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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY , 1997
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FORM 20-F
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM
--------------- TO
---------------
COMMISSION FILE NUMBER
MINCO MINING & METALS CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
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(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
PROVINCE OF BRITISH COLUMBIA, CANADA
- --------------------------------------------------------------------------------
(JURISDICTION OF INCORPORATION OR ORGANIZATION)
543 GRANVILLE STREET, SUITE 1200, VANCOUVER, B.C., CANADA V6C 1X8
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT.
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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N/A N/A
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SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT.
COMMON SHARES WITHOUT PAR VALUE
- --------------------------------------------------------------------------------
(TITLE OF CLASS)
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
OF THE ACT.
N/A
- --------------------------------------------------------------------------------
(TITLE OF CLASS)
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report. N/A
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark which financial statement item the registrant has
elected to follow:
Item 17 [X] Item 18 [ ]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ] Not applicable
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Except as otherwise noted, all dollar amounts are presented in Canadian
dollars. As of April 14, 1997, the exchange ratio of Canadian dollars into
United States dollars was $1.3985 Canadian to $1.00 United States dollar.
TABLE OF CONTENTS
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Part I................................................................................. 4
Item 1. Description of Business....................................................... 4
Introduction......................................................................... 4
Background and General Development................................................... 4
Organization and Subsidiary.......................................................... 4
Primary Business and Overview........................................................ 4
Recent Financing..................................................................... 5
Pacific Canada Resources -- Teck Corporation -- Cominco Ltd. Transaction............. 6
Immediate Business Plan.............................................................. 8
Doing Business in the People's Republic of China..................................... 9
Risk Factors Related to Doing Business in China...................................... 9
People's Republic of China -- Background Information................................. 13
Legal Framework for Chinese-Foreign Co-operative Joint Ventures...................... 15
Item 2. Description of Property....................................................... 18
Acquisition of the Registrant's Chinese Properties................................... 18
The PCR Assignment Agreement......................................................... 18
Teck-Cominco Investment and Participation Agreements................................. 19
Temco Option Agreement............................................................... 20
GEC-FGEB Co-operation Agreement...................................................... 20
Independent Consultants' Reports..................................................... 21
China's Resource Classification System of Ore Reserves............................... 22
The Chapuzi Property................................................................. 23
Acquisition.......................................................................... 23
Location and Description............................................................. 24
Exploration and Development History.................................................. 24
Geology, Mineral Deposits and Resources.............................................. 25
Proposed Exploration and Development Program......................................... 26
Emperor's Delight Property........................................................... 28
Acquisition.......................................................................... 28
Joint Venture Agreement.............................................................. 28
Location and Description............................................................. 29
Exploration and Development History.................................................. 29
Geology, Mineral Deposits and Reserves............................................... 34
Proposed Exploration and Development Program......................................... 37
Changba-Lijiagou Property............................................................ 38
Acquisition.......................................................................... 38
Location and Description............................................................. 39
Exploration and Development History.................................................. 30
Proposed Exploration and Development Program......................................... 41
Stone Lake Property.................................................................. 42
Acquisition.......................................................................... 42
Location and Description............................................................. 42
Exploration and Development History.................................................. 43
Geology, Mineral Deposits and Reserves............................................... 44
Proposed Exploration and Development Program......................................... 45
Crystal Valley Property.............................................................. 46
Acquisition.......................................................................... 46
</TABLE>
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<TABLE>
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Location and Description............................................................. 47
Exploration and Development History.................................................. 47
Geology, Mineral Deposits and Reserves............................................... 47
Proposed Exploration and Development Program......................................... 48
Other Properties of the Registrant................................................... 49
Tian Shan (or "Heavenly Mountains") Properties....................................... 49
Xifanping Property................................................................... 52
Gala Property........................................................................ 52
Item 3. Legal Proceedings............................................................. 53
Item 4. Control of Registrant......................................................... 53
Performance Shares or Escrow Securities.............................................. 53
Item 5. Nature of Trading Market...................................................... 55
Item 6. Exchange Controls and Other Limitations Affecting Security Holders............ 55
People's Republic of China........................................................... 55
Canada............................................................................... 56
Item 7. Taxation...................................................................... 56
People's Republic of China........................................................... 56
Canadian Federal Income Tax Considerations........................................... 56
United States Tax Considerations..................................................... 57
Item 8. Selected Financial Data....................................................... 59
Financial Statements................................................................. 59
Item 9. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 60
General.............................................................................. 60
(a) Liquidity and Capital Resources.................................................. 61
(b) Results of Operations............................................................ 61
Fiscal 1996 Compared with Fiscal 1995................................................ 62
Fiscal 1995 Compared with Fiscal 1994................................................ 62
Expenditures on Properties of the Registrant......................................... 62
Outlook.............................................................................. 63
Item 10. Directors and Officers of Registrant......................................... 63
Item 11. Compensation of Directors and Officers....................................... 64
Item 12. Options to Purchase Securities from Registrant or Subsidiaries............... 65
Item 13. Interest of Management in Certain Transactions............................... 65
Part II................................................................................ 66
Item 14. Description of Securities to be Registered................................... 66
(a) Capital Stock To Be Registered................................................... 66
(b) Debt Securities To Be Registered................................................. 67
Part III............................................................................... 67
Item 15. Defaults Upon Senior Securities.............................................. 67
Item 16. Changes in Securities and Changes in Security for Registered Securities...... 67
Part IV................................................................................ 67
Item 17. Financial Statements......................................................... 67
Item 18. Financial Statements......................................................... 68
Item 19. Financial Statements and Exhibits............................................ 68
Exhibit Index........................................................................ 68
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
INTRODUCTION
Minco Mining & Metals Corporation ("the Registrant") is a British Columbia
corporation, the stock of which is traded on the Vancouver Stock Exchange
(trading symbol MMM), engaged in the acquisition of base and precious metal
mineral projects in the People's Republic of China ("PRC"). The Registrant's
wholly-owned subsidiary, Triple Eight Mineral Corporation ("Temco"), is a
British Virgin Islands corporation also engaged in the acquisition and
exploration of mineral projects in the PRC. The Registrant completed three
private placements of its securities in 1995 and 1996, involving a total
investment of $9,660,000, followed by a registration on the Vancouver Stock
Exchange of the securities issued in the last such private placement. Such
investments also involved contractual alliances with certain other major
Canadian mining companies and the acquisition of various interests in mineral
projects located in China.
BACKGROUND AND GENERAL DEVELOPMENT
Organization and Subsidiary
The Registrant was incorporated under the laws of the Province of British
Columbia on November 5, 1982, under the name "Caprock Energy Ltd." and is
governed by the Company Act of the Province of British Columbia. Effective
September 14, 1989, the Registrant changed its name to "Consolidated Caprock
Resources Ltd.", consolidated its share capital on the basis of one new share
for every five old shares and increased its authorized capital to 20,000,000
common shares without par value. Prior to February 8, 1993, the Registrant had
become inactive and had no significant operations or assets. Effective February
8, 1993, the Registrant changed its name to its current name, consolidated its
share capital on the basis of one new share for every three old shares and
increased its authorized capital to 20,000,000 common shares without par value.
Effective July 8, 1996 the Registrant increased its authorized capital to
100,000,000 common shares without par value.
The Registrant has one wholly-owned subsidiary, Triple Eight Mineral
Corporation ("Temco"), a corporation organized on September 1, 1995 under the
laws of the British Virgin Islands and having an office at Arawak Chambers, P.O.
Box 173, Road Town, Tortola, British Virgin Islands. The Registrant acquired a
60% equity interest in Temco pursuant to an "Assignment of Contracts and Share
Purchase Agreement" made between the Registrant and Pacific Canada Resources
Inc. dated February 19, 1996, the "PCR Agreement" (see the subheading "The PCR
Agreement" in this Item 1). Under the PCR Agreement, the Registrant acquired
from Pacific Canada Resources Inc. ("PCR") all of PCR's interests in certain
mineral properties in the PRC, some of which are held in Temco. The Temco
acquisition has been treated by the Registrant as a reverse-take over for
accounting purposes (see "Notes to the Financial Statements" attached hereto as
Item 17). On February 27, 1997, the Registrant acquired the remaining 40% equity
interest in Temco pursuant to an "Purchase and Sale Agreement" made between the
Registrant and China Clipper Gold Mines Ltd..
Temco has the right to acquire a 55% equity interest in a Chinese company,
Chengde Huajia Mining Industry Co. Ltd. ("Huajia"). Chengde Huajia Mining
Industry Co. Ltd. has been incorporated for the purpose of conducting the joint
venture business in respect to the Emperor's Delight Property (see "Properties
of the Registrant -- Emperor's Delight Property" in Item 2, below).
Primary Business and Overview
The Registrant is a natural resource company engaged directly and through
its wholly-owned subsidiary, Temco, in the acquisition, exploration and
development of mineral resource properties. The Registrant has focused on the
exploration and development of mineral resource projects in the People's
Republic of China. At present, none of the properties in which the Registrant
has rights have a known body of commercial ore, nor are any of such properties
at the commercial development or production stage and all such properties are
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in the exploration stage, except the Changba-Lijiagou Property which has a known
body of commercial ore and which is being commercially developed and the Gala
Property which also has a known body of commercial ore which is being
commercially developed (See "Properties of the Registrant -- Changba-Lijiagou
Property" and "Properties of the Registrant -- Gala Property" in Item 2, below.)
From its incorporation in 1982, the Registrant has been involved primarily
in mineral exploration and development. The Registrant has been a public company
with its shares trading on the Vancouver Stock Exchange since November of 1984.
The Registrant was declared inactive during the period from May 9, 1990 to
September 14, 1990. Following a further period of inactivity from July, 1992 the
Registrant was reorganized in 1993. This reorganization involved a one-for-three
share consolidation, name change from Consolidated Caprock Resources Ltd. to
Minco Mining & Metals Corporation and subsequent changes in the board of
directors. In February of 1996 the Registrant was fully reinstated on the
Vancouver Stock Exchange following its acquisition of an interest in the Chapuzi
Property (see "Properties of the Registrant -- Chapuzi Property" in Item 2,
below). After the acquisition of its interest in the Chapuzi Property, on
February 19, 1996, the Registrant entered into an arms length agreement with
Pacific Canada Resources Inc. ("PCR"), a private company controlled by Ken Cai
and Donald Hicks, pursuant to which the Registrant acquired interests in mineral
properties in the PRC known as the Emperor's Delight Property, the Stone Lake
Property, the Crystal Valley Property and the Changba-Lijiagou Property. See
"Properties of the Registrant" Item 2, below. The consideration paid by the
Registrant to PCR for these property interests was 7,280,000 common shares of
the Registrant and was established pursuant to arms length negotiations between
the Registrant and PCR. Of these shares, 4,880,000 shares are subject to the
terms of an escrow agreement and will only be released upon the Registrant
satisfying certain earn out requirements (see "Performance Shares or Escrow
Securities" in Item 4 below.). The balance of 2,400,000 shares issued to PCR
were issued at a deemed price of $0.97 per share based on a valuation of the
Emperor's Delight Property prepared by A.C.A. Howe International dated March 13,
1995 (see "Properties of the Registrant -- Independent Consultants' Reports").
Upon the completion of the acquisition of the Chinese mineral properties from
PCR, Ken Cai and Donald Hicks became directors and officers of the Registrant
(see Item 10, below).
Concurrently with the acquisition of properties from PCR, the Registrant
completed private placements with Teck Corporation ("Teck") and Cominco Ltd.
("Cominco"), both of which are major public Canadian mining companies traded on
the Toronto Stock Exchange, pursuant to an Investment and Participation
Agreement dated February 20, 1996 (see "Teck-Cominco Agreement" below).
At present, the Registrant has an agreement under which it has the right to
negotiate the acquisition of a majority interest in a property which has a known
body of ore and which is being commercially developed on the Changba-Lijiagou
Property. (See "Properties of the Registrant -- Changba-Lijiagou Property" in
Item 2, below). Also, at present, the Registrant has an agreement under which it
has the right to negotiate the acquisition of an interest in a property which
has a known body of ore and which is being commercially developed on the Gala
Mine Property. (See "Properties of the Registrant -- Gala Property" in Item 2,
below). In addition, the Registrant's Stone Lake and Crystal Valley have
reserves of gold that have not yet been proven to be commercially viable. (See
"Properties of the Registrant -- Stone Lake Property" and "Properties of the
Registrant -- Crystal Valley Property" in Item 2, below). The Registrant's
Chapuzi Property has geological resources of gold that have not yet been proven
to be commercially viable. (See "Properties of the Registrant -- Chapuzi
Property" in Item 2, below). All other agreements relate to properties at the
exploration stage. Management of the Registrant is committed to pursuing mineral
exploration and development in Asia, with its primary and initial focus on the
People's Republic of China.
Recent Financing
On June 27, 1996, the Registrant completed a private placement of 3.2
million Special Warrants at a price of $2.55 per Special Warrant, for gross
proceeds of $8,160,000. Each unit consisted of one common share and one half of
a non-transferrable common share purchase warrant. Each whole share purchase
warrant entitled the holder to acquire one additional common share at a price of
$2.55 per share until one year after the date of issuance of the warrant upon
exercise of the Special Warrant. Special Warrants were exercisable without
payment of further consideration immediately upon closing (the "Closing") of the
private placement
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and were deemed to be exercised upon the earliest to occur of the twelfth month
after such Closing or five days after issuance of a receipt for a final
prospectus by the British Columbia Securities Commission relating to the
qualification of the common shares issuable upon exercise of the Special
Warrants. Such receipt was issued on December 20, 1996. Upon such qualification,
the common shares became freely tradable in British Columbia; prior to such date
they were "restricted securities" under the rules of the British Columbia
Securities Commission. See Item 14. If such qualification had not occurred
within one hundred and eighty days after the Closing, each of the Special
Warrants would thereafter have entitled the holder to acquire 1.1 common shares
and a warrant to purchase .55 common shares.
Proceeds of the private placement financings are intended to be used for
exploration and development expenditures in connection with the Registrant's
base and precious metal projects located in the PRC, for working capital, and
for acquisition of additional projects. See "Immediate Business Plan," below.
PACIFIC CANADA RESOURCES -- TECK CORPORATION -- COMINCO LTD. TRANSACTION
Pacific Canada Resources Agreement
On February 19, 1996, the Registrant entered into an arms length agreement
with Pacific Canada Resources, Inc. ("PCR"), a private company not then
affiliated with the Registrant, pursuant to which the Registrant purchased
rights to PCR's portfolio of base and precious metal property agreements and
acquisition rights in China, some of which were held directly and some of which
were held by PCR's British Virgin Islands subsidiary, Temco. At that time, China
Clipper Gold Mines, Ltd. ("China Clipper"), an Ontario business corporation,
held a forty percent equity interest in Temco. On February 27, 1997, the
Registrant entered into an agreement with China Clipper whereby its joint
venture business with China Clipper was terminated by mutual agreement. The
Registrant purchased all of China Clipper's beneficial interest in Triple Eight
Mineral Corporation ("Temco") for $175,000. In so doing, Temco became
wholly-owned by the Registrant and, incidental thereto, all co-venture
relationships between the parties ended and all of China Clipper's interests and
other rights that it may have held in respect to joint venture businesses were
transferred to the Registrant.
The PCR Agreement also granted the Registrant exclusive rights of first
refusal to all agreements relating to base and precious metal properties located
in China acquired by PCR over the succeeding four years. In consideration of the
transfer, the Registrant issued 7,280,000 common shares to PCR, 2,400,000 of
which were restricted for a period of one year and free trading thereafter. The
balance of 4,800,000 shares issued to PCR was issued at a deemed price of $0.97
per share based on a valuation of the Emperor's Delight Property prepared by
A.C.A. Howe International Limited dated March 13, 1995 (see "Independent
Consultants' Reports" in Item 2, below). These 4,880,000 shares are subject to
the terms of an Escrow Agreement dated February 19, 1996 and will only be
released upon the Registrant satisfying certain earn out requirements as more
particularly described in Item 4 below under the subheading "Performance Shares
or Escrow Securities". The escrowed shares are subject to an earn-out at the
rate of $0.97 per share, based on: (i) the valuations of the properties
acquired, as determined by a qualified independent consultant; (ii) one share
for each $1.81 of expenditures on exploration or development of the properties;
or (iii) cumulative cash flows from the properties. As further consideration for
the PCR Agreement, the Registrant agreed to reimburse PCR for a total of $97,800
in legal, accounting and consulting fees paid by PCR. Included in this amount is
a total of $75,800 in consulting fees paid to Kaisun Group (Canada) Inc. and
1066098 Ontario Inc., private companies controlled by Ken Cai and Donald Hicks,
respectively.
Under the PCR agreement, PCR has the right to designate two (out of five)
directors of the Registrant and upon enlargement of the board to seven members,
one new member is to be a nominee of PCR. See Item 10 and Item 13, below.
Teck-Cominco Agreement
Simultaneously, and in connection with the PCR agreement, the Registrant
entered into a related agreement (the "Teck-Cominco Agreement") with Teck and
Cominco. Pursuant to these agreements, Teck and Cominco each invested $500,000
and received 625,000 units, each unit consisting of one common share of
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the Registrant and one fifth of a non-transferrable common share purchase
warrant, each whole share purchase warrant entitling the holder to acquire one
additional common share at a price of $1.20 on or before February 20, 1997 or
$1.38 on or before February 20, 1998. The shares purchased by Teck and Cominco
were "restricted shares" under the rules of the British Columbia Securities
Commission until February 20, 1997. See Item 14. Teck exercised its warrants
prior to February 20, 1997. As partial consideration for the investments by Teck
and Cominco, they received a right of first refusal as to the Non-Chinese
Interest ("NCI") in any two mineral property rights acquired by the Registrant
in the PRC until March 1, 2004. After preliminary work by the Registrant, Teck
and Cominco have the right to earn a 51% interest in an Exploration Property or
a 70% interest in a Development Property by completing, at their expense (as
between the parties), a Final Feasibility Report on the property and arranging
for funding of all costs which the holders of the NCI must bear in respect of
the property in order to bring the property into production, as detailed in the
Final Feasibility Study. (See Item 2 -- Teck-Cominco Investment and
Participation Agreements). The agreement further provides that Cominco (in the
case of a base metal property) or Teck (in the case of a precious metal
property) shall be the designated operator of the property on behalf of the
joint venture which shall be formed to exploit any such property. The
Teck-Cominco Agreement contains provisions under which Teck and Cominco agree,
subject to certain limitations, not to increase their share holdings in the
Registrant beyond 20% of the common shares, nor to reduce them beyond 50% of
their initial ownership, which limitations expire upon certain changes in
control of the Registrant. Teck and Cominco have a right of first refusal to
purchase common shares of the Registrant in any future offerings, so as to
maintain their percentage ownership of the Registrant.
Temco
The Registrant acquired its initial interest in Temco pursuant to the PCR
agreement discussed above. The Registrant and China Clipper Gold Mines Ltd.
("China Clipper") had formed Temco to conduct, as co-venture partners, the
exploration and development of certain Chinese mineral projects located in Hebei
Province of the People's Republic of China. Temco is participating in these
properties by earning a 55% interest in a Chinese joint venture with the
Geoexploration Corporation of the First Geoexploration Bureau ("GEC-FGEB"), a
subsidiary of the central government's Ministry of Metallurgical Industry. Temco
is participating in this joint venture by earning a 55% interest in the joint
venture operating company, Chengde Huajia Mineral Industry Co. Ltd. ("Huajia").
The remaining 45 % interest in Huajia is held by GEC-FGEB. This joint venture
company holds exploration rights to the Emperor's Delight Property. In addition,
Temco possesses rights to the Non-Chinese Interest in the Crystal Valley and
Stone Lake properties. Huajia will continue the exploration and development of
these properties and pursue other projects in Hebei Province. See "Properties of
the Registrant" in Item 2, below.
China Clipper owned a forty percent interest in Temco, pursuant to an
earlier agreement with PCR under which China Clipper expended $500,000 on behalf
of Temco. In order to maintain its forty percent interest, China Clipper was
required to contribute 60% of expenditures on behalf of Temco, and the
Registrant was required to contribute 40% of such expenditures, up to a total of
$8,000,000, after which time contributions were to be on the basis of respective
beneficial interests. The amount of a party's beneficial interest was subject to
increase or dilution, depending on each party's election to contribute to
certain voluntary expenditures of Temco. As of April 30, 1996, China Clipper had
paid US$ 396,000 to Temco as part of its $2,640,000 exploration commitment on
the Emperor's Delight property.
On February 27, 1997, the Registrant entered into an agreement with China
Clipper wherein its joint venture business with China Clipper was terminated by
mutual agreement. The Registrant purchased all of China Clipper's beneficial
interest in Triple Eight Mineral Corporation ("Temco") for $175,000. In so
doing, Temco became wholly-owned by the Registrant and, incidental thereto, all
co-venture relationships between the Registrant and China Clipper ended and all
of China Clipper's interests and other rights that it may have held in respect
to joint venture businesses were transferred to the Registrant.
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Property Ownership and Relationships
The Registrant has acquired various rights and interests in mineral
properties through agreements with various Chinese governmental entities and
through its acquisition of Temco. The following chart sets forth the structure
of such relationships, including the jurisdiction of incorporation of each
entity, the percentage of voting securities or ownership held by the Registrant
and the mineral properties owned by each of them:
[GRAPH]
IMMEDIATE BUSINESS PLAN
For the remainder of 1997, the Registrant's business plan is to conduct
exploration activities, as discussed in Item 2 below, with respect to each
individual property. Where results of exploration warrant, the Registrant will
proceed, on a property-by-property basis to take further steps toward the final
creation of a joint venture for each such property. Proposed budgets for
exploration work with respect to each property are discussed in Item 2 below.
The Registrant believes that the proceeds of its 1996 private placements of
special warrants together with possible contributions pursuant to the
Teck-Cominco Agreement will be sufficient to fund such work for 1997. The
Registrant may also enter into various agreements with other companies under
which these companies may fund various portions of exploration or development
work for a specific property and will earn interests in such properties to be
negotiated at the time. Such arrangements already exist in connection with the
Teck-Cominco Agreement; except for these arrangements, no such other agreements
have been entered into, and there can be no guarantee that any such other
agreements will be concluded on advantageous terms, or at all.
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DOING BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA
Risk Factors Related to Doing Business in China
Approvals
In the mining industry, before a Chinese-foreign joint venture (also
referred to as a Sino-foreign joint venture) can be created, an assessment or
feasibility study of the proposed joint venture must be prepared and approved by
the State Planning Commission (the "SPC"). Therefore, upon completing a
Co-operation Agreement, the parties prepare a feasibility study for the proposed
joint venture and submit this feasibility study along with the Co-operation
Agreement to the SPC for what may be described as an approval in principle, the
granting of which depends upon whether the proposed project broadly conforms to
the economic policy issued by the government and any prescribed regulations. As
part of this approval process, the SPC consults with the Ministry of Geology and
Mineral Resources ("MGMR") and with the government agency directly concerned
with the specific mineral commodity (for example, in the case of gold, with the
Gold Bureau of the Ministry of Metallurgical Industry). Upon receiving this
approval in principle, the parties then negotiate and prepare a Joint Venture
Contract which is then submitted to the Ministry of Foreign Trade and Economic
Co-operation ("MOFTEC") which approves the specific terms of all Joint Venture
Contracts between Chinese and foreign parties. Within one month after the
receipt of a certificate of approval from MOFTEC, a joint venture must register
with the State Administration of Industry and Commerce (the "SAIC"). Upon
registration of the joint venture, a business license is issued to the joint
venture. The joint venture is officially established on the date on which its
business license is issued. Following the receipt of its business license, the
joint venture applies to MGMR to approve and grant to the joint venture its
exploration permits or mining licenses. As part of this approval process, MGMR
consults with the military authorities to confirm that no military reserves lie
within the areas of interest (see "Legal Framework for Chinese -- Foreign
Cooperative Joint Ventures" below). Other than in respect to the Issuer's
Emperor's Delight property, such approvals, permits and licenses in respect to
the Registrant's properties have not been obtained and there can be no assurance
that such approvals will be obtained.
Environmental Regulations
The Registrant's operations may be subject to environmental regulations
promulgated by government agencies from time to time. Although Chinese
environmental regulations are apparently less stringent that those in North
America, there are restrictions and prohibitions on spills, releases or
emissions or various substances produced in association with certain mining
industry operations, such as seepage from tailings disposal areas, which would
result in environmental pollution. A breach of such legislation may result in
imposition of fines and penalties. The nature of the Changba-Lijiagou Project
acquisition may present particular environmental risks to investors as the
environmental conditions in the smelter town of Baiyin are appalling by North
American standards. An environmental baseline study would be required in respect
to the Changba-Lijiagou Property to qualify the extent of the environmental
issues and to mitigate future liability. Environmental assessments of this
nature in respect of the Registrant's proposed projects carry a heightened
degree of responsibility for companies and their directors, officers and
employees. The cost of compliance resulting from changes in governmental
environmental regulations has potential to reduce the profitability of
operations.
Gold Prices
The profitability of the Registrant's future operations could be
significantly affected by changes in the market price of gold. Gold prices
fluctuate widely and are affected by numerous factors beyond the Registrant's
control. Political instability, the level of interest rates, rates of inflation,
world supply of gold and stability of exchange rates can all effect significant
investment patterns, monetary systems and political developments. The price of
gold has fluctuated widely in recent years and future serious price declines
could cause commercial production to be impractical from specific operations.
Depending on the price of gold, cash flow from mining operations may not be
sufficient to sustain specific operations. If, as a result of a decline in gold
prices, revenues from metal sales were to fall below cash operating costs, any
future production might be discontinued. Further, the mandatory sale of gold
production in China to the People's Bank of China may
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mean fluctuations in revenues earned based on varying purchase prices set by the
People's Bank of China. The People's Bank of China generally purchases gold at a
discounted price equal to 90% of the price of gold as fixed by the London Metals
Exchange.
Politics of China
The value of the Registrant's investments in China may be adversely
affected by political, economic and social uncertainties in China. A change in
policies by China's central government could adversely affect the Registrant's
investment by, among other factors, changes in laws and regulations or the
interpretation thereof, the expropriation of private enterprises, or
restrictions on currency conversion, imports and sources of supplies. Although
China's central government has been pursuing economic reform policies for the
past 18 years and has repeatedly reiterated its commitment to such policies, no
assurance can be given that China's central government will continue to pursue
such policies or that such policies may not be significantly altered, especially
in the event of a change of leadership, social or political disruption or
unforeseen circumstances affecting China's political, economic and social
structure. See "Legal Systems" below.
Legal Systems
China's legal system is based on written statutes and, therefore, decided
legal cases are without binding legal effect, although they are often followed
by judges as guidance. Since 1979, many laws and regulations dealing with
economic matters, in general, and foreign investment, in particular, have been
promulgated in China. In December of 1982, the Constitution of China was amended
to authorize foreign investment and to guarantee the lawful rights and interests
of foreign investors in China. Despite the activity and progress in developing
the legal system, China does not have a comprehensive system of laws. In
addition, enforcement of existing laws may be uncertain and sporadic, and
implementation in the interpretation thereof inconsistent. China's judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in China, it may be impossible to obtain swift and equitable
enforcement of such law, or to obtain enforcement of the judgment by a court of
another jurisdiction. The interpretation of the laws of China may be subject to
policy changes reflecting domestic political changes.
As China's legal system develops, the promulgation of new laws, changes to
existing laws and the pre-emption of local regulations by national laws may
adversely affect foreign investors. The trend of legislation over the past 15
years has, however, significantly enhanced the protection of foreign investment
and allows for more active control by foreign parties of foreign investment
enterprises in China. There can be no assurance, however, that the current trend
in economic legislation towards promoting market reforms as well as further
opening to the outside world will not be slowed, curtailed or reversed,
especially in the event of a change in leadership, social or political
disruption or unforeseen circumstances affecting China's political, economic or
social structure. Such a shift could have a material adverse effect upon the
business and prospects of the Registrant.
The Registrant's activities in China are by law subject in some particular
cases to administrative review and approval by various national, provincial and
local agencies of China's central government. Although the Registrant believes
that the support of local, provincial and national governmental entities
benefits its operations in connection with administrative review and receiving
approvals, there is no assurance that such approvals, when necessary or
advisable, will be forthcoming. While China has promulgated, and administrative
law has permitted, redress to the courts with respect to certain administrative
actions, this law appears to be largely untested in this context.
Currently, the legal requirements and/or the enforcement of existing
Chinese legal requirements applicable to occupational health and safety and
environmental protection do not appear to be as rigorous as in North America.
Should this situation change, the Registrant could, in the future, be required
to take additional steps to comply with such laws, including making capital
expenditures, which expenditures could be material.
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Economic Considerations
The economy of China is traditionally a planned economy subject to five
year annual plans, adopted by the Chinese government, which set forth national
economic development goals. Policies of the Chinese central government can have
significant effects on the economic conditions of China. The Chinese government
established the Economic and Trade Office under the direction of the State
Council to assume responsibilities regarding China's economic and trade
policies. At present, the Economic and Trade Office has emphasized greater
decentralization and utilization of market forces for the allocation of China's
resources. The central government has recently confirmed that China's economic
development will follow a model of market economy under socialism. Under this
direction, it is expected that China will continue to strengthen its economic
and trading relationships with foreign countries and business development in
China will follow market forces and the rules of economics. While it is expected
that this trend will continue, there can be no assurances that such will be the
case.
Currency Conversion and Exchange Rates
The Renminbi ("RMB"), China's lawful currency, is yet to be freely
convertible into foreign currency. Prior to the foreign exchange reforms which
became effective January 1, 1994, all foreign exchange transactions involving
RMB took place either through the People's Bank of China, China's central bank,
at other authorized institutions or at a Swap Center (foreign exchange
adjustment centers).
An official exchange rate set by the government from time to time coexisted
with a Swap Centre exchange rate determined largely by supply and demand of
foreign currency and RMB. Effective January 1, 1994, China's foreign exchange
system underwent some fundamental changes. The purpose of the reform was to
achieve the unification of the dual exchange rate system into a unitary and
controlled floating exchange rate system. Under the new system, China's central
bank publishes daily the RMB exchange rate against the U.S. dollar and other
major international currencies, including the Canadian dollar, largely based on
supply and demand of foreign currency and RMB. Further, systems are in place to
facilitate inter-bank foreign exchange trading and trading between designated
banks and Chinese enterprises. Swap Centers continue to provide services
exclusively to foreign investment enterprises which need to conduct foreign
exchange transactions. Swap Centre rates are generally in line with the state
managed exchange rate although there is no guarantee that this will continue to
be the case.
As a Chinese-foreign cooperative joint venture enterprise, the Registrant
will conduct its foreign exchange transactions at Swap Centers. While conversion
of RMB into other currencies can generally be effected at the Swap Centers with
no delay, there is no guarantee that it can be effected at all times. Since
foreign exchange transactions at Swap Centers are confined to foreign investment
enterprises, this may adversely limit foreign currency supply from other
sources, such as banks and Chinese enterprises.
Over the past few years, there has been a significant devaluation of the
RMB against the major foreign currencies. The Registrant conducts substantially
all of its business in China and, accordingly, the sale of its products may
primarily be settled in RMB. As a result, continued devaluation of the RMB
against the Canadian and U.S. dollars may adversely affect the financial
performance of the Registrant when measured in terms of Canadian or U.S.
dollars. As well, continued devaluation of the RMB against the Canadian or U.S.
dollars and other currencies will increase the Registrant's cost of purchasing
imported parts and equipment. The combination of the foregoing could have a
material adverse effect upon the financial condition and asset values of the
Registrant and upon the hard currency equivalent of any profits of the
Registrant.
Proposed Changes to Chinese Tax System
The Law of China on income tax of Chinese-Foreign Joint Ventures and
Foreign-Capital Enterprises stipulates that foreign enterprises and joint
ventures shall be taxed at a standard rate of 30% plus a local tax of 3%. In
addition, Chinese mining enterprises are required to pay a mineral compensation
fee which, for gold mining, is up to 4% of income from gold sales.
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The Chinese government has recently announced that it plans to reform the
existing Chinese tax system (including the value added tax) and particularly its
tax preference policies applicable to foreign enterprises. The aim of such
future reforms will be to unify and simplify China's existing tax system. No
timetable for implementing such reforms has been announced by the Chinese
government nor has any legislation been introduced.
Inflation and the Chinese Government Austerity Plan
The Chinese economy has experienced rapid growth which has led to a
significant growth in money supply and rising inflation. In September, 1993,
total money supply had grown by 34% on an annual basis. The average inflation
rate in the first quarter of 1995 was recorded at an annualized rate of
approximately 23%. If revenues generated by the Registrant do not rise
sufficiently to compensate for the rate of inflation, profitability may be
adversely affected.
In order to control inflation, the Chinese government recently reinstated
controls on bank credits, limits on loans for fixed assets and restrictions on
state bank lending. This austerity plan, first announced in June of 1993, seemed
to have been relaxed during the last quarter of 1993. In early 1994, the Chinese
government announced that it intended to reimpose its austerity measures,
including a ban on fixed asset investments.
The Chinese government announced in March of 1994 that the People's Bank of
China will begin examining all loans made for fixed asset investments and any
financial institutions which have exceeded their lending quota or granted loans
to non-state planned projects, unapproved development zones or real estate
speculators, will be strictly punished. The Registrant does not believe that
these recent announcements should have a material effect on the business of the
Registrant.
Title Matters
The Mineral Resources Law of the People's Republic of China was first
passed at the 15th session of the Standing Committee of the 6th National
People's Congress on March 19, 1986 and was amended at the 21st Session of the
Standing Committee of the 8th National People's Congress on August 29, 1996.
This law entered into force on January 1, 1997. Article 3 of this law states
that "Mineral resources shall be owned by the State." and "The State's ownership
of mineral resources shall be exercised by the State Council."
The Registrant has recently gained interests in a number of projects, most
of which are at an early stage of investigation. Title investigation is
difficult or impossible in the PRC and thus the level of title investigation in
respect to most, or all, of the Registrant's properties has been limited. To the
best of the Registrant's knowledge, title to all properties is in good standing,
although this should not be construed as a guarantee of title. Title to the
properties may be affected by undetected defects such as unregistered agreements
or transfers. The Registrant has not obtained any title opinion on its Chinese
Properties and as a result the title to these Properties and the validity of the
Registrant's interests therein are not assured. To the best knowledge of the
Registrant, none of the properties in which the Registrant has an interest has
been surveyed, and their actual extent and location may therefore be in doubt.
Enforcement of Civil Liabilities
As substantially all of the assets of the Registrant and its subsidiary, as
well as the Registrant's jurisdiction of incorporation and the residences of its
officers and directors are located outside of the United States, it may be
difficult or impossible to enforce judgments granted by a court in the United
States against the assets of the Registrant and its subsidiaries or the
directors and officers of the Registrant resident outside of the United States.
Reliability of Information
While the information contained herein regarding the PRC, including its
economy and industries has been sourced from a variety of government and
industry officials and sources, independent verification of this information is
not available and there can be no assurance that the sources from which it is
taken, or on which
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it is based, are wholly reliable. Official statistics in relation to the PRC,
including its economy and industries may also be produced on a basis different
from that used in more developed countries. If such official statistics are
materially inaccurate, the present and future economic prospects of the PRC,
including its economy and industries, could be materially different from those
which currently appear to be the case. Accordingly, no assurance can be given as
to the completeness or reliability of available official and public information.
In addition, much of the information contained in the Consultants' Reports
referred to herein (See "Properties of the Registrant" Item 2, below) is based
on information provided by PRC governmental officials, geologists and mining
engineers. Accordingly, the reliability of geological and mineral information
regarding the properties, the costs of labor, operation and construction
provided by Chinese government officials, geologists and mining engineers cannot
be assured.
People's Republic of China -- Background Information
The following is a general description of China's governmental
organization, currency regulation, foreign investment in China and the history
of gold mining therein and has been compiled by the Registrant from various
sources:
General Information
The People's Republic of China is located in the eastern part of Asia. It
is bordered by fourteen countries, including India, Kazakhstan, Mongolia, and
Russia. It has an area of 9,561,000 square kilometers with an estimated
population, as at 1994, of over 1.17 billion people. The language is mainly
Putonghua (Mandarin) with several local dialects.
Governmental Organization
China is a centralized state power. China's Head of State is its President.
The Central Government of China is organized pursuant to the Constitution of
China, the most recent form of which was adopted by the National People's
Congress (the "NPC") in December, 1982, with amendments made in 1988 and 1992.
The unicameral NPC is the "highest organ of state authority" and exercises
legislative power in the country. About 3,000 members of the NPC are elected by
the provinces, autonomous regions, those municipalities which are directly under
the Central Government and the armed forces. The NPC meets once a year and when
it is not in session it exercises its powers through its Standing Committee with
some 250 members.
Local people's congresses are established at various levels, including
within provinces, autonomous regions, municipalities, counties, districts, towns
and townships. Local people's congresses are "local organs of state power". They
are empowered to promulgate local laws, rules and regulations and to approve
local economic plans and budgets. In addition, they elect governors, mayors and
other local government heads.
The State Council is the "executive agency" of the NPC, and in effect, the
cabinet. It usually has 15 members, composed of the Premier, Deputy Premiers,
State Councilors and a Secretary-General. There are over 40 ministries and
commissions, including the People's Bank of China, as well as a number of
important state-owned corporations under the authority of the State Council. The
State Council has the authority to promulgate administrative rules, orders and
regulations, and to rescind or amend administrative rules, orders and
regulations issued by administrative agencies at both the central and provincial
government levels. The State Council also prepares and supervises the
implementation of national economic plans and budgets and co-ordinates the
administrative agencies at both the central and provincial government levels.
The Chinese Communist Party (the "CCP") has a constitutional role in the
government organization of China. Although the state and the CCP structures are
technically separate, there is a considerable overlap between the
decision-making functions of the state organs and the CCP organs. In practice,
the NPC has never acted as the true source of power. It approves decisions made
by the Communist Party. Basically China's political structure remains that of an
authoritarian one-party state.
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Currency
The Chinese currency is the Renminbi yuan ("RMB" or "Rmb"). It is not
freely convertible although the Chinese government has emphasized that full
convertibility is the long-term goal. Full convertibility, probably after some
transitional period, will be a condition precedent to membership in the World
Trade Organization, for which China has applied. The People's Bank of China,
China's central banking authority, publishes the Renminbi exchange rate against
the U.S. dollar every day based on the trading price between the two currencies
of the previous day on the Inter-Bank Foreign Exchange Market established in
Shanghai in 1994. In addition, the People's Bank of China publishes the Renminbi
exchange rates against other major foreign currencies. Designated banks
participate on the Inter-Bank Foreign Exchange Market through a computer network
connected with major cities in China.
Foreign exchange is administered by the State Administration of Exchange
Control (SAEC), and its local branch offices, all of which are subject to the
supervision of the People's Bank of China. The SAEC has established regulations
relating to outward remittance by foreign investors of their share of net
profits or dividends and final repatriation of their investments, in foreign
currency. Subject to payment of applicable taxes, foreign investors may remit
out of China, in foreign exchange, profits or dividends derived from a source
within China. However, foreign-invested enterprises are required to secure their
own sources of foreign exchange, and the foreign exchange adjustment Centers
(commonly known as Swap Centers) may be used for this purpose. The Swap Centers
were established to assist foreign investment enterprises to balance their
foreign currency income and expenses by converting surplus local currency
earnings into foreign exchange and vice versa without their having to wait for
central allocation. The central foreign exchange adjustment center is in Beijing
and other centers have been established in the coastal cities, Special Economic
Zones and other major cities, municipalities and autonomous regions. Remittance
by foreign investors of any other amounts (including, for instance, principal
and interest on debt and proceeds of sale arising from a disposal by a foreign
investor of any of its or his investments in China) out of China is subject to
the approval of the SAEC.
Foreign Investment
China is in the process of developing a comprehensive system of laws for
the development of a market-oriented economy. Since 1979, a significant number
of laws and regulations dealing with foreign investment and matters related to
foreign investment have been promulgated.
The Constitution authorizes and encourages foreign investment and protects
the "lawful rights and interests" of foreign investors in China. The Civil
Procedure Law of China (the "Civil Procedure Law"), effective April 9, 1991,
provides that if there is a conflict between the provisions of international
treaties, to which China is a signatory, and domestic Chinese law, the treaty
provisions will prevail. In addition, the Foreign Economic Contract Law of China
(the "FECL"), effective July 1, 1985, provides that matters not covered by
Chinese law will be dealt with by reference to international practices.
Direct foreign investment in China usually takes the form of equity joint
ventures ("EJVs"), co-operative joint ventures ("CJVs") and wholly foreign-owned
enterprises. These investment vehicles are collectively referred to as foreign
investment enterprises ("FIEs").
An EJV is a Chinese legal person and consists of at least one foreign party
and at least one Chinese party. The EJV generally takes the form of a limited
liability company. It is required to have a registered capital, to which each
party to the EJV subscribes. Each party to the EJV is liable to the EJV up to
the amount of the registered capital subscribed by it. The profits, losses and
risks of the EJV are shared by the parties in proportion to their respective
contributions to the registered capital. There are also rules and regulations
governing specific aspects of EJVs or FIEs, including capital contribution
requirements, debt-equity ratio, foreign exchange control, labor management,
land use and taxation.
Unlike an EJV, a CJV may be, but need not be, incorporated as a separate
legal entity. The relationship between the parties is contractual in nature. The
rights, liabilities and obligations of the parties are governed by the CJV
contract, as is each party's share of the goods produced or profits generated. A
CJV is considered a legal person with limited liability.
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The establishment of FIEs requires the approval of various Chinese
government authorities. Generally speaking, the approval authority is determined
on the basis of the total amount of investment involved and the location of the
project in question. The State Council must approve any foreign investment
projects having an investment of U.S.$100 million or more. The State Planning
Commission and the Ministry of Foreign Trade and Economic Co-operation are
authorized by the State Council to approve foreign investment projects of less
than U.S.$100 million. Provincial authorities, usually the provincial
commissions of foreign trade and economic co-operation, are also authorized to
approve projects up to certain pre-determined amounts.
Foreign investment enterprises and their employees are subject to a variety
of taxes in China. Each tax levied is based on a separate law. The most
significant taxes imposed are income tax, value added tax, business tax,
consumption tax, land appreciation tax, real estate tax, vehicle and vessel
license tax, stamp duties and customs duties. Various tax incentives are
provided under the income tax law and regulations.
Gold Mining in China
Gold has been produced in China for over 4,000 years. In 1994, China was
the world's 6th largest producer of gold at a reported 130 tonnes, immediately
following Canada which was then the fifth largest producer of gold. It is
presumed that early Chinese production was from placer deposits and placer
reserves still account for over 15% of China's total gold reserves. Gold mining
is currently active in all of China's provinces, with over 460 official
operations. However, only 40 of these have reported annual production over
10,000 ounces of gold and only 10 have facilities capable of processing over 500
tonnes of ore per day.
The Chinese mining industry has traditionally been closed to foreign
participation. However, a change in the Mineral Resources Law has been
implemented by the PRC's Central Government which permits foreign participation.
The regulation of mining, including gold mining, in the PRC is in a state of
evolution from a totally planned, state-controlled condition to free market
conditions as experienced in developed and most developing countries. Ultimate
control is in the hands of the State Council. Policy is developed for the State
Council by its State Planning Commission ("SPC"). The State Gold Bureau ("SGB"),
a branch of the Ministry of Metallurgical Industry ("MMI"), regulates the gold
mining industry.
The Ministry of Geology and Mineral Resources ("MGMR") administers
geological exploration and also carries out exploration through its own
personnel. There are at present over one million people engaged in mineral
exploration, including petroleum exploration, in China, of which over 400,000
are employed by MGMR and its provincial affiliates.
Gold Sales In China
Under present Chinese law, all gold produced must be sold to the People's
Bank of China ("PBOC"), the Central Bank. The price paid by the PBOC has
increased considerably over the last three years but is still lower than the
current world gold price. Currently the PBOC purchases the gold for 90% of the
London Bullion Market fixed price for gold from time to time. The price paid by
the PBOC per ounce of gold is subject to adjustment based on significant
fluctuations in the fixed price as determined by the London Bullion Market.
Legal Framework for Chinese-Foreign Co-operative Joint Ventures
The following is a general description of the legal framework for
Sino-foreign co-operation joint ventures pursuant to which the business of the
Registrant is carried on in China or will be regulated. This description has
been compiled by the Registrant from various sources.
Legal Framework
Each of the various joint venture entities through which the Registrant
will carry on business in China has been or will be formed under the laws of
China as a Chinese-foreign co-operative joint venture enterprise and is or will
be a "legal person" with limited liability. All joint ventures entered into, or
to be entered into, by the Registrant must be approved by both the Ministry of
Foreign Trade and Economic Cooperation
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("MOFTEC") and the State Planning Commission ("SPC") in Beijing or their
provincial bureaus. Such approvals have not yet been obtained by the Registrant
except for its Emperor's Delight Property.
The establishment and activities of each of the Registrant's joint venture
entities are governed by the Law of the People's Republic of China on
Chinese-foreign Co-operative Joint Ventures and the regulations promulgated
thereunder (the "China Joint Venture Law"). As with all Chinese-foreign
co-operative joint venture enterprises, the Registrant's joint venture
enterprises will be subject to an extensive and reasonably well-developed body
of statutory law relating to matters such as establishment and formation,
distribution of revenues, taxation, accounting, foreign exchange and labor
management.
On January 1, 1997, an amendment to the Mineral Resources Law of China
became effective. Among other things, the amended law deals with foreign
ownership of Chinese mines and mineral rights, and allows, under some
circumstances, the transfer of exploration rights and mining rights. Pursuant to
this law, regulations are being drafted which are expected to set out in more
detail provisions related to foreign investment and development of Chinese
mines. These regulations are expected to be promulgated in 1997.
Under existing laws, in order to form a mining joint venture, foreign
companies must complete three levels of agreements which are subject to approval
by various government authorities depending upon the scale of the proposed
investment and the mineral commodities involved in the project. Larger projects
are submitted to Provincial or Central government authorities and smaller
projects are submitted to Local government authorities.
In general, the first level of agreement is a Letter of Intent or a
Memorandum of Understanding, which sets forth broad areas of "mutual
co-operation". The second level of agreement is a more detailed Co-operation
Agreement which outlines the essential terms of the joint venture which
ultimately will be formed. The third level of agreement is a Joint Venture
Contract which sets out the entire agreement among the parties and contemplates
the establishment of a "Chinese Legal Person", a separate legal entity.
Before a joint venture can be created, an assessment or feasibility study
of the proposed joint venture must be prepared and approved by the State
Planning Commission (the "SPC"). Therefore, upon completing a Co-operation
Agreement, the parties prepare a feasibility study of the proposed joint venture
and submit this feasibility study along with the Co-operation Agreement to the
SPC for what may be described as an approval in principle, the granting of which
depends upon whether the proposed project broadly conforms to the economic
policy issued by the government and any prescribed regulations. As part of this
approval process, the SPC consults with the Ministry of Geology and Mineral
Resources (the "MGMR") and with the government agency directly concerned with
the specific mineral commodity; for example, in the case of gold, with the Gold
Bureau of the Ministry of Metallurgical Industry.
Upon receiving this approval in principle, the parties then negotiate and
prepare a Joint Venture Contract and then submit it to the Ministry of Foreign
Trade and Economic Co-operation ("MOFTEC") which approves the specific terms of
all Joint Venture Contracts between Chinese and foreign parties. Within one
month after the receipt of a certificate of approval from MOFTEC, a joint
venture must register with the State Administration of Industry and Commerce
(the "SAIC"). Upon registration of the joint venture, a business license is
issued to the joint venture. The joint venture is officially established on the
date on which its business license is issued. Following the receipt of its
business license, the joint venture applies to MGMR to approve and grant to the
joint venture its exploration permits and/or mining licenses. As part of this
approval process, the MGMR consults with the military authorities to confirm
that no military reserves lie within the areas of interest.
Governance and Operations
Governance and operations of a Sino-Foreign Co-operative joint venture
enterprise are governed by the China Joint Venture Law and by the parties' joint
venture agreement and the Articles of Association of each joint venture entity.
Pursuant to relevant Chinese laws, certain major actions of the joint venture
entity require unanimous approval by all of the directors present at the meeting
called to decide upon actions such as: amendments to the joint venture agreement
and the Articles of Association; increase in, or assignment of, the
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registered capital of the joint venture; a merger of the joint venture with
another entity; or the termination and dissolution of the joint venture
enterprise.
Term
Under the joint venture agreement, the parties will agree to a term of the
joint venture enterprise from the date a business license is granted. However,
the term may be extended with the unanimous approval of the board of directors
of the joint venture entity and the approval of the relevant Chinese
governmental entities.
Employee Matters
Each joint venture entity is subject to the Chinese-Foreign Co-operative
Joint Venture Enterprise Labor Management Regulations. In compliance with these
regulations, the management of the joint venture enterprise may hire and
discharge employees and make other determinations with respect to wages,
welfare, insurance and discipline of its employees.
Generally, in the joint venture agreement, the standard of salary, social
welfare insurance and travelling expenses of senior management will be
determined by the board of directors of the joint venture entity. In addition,
the joint venture will establish a special fund for enterprise development,
employee welfare and incentive fund, and a general reserve. The amount of
after-tax profits allocated to the special funds is determined at the discretion
of the board of directors on an annual basis.
Distributions
After provision for a reserve fund, enterprise development fund and
employee welfare and incentive fund, and after provision for taxation, the
profits of a joint venture enterprise will be available for distribution to the
Registrant and the relevant Chinese governmental entity, such distribution to be
authorized by the board of directors of the joint venture entity.
Assignment of Interest
Under joint venture agreements and the China Joint Venture Law, any
assignment of an interest in a joint venture entity must be approved by the
relevant governmental authorities. The China Joint Venture Law also provides for
pre-emptive rights and consent of the other party for proposed assignments by
one party to a third party.
Liquidation
Under the China Joint Venture Law and joint venture agreements, the joint
venture entity may be liquidated in certain limited circumstances including the
expiry of its term or any term of extension, inability to continue operations
due to severe losses, failure of a party to honor its obligations under the
joint venture agreement and Articles of Association in such a manner as to
impair the operations of Chinese governmental entitles and force majeure.
Resolution of Disputes
In the event of a dispute between the parties, attempts will be made to
resolve the dispute through friendly consultation. This is the practice in China
and the Registrant believes that its relationship with Chinese governmental
entities is such that it will be able to maintain a good working relationship
with respect to the operations of its joint venture enterprises. In the absence
of a friendly resolution of any dispute, the parties have agreed or will agree
that the matter will first be referred to the Foreign Economics and Trade
Arbitration Commission of China Council ("FETAC") for the Promotion of
International Trade for Arbitration. Awards of FETAC are enforceable in
accordance with the laws of China before Chinese courts. Resort to Chinese
courts to enforce a joint venture contract or to resolve disputes between the
parties over the terms of the contract is permissible. However, the parties may
jointly select another internationally recognized arbitration institution to
resolve disputes.
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Expropriation
The Chinese Joint Venture Law also provides that China generally will not
nationalize and requisition enterprises with foreign investment. However, in
special circumstances where demanded by social public interest, enterprises with
foreign investment may be requisitioned by legal procedures, but appropriate
compensation will be paid.
ITEM 2. DESCRIPTION OF PROPERTY.
ACQUISITION OF THE REGISTRANT'S CHINESE PROPERTIES
The PCR Assignment Agreement
The Registrant acquired its interests in the Emperor's Delight, Stone Lake,
Crystal Valley and Changba-Lijiagou Properties pursuant to the PCR Agreement.
See Item 1, ("Pacific Canada Resources Agreement"). PCR is an Ontario,
Canada-based private company, controlled by Ken Cai and Donald Hicks, who
collectively own 56% of the issued shares of PCR. After completion of the PCR
Agreement, Ken Cai and Donald Hicks were appointed to the Registrant's Board of
Directors.
Under the terms of the PCR Agreement, the Registrant acquired 60% of the
issued and outstanding shares of Triple Eight Mineral Corporation ("Temco"). At
the time of this acquisition, the remaining 40% of the issued shares of Temco
were owned by China Clipper Gold Mines Ltd. ("China Clipper"), an Ontario
company the shares of which are listed on the Alberta Stock Exchange. On
February 27, 1997, the Registrant entered into an agreement with China Clipper
wherein its joint venture business with China Clipper was terminated by mutual
agreement. The Registrant purchased all of China Clipper's beneficial interest
in Temco for $175,000. In so doing, Temco became wholly-owned by the Registrant
and, incidental thereto, all co-venture relationships between the parties ended
and all of China Clipper's interests and other rights that it may have held in
respect to joint venture business were transferred to the Registrant. In
addition, pursuant to the PCR Agreement, PCR assigned to the Registrant all of
its interests in and to the following agreements:
1. Letter of Intent Regarding the Development of the Changba-Lijiagou
Large Lead-Zinc Deposit, dated June 6, 1995 between PCR, Teck Exploration
Ltd. and Baiyin Non-Ferrous Metals Company (the "CBLG Agreement");
2. Co-operation Agreement regarding certain mineral deposit
properties, dated November 24, 1994 between PCR, Patrician Gold Mines Ltd.
and the First Geoexploration Bureau of Ministry of Metallurgical Industry,
the interests of Patrician Gold Mines Ltd. having subsequently been
assigned to China Clipper (the "FGEB Co-operation Agreement");
3. Joint Venture Contract dated December 25, 1995 between
Geoexploration Corporation of the First Geoexploration Bureau ("GEC-FGEB"),
a subsidiary of the Ministry of Metallurgical Industry of the government of
the PRC, and Temco regarding the exploration and development of the
Emperor's Delight Property (the "Emperor's Delight Joint Venture
Agreement"); and
4. Option Agreement dated March 3, 1995 between PCR and Orient Gold
Mines Ltd. (the "Temco Option Agreement").
The PCR Agreement also entitles the Registrant to an exclusive right to
acquire from PCR, at cost, all non-Chinese interests in base and precious metal
property agreements which PCR may secure in China until March 1, 2000, subject
only to certain prior rights held by Teck Corporation and Cominco Ltd. described
below under the subheading "Teck-Cominco Investment and Participation
Agreements".
The Registrant's interests in the GEC-FGEB Co-operation Agreement and the
Emperor's Delight Joint Venture Agreement are held through the Registrant's
subsidiary Temco and are subject to the terms and conditions of the Temco Option
Agreement. See "Temco Option Agreement", below.
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<PAGE> 19
In addition to the agreements assigned to it by PCR, the Registrant has
acquired interests in mineral properties in China known as the Chapuzi Property,
the Tian Shan Properties, the Gala Property and the Xifanping Property pursuant
to the following agreements:
1. Co-operative Agreement between the Registrant and Sichuan Bureau of
Geology and Mineral Resources ("MGMR-Sichuan") dated July 7, 1995 and
subsequently amended regarding the exploration and development of the
Chapuzi Property (the "Chapuzi Agreement");
2. Co-operative Agreement between the Registrant and Bureau of Geology
and Mineral Resources of Xinjiang Uygur Autonomous Region dated May 27,
1996 regarding the exploration and development of the West Tian Shan
Properties;
Letter of Intent between the Registrant and the MGMR-Sichuan dated
October 15, 1996 regarding the exploration and development of the
Xifanping Property.
Letter of Intent between the Registrant and the MGMR-Sichuan dated
February, 1997 regarding the exploration and development of the Gala
Property.
Further details with respect to the Chapuzi Agreement and the Chapuzi
Property are found below under the heading "Chapuzi Property" below. Details
with respect to the Tian Shan, Gala and Xifanping Properties are found under the
heading "Other Properties of the Registrant" below.
Teck-Cominco Investment and Participation Agreements
PCR and the Registrant have separately entered into an Investment and
Participation Agreement with Teck Corporation and Cominco Ltd. dated,
respectively, February 19 and 20, 1996 (collectively the "TCIP Agreements").
Pursuant to the TCIP Agreements, Teck and Cominco have been granted earn-in
rights on the non-Chinese interests in any two Chinese properties identified and
secured by PCR or the Registrant subsequent to the dates of the TCIP Agreements
(the "TC Earn-In Rights"). In consideration for the grant of the Earn-In Rights
to Teck and Cominco, Teck and Cominco each agreed to subscribe for 625,000 units
of the Registrant at a price of $0.80 per unit, on a private placement basis,
each unit consisting of one common share in the capital of the Registrant and
one fifth of one non-transferable share purchase warrant of the Registrant. One
whole share purchase warrant entitles the holder to purchase one common share of
the Registrant. The share purchase warrants issued to Teck were exercised prior
to February 20, 1997. The warrants issued to Cominco are still exercisable, at a
price of $1.38 per share, until February 20, 1998.
The TC Earn-In Rights provide that upon PCR procuring a base or precious
metal project, Teck and Cominco shall first determine whether such project is to
be governed by the TCIP Agreements. If they determine that it is to be so
governed, the project shall automatically be transferred by PCR to the
Registrant at cost and Teck and Cominco shall hold Earn-In Rights in respect to
such property. If Teck and Cominco determine that the project is not to be
governed by the TCIP Agreements, the Registrant shall thereafter have the right
to elect whether or not to have the project assigned to it at cost.
If Teck and Cominco determine that a base or precious metal project is to
be governed by the TCIP Agreements, their Earn-In Rights shall be exercisable in
one of two ways, depending on whether the project is determined to be a
"development property" or an "exploration property" under the TCIP Agreements,
which determination is made solely by Teck and Cominco. If determined to be a
development property, Teck and Cominco shall have the right to acquire 70% of
the non-Chinese interest in such property and to become the operator of the
project by completing, at their sole cost, any further project work and the
final feasibility report on the project. Teck and Cominco must then arrange for
70% of the costs required to be provided by the non-Chinese parties to place the
property into commercial production. Upon completion of all of the foregoing,
Teck and Cominco shall be deemed to have exercised their Earn-In Rights in
respect to the development project.
If a project is determined to be an exploration property, Teck and Cominco
shall have the right to acquire 51% of the non-Chinese interest in such
exploration property and to become the operator of programs on the property. To
earn this 51% interest, Teck and Cominco must fund the final feasibility study
on the project and
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<PAGE> 20
arrange for all financing required to be provided by the non-Chinese parties to
place the property into commercial production. Upon completion of all of the
foregoing, Teck and Cominco shall be deemed to have exercised their Earn-In
Rights in respect to the exploration project.
Each property for which Teck or Cominco have exercised an Earn-In Right
shall be governed by its own separate joint venture agreement which will include
a provision that if the Registrant's interest is diluted to 10% or less, such
interest will be converted to a 1% net smelter return royalty.
After Teck and Cominco have exercised their Earn-In Rights in an aggregate
of two projects procured by PCR or the Registrant, Teck and Cominco shall have
further preferential rights of purchase in respect to further properties
identified by PCR or the Registrant for a period of three years after the
exercise of their Earn-In Rights. These preferential rights of purchase will
apply only in circumstances where PCR or the Registrant, if the Registrant has
elected to acquire a project identified by PCR, intend to offer an interest to
third parties or have received an offer to purchase, earn or acquire an interest
in such properties from third parties.
The rights of Teck and Cominco under the TCIP Agreements shall only apply
to projects secured by PCR or the Registrant on or before March 1, 2004.
Temco Option Agreement
Pursuant to the Temco Option Agreement, PCR granted China Clipper's
predecessor, Orient Gold Mines Ltd., an option to earn a 40% equity interest in
Temco by expending $500,000 on the Chinese mineral properties which are the
subject matter of the GEC-FGEB Co-operation Agreement. China Clipper completed
its earn-in obligation and held 40% of the issued shares of Temco prior to these
shares being purchased by the Registrant in February of 1997.
The terms of the Temco Option Agreement provided that in order to maintain
its 60% interest, the Registrant had the obligation to fund 40% of further
expenditures on the mineral properties underlying the GEC-FGEB Co-operation
Agreement until a total of $8,000,000 had been spent by the parties (excluding
the initial $500,000 expended by China Clipper). In order to maintain its 40%
interest, China Clipper had the obligation to fund 60% of further expenditures
until $8,000,000 in total has been spent. The GEC-FGEB Co-operation Agreement
further provides that 20% of such expenses shall be deemed to be credited to the
Registrant for the purposes of calculating each party's respective interests in
Temco until such time as $8,000,000 in total has been spent. Subsequent to the
expenditure of $8,000,000, each party was to contribute based on its pro rata
interests in Temco. If either party had diluted down to less than a 20% equity
interest in Temco pursuant to a standard dilution formula, such diluted party
would have relinquished its remaining equity interest and received as
consideration therefor a 12.5% net profits royalty interest and a lump sum of
$100,000 also payable from net profits.
As the initial project being undertaken by Temco involves the Emperor's
Delight Property, China Clipper's funding obligations corresponded to the timing
of Temco's obligations to fund expenditures under the Emperor's Delight Joint
Venture Agreement. Pursuant to this Agreement, as at December 31, 1996, China
Clipper had paid U.S.$396,000 to Temco as part of its U.S.$2,640,000 exploration
commitment on the Emperor's Delight Property.
On February 27, 1997, the Registrant entered into an agreement with China
Clipper wherein its joint venture business with China Clipper was terminated by
mutual agreement. The Registrant purchased all of China Clipper's beneficial
interest in Triple Eight Mineral Corporation ("Temco") for $175,000. In so
doing, Temco became wholly-owned by the Registrant and, incidental thereto, all
co-venture relationships between the Registrant and China Clipper ended and all
of China Clipper's interests and other rights that it may have held in respect
to joint venture business were transferred to the Registrant.
GEC-FGEB Co-operation Agreement
Under the GEC-FGEB Co-operation Agreement, a framework was established for
the negotiation of joint venture agreements in respect to each of the Emperor's
Delight, Stone Lake and Crystal Valley
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<PAGE> 21
Properties. At present, a joint venture agreement has been finalized only in
respect to the Emperor's Delight Property which is described in greater detail
below under the subheading "Emperor's Delight Property" and which supersedes the
GEC-FGEB Co-operation Agreement insofar as it relates to the Emperor's Delight
Property. The Registrant is still negotiating the terms of possible joint
venture agreements with GEC-FGEB in respect to each of the Stone Lake and
Crystal Valley Properties, which negotiations are expected to be concluded in
1997. However, there is no assurance that such joint venture agreements will
ever be concluded.
Pursuant to the terms of the GEC-FGEB Co-operation Agreement, the
Registrant has the exclusive right to negotiate joint venture agreements on
behalf of Temco with GEC-FGEB in respect to the Stone Lake and Crystal Valley
Properties, with such right enduring for so long as the parties continue to
negotiate in good faith. Such joint venture agreements will require GEC-FGEB to
contribute to the joint ventures the exploration interests in the properties and
the required exploration and development permits, as well as all technical data
available to GEC-FGEB in respect to such mineral properties. Temco is required
to contribute certain technology as well as capital for the further exploration
and development of the subject properties. The joint venture agreements will
entitle Temco to earn no less than a 55% undivided interest in any joint venture
involving a gold property and a 60% undivided interest in any joint venture
involving a base metals property.
The extent of the capital contributions required to be made by Temco under
the to-be-negotiated new joint venture agreements will be a function of: (i) the
total amount of capital expended by GEC-FGEB, other levels of Chinese government
and other Chinese legal entities (the "Chinese Entities") on the subject
properties prior to the date of finalization of a joint venture agreement; and,
(ii) the percentage interest in the joint venture which Temco may earn. For
example, if the Chinese Entities have expended the equivalent of U.S.$400,000
and if Temco is granted the right to earn a 60% interest in the joint venture,
then the amount required to be expended by Temco in order to earn the 60%
interest will be U.S.$600,000. After Temco has earned its initial equity
interest in the joint venture, each party to the joint venture will be required
to contribute additional capital based on their respective pro rata interests,
with standard dilution provisions applicable to non-contributing parties.
INDEPENDENT CONSULTANTS' REPORTS
The Emperor's Delight, Stone Lake and Crystal Valley Properties are the
subject matter of a geological report prepared by A.C.A. Howe International
Limited ("A.C.A. Howe") entitled, "Evaluation Report on the Crystal Valley,
Stone Lake and Emperor's Delight Gold Projects, Hebei Province, The People's
Republic of China" dated March 13, 1995 and as updated by two reports, also
prepared by A.C.A. Howe, entitled "Valuation of the Emperor's Delight Joint
Venture Property, Hebei Province, The People's Republic of China", dated
November 15, 1995 and "Update of Work Performed on the Emperor's Delight,
Crystal Valley and Stone Lake Properties" dated December 9, 1996 (collectively
the "A.C.A. Howe Report"). The descriptions which follow in this section
concerning these properties have been prepared on the authority of A.C.A. Howe
International Limited and, in some cases, are extracts from the A.C.A. Howe
Report.
The Chapuzi Property is the subject of an independent consultant's report
titled "Chapuzi Gold Occurrence Report for Minco Mining and Metals Corporation"
prepared by H.A. Simons Ltd. of Calgary, Alberta dated December, 1996 (the "H.A.
Simons Report"). The descriptions that follow are based primarily on these
reports and on observations made during a site visit made to the property in
July of 1995 by management of the Registrant. The description which follows in
this Item 2 concerning the Chapuzi Property has been prepared on the authority
of H.A. Simons Ltd. and, in some cases, are extracts from the H.A. Simons
Report.
The Changba-Lijiagou Property is the subject matter of two reports prepared
by H.A. Simons Ltd. entitled "Technical Site Visit to Smelters and Mine
Facilities of Baiyin Non-Ferrous Metals Corporation, Ganzu Province, People's
Republic of China" dated December, 1995 and "Proposed Development Strategy for
the Changba Lijiagou Underground Mine" dated December 9, 1996 (collectively, the
"CBLG Technical Reports"). The description which follows in this Item 2
concerning the Changba-Lijiagou Property has been prepared using information
from the CBLG Technical Reports.
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<PAGE> 22
Much of the information contained in the Consultants' Reports is based on
information provided by Chinese governmental officials, geologists and mining
engineers. Accordingly, the reliability of geological and mineral information
regarding the properties, the costs of labor, operation and construction
provided by Chinese government officials, geologists and mining engineers cannot
be assured.
CHINA'S RESOURCE CLASSIFICATION SYSTEM OF ORE RESERVES
The following definitions of Chinese reserve and resource categories are
largely extracted from the 1995 "Evaluation Report On The Crystal Valley, Stone
Lake and Emperor's Delight Gold Projects, Hebei Province, The People's Republic
Of China" by Dr. Wayne Ewert of A.C.A. Howe International Limited.
In China, producible reserves are divided into A, B, C, and D categories
based on the level of geological certainty.
The "A" reserve category represents the highest level of reserve and is
based on the following factors which act as the foundation for mine design:
- the shape and occurrence of the mineralized bodies have been accurately
defined to the highest level of certainty;
- structural elements such as faults, folds and fracture zones that affect
mining have been accurately defined by extensive underground exploration;
- the lithologic character, occurrence and distribution of waste rock has
been totally ascertained; and
- the varying industrial types and grades of the mineralization within the
deposit have been totally ascertained.
The "B" category reserves have a high degree of certainty and can be used
as the basis for mine design. Such reserves usually define the shallow portions
of a deposit (i.e. the first mining blocks). The requirements for these reserves
are:
- the shape of the occurrence of the mineralization has been defined in
great detail;
- structural elements such as faults, folds and fracture zones that affect
mining have been basically defined, usually by detailed underground
exploration; and
- within the deposit the different industrial types and grades of the
reserves have been defined in detail.
The "A" and "B" reserve categories in China's classification scheme have
complete and detailed geologic certainty and correspond to the measured reserves
in Canada which also have detailed geologic certainty defined by detailed
sampling and measurement on a closely spaced basis. These reserves in both
countries have the highest degree of certainty and are usually based on detailed
underground work.
A "C" category reserve may also be used as the basis for mine design. Such
reserves are required to have the following attributes:
- the shape and occurrence of the deposit has been basically defined;
- the character and occurrence of structural elements that affect the
mineralization have been basically defined by suitable underground
exploration;
- the lithologic character, occurrence and the distribution of the
stratigraphic and igneous strata that inhibit the development of the ore
are generally known and understood; and
- within the ore bodies, the different industrial types and grades of ores
have been basically ascertained.
"C" category reserves in China roughly correspond to the "Indicated"
reserve category in Canada. In China's classification system, "C" category
reserves while having a basic geologic certainty that is lower than "A" and "B"
category reserves, are highly reliable, detailed in nature and are based on
closely spaced measurements usually collected from data points gathered on
several underground levels.
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<PAGE> 23
The "D" level reserves are for future exploration and mine development.
They are normally controlled by relatively sparse drilling (e.g. 80 meter X 80
meter centers). They may be used for mine design when the "C" category reserves
are difficult to calculate because of complexities inherent in the deposit. In
such cases the "D" reserves can only be used if:
- the shape, occurrence and distribution of the deposits have been
generally defined;
- the structural characteristics that affect the deposits have been
generally understood; and
- the industrial type and grade of the deposits have been generally
ascertained and understood.
"D" category reserves in China correspond to the "Inferred" category in
Canada. Such reserves are controlled by relatively sparse drilling or estimated
by the extension of the "C" category reserves.
"E" and "F" category resources in China correspond to the hypothetical
resource category in Canada. Basically an "E" category resource is defined as an
extension of "D" category while an "F" category resource is estimated on the
basis of geological data in areas adjacent to known reserves.
"G" category resource refers to the geological potential of an area without
an established mineral resource but has very favorable geological conditions.
The would correspond to a speculative resource in Canada.
Unproducible reserves in China are reserves that do not satisfy the minimum
physical and chemical criteria in the code issued by the Ministry of Geology and
Mineral Resources but which may be potentially classified as feasible reserves
in the future. These reserves include those that are difficult to mine, hard to
beneficiate, have complicated hydrology or are small, difficult to access and
are widely scattered.
THE CHAPUZI PROPERTY
Acquisition
The Chapuzi Property is considered a "Principal Property" of the Registrant
as the Registrant intends to expend a material portion of the net proceeds of
previous private placements of securities on such property.
The Registrant acquired its interest in the Chapuzi Agreement pursuant to
arms length negotiations with the Sichuan Bureau of the Ministry of Geology and
Mineral Resources (the "MGMR-Sichuan") resulting in the Chapuzi Agreement. The
Chapuzi Property is the subject of a report prepared by H.A. Simons Ltd. dated
December, 1996 (the "H.A. Simons Report").
Pursuant to the Chapuzi Agreement, the Registrant and MGMR-Sichuan agreed
to create a joint venture in respect to the exploration and development of the
Chapuzi Property located in Mianning County, Sichuan Province. Under the Chapuzi
Agreement, MGMR-Sichuan has designated the Panxi Geological Investigation
Institute of Xichang, Sichuan Province ("Panxi"), as its representative in the
joint venture. The joint venture shall be conducted through a joint venture
corporation to be incorporated pursuant to the Joint Venture Law of China. The
original Cooperation Agreement was entered into between the Registrant and
MGMR-Sichuan dated July 7, 1995, as amended October 11, 1995 and supplemented by
a new Co-operation Agreement dated July 27, 1996.
As its contribution to the joint venture, the Registrant has agreed to
provide all funding required for the exploration and development of the Chapuzi
Property. In addition, the Registrant will serve as operator of all exploration
and development programs to be conducted by the joint venture. MGMR-Sichuan and
Panxi have agreed to transfer all their rights and interests in and to the
Chapuzi Property, make available certain exploration and mining equipment as
well as local technicians and other necessary personnel, at wages consistent
with prevailing local market conditions, provide all necessary geological
information and arrange for all necessary regulatory and governmental approvals
required for the joint venture.
Upon expending the sum of Cdn.$5,000,000, the Registrant shall have earned
a 51% equity interest in the joint venture corporation. If the Registrant
finances the construction of a mine and plant on the Chapuzi Property, its
equity interest in the joint venture corporation will, effective on the
commencement of
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<PAGE> 24
commercial production from such mine and plant, be increased to 75%. The Chapuzi
Agreement further provides that all funds advanced by the Registrant to the
joint venture corporation shall be treated as non-interest bearing loans, to be
repaid to the Registrant from profits of the joint venture corporation prior to
any annual pro-rata distribution of income to the joint venture partners. Once
the loans are paid, profits will be distributed annually based upon the equity
shares held in the joint venture corporation.
The Chapuzi Agreement further provides that if the Registrant advances less
than Cdn.$5,000,000 to the joint venture and if a final feasibility report
obtained by the Registrant concludes that it is uneconomic to construct a mine
and plant on the Chapuzi Property, then the Registrant's equity interest in the
joint venture corporation shall be determined as that percentage which is equal
to 51% multiplied by a fraction in which the numerator is the amount of funds
expended by the Registrant and the denominator is Cdn.$5,000,000. Thereafter,
MGMR-Sichuan and Panxi shall have the right to enter into an agreement with any
third party to continue exploration and development work on the Chapuzi Property
provided that such third party first reimburses the Registrant for all prior
expenditures made by the Registrant.
A title opinion in respect to the Chapuzi Property has not been obtained by
the Registrant.
The following information respecting the Chapuzi Property was derived from
the H.A. Simons Report which report relied heavily on a report prepared by the
Sichuan Bureau of the Ministry of Geology and Mineral Resources dated April 3,
1995 and entitled "Brief Introduction of Chapuzi Gold Deposit, Mianning County,
Sichuan Province".
Location and Description
The 120 square kilometer Chapuzi Property is located within Mianning
County, Sichuan Province, approximately 350 kilometers southwest of Chengdu, the
provincial capital. The property is located west of the Yangtze Platform at an
elevation of about 3,000 meters in a region of moderate to strong local relief.
To get to this property one can travel from Beijing to Chengdu and on to
Xichang by regular scheduled flights. From Xichang there is a 150 kilometer
drive on paved roads to the Mofangou Hydroelectric Power Station at the southern
end of the property, approximately a five hour journey. The paved road ends
after crossing the Yalong River. To get to the area of the deposits on the
property one needs to go by horseback up mountain trails used by the local
subsistence level farmers -- a journey of approximately five to six hours. A new
25 Megawatt hydroelectric power station is being constructed approximately 5
kilometers north of the Mofangou Power Station.
Exploration and Development History
The Chapuzi gold deposits were first discovered in 1961 after follow-up
work on a regional geochemical anomaly was initiated by a division of the
MGMR-Sichuan. The MGMR-Sichuan has carried out regional geological mapping and
geochemical surveying at a scale of 1:200,000 and more detailed geochemical
surveying at a 1:50,000 scale.
Between 1977 and 1983, more detailed work, including 58,200 cubic meters of
trenching, 1,420 meters of underground cross-cutting and 2,770 meters of diamond
drilling, has resulted in the delineation of the resources on the property. In
addition, during this time some metallurgical testing was performed by the
MGMR-Sichuan on the mineralization. The MGMR-Sichuan's conclusions from all
their work completed to date is that the known mineralization is amenable to
open pit mining methods and to heap leach extraction methods.
Due to a lack of capital and the fact that the deposit has a relatively low
grade (2.68 grams/tonne), no further work was completed by the MGMR-Sichuan on
the property since 1983. Some small-scale illegal recovery of gold from
development dumps has been carried out intermittently by local farmers.
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<PAGE> 25
Geology, Mineral Deposits and Resources
Tectonically the Chapuzi Property is located in front of the Muli-Yanyuan
nappe zone to the west of the Yangtze Platform. On the property, gold
mineralization is hosted by Permian age Chapuzi Formation structurally altered,
metasomatized basic volcanic rocks intercalated with volcanic tuffs and
dolomitic marbles. The host Chapuzi Formation rocks occupy a zone, approximately
two kilometers wide by fifty kilometers long, which forms the core of a
north-trending synclinal structure. This north-south structural trend is
dominant on the property.
Small-scale, high-grade gold mining of veins is being carried out in the
region by local mining companies. The closest such operation to the Chapuzi
deposit is located some 15 kilometers to the south-southeast of the property on
the south side of the Yalong River.
On the Chapuzi Property, two mineralization types are present; (1)
gold-bearing, polymetallic sulphide, quartz vein mineralization and (2)
disseminated, gold-bearing, pyrite and carbonate mineralization. Within the vein
type mineralization minerals are mainly pyrite and limonite with secondary
tetrahedrite, galena, sphalerite, chalcopyrite, pyrrhotite and bornite in a
gangue of ferroan dolomite and quartz. Within the disseminated pyrite-gold
mineralization the only sulphide present is pyrite, commonly showing a
pyritohedron form in a quartz/sericite/carbonate altered host rock. This latter
type of gold mineralization is by far the most important on the property. The
gold occurs as native, fine-grained lamellar and platy grains situated within
cracks in the pyrite and limonite crystals or occupying sites between quartz and
limonite crystals. Gold grain size range from 0.01 -- 0.02 mm.
The mineralized lenses that make-up the known resources on the Chapuzi
Property appear as lenticular shaped zones, which dip 30 degrees to 50 degrees
to the west, that are parallel to the fabric in the host rock. Twenty-nine
individual mineralized bodies have been identified to date within a 7.0
kilometer long by 1.2 kilometer wide zone. The length of individual lenses can
be vary from several tens of meters to 330 meters and their width can vary from
about 2 to 40 meters. Of those mineralized zones that have been investigated at
depth the down dip continuity has ranged from 10 to 160 meters.
The known mineralized zones on the Chapuzi Property are subdivided into
seven main blocks from north to south: Sujiaping, Maidigen, Qiankuangbao,
Yangliuwan, Baimachang, Jinchuan and Lagushan. The Maidigen block has been
systematically explored with 40 meter spaced surface trenching, two underground
adits, at the 2,960 meter and 2,920 meter elevations, and fourteen 40 to 80
meter spaced diamond drill holes. The Sujiaping, Yangliuwan and the Baimachang
blocks have been covered by 80 meter spaced trenches across the mineralized
zone. The Jinchuan and an area south of Lagushan has been trenched at 100 meter
intervals. The Qiankuangbao block which covers a gold-bearing, polymetallic vein
type lead-zinc deposit in the footwall of the main disseminated gold-pyrite
mineralization has been systematically explored by 40 meter spaced trenching and
some underground openings.
Surface trenching has been the main exploration tool used to date. Of the
seven blocks the two southern areas, Jinchuan and Lagushan, have been tested
along strike by 100 meter spaced trenches. The Sujiaping, Yangliuwan and
Baimachang blocks have trenches spaced at 80 meters, while the Maidigen and
Qiankuangbao blocks have trenches spaced at 40 meters. Examination of outcrop
shows very prominent, continuous channel samples cut approximately 10 cm wide
and 5 cm deep into the exposure.
Fourteen diamond drill holes have been completed for a total of 2,771.9
meters. Ten of the holes are within a 300 meter strike length, on four cross
sections, in the most northerly Maidigen block. The holes are on cross-sections
spaced approximately 80 meters apart and the holes are drilled between 40 and 80
meters apart.
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The only resource estimate available for the property is one prepared by
the Sichuan Bureau of the Ministry of Geology and Mineral Resources. Using a
cut-off grade of 1.0 gram gold / tonne the MGMR-Sichuan has calculated resources
for each of these blocks as follows:
<TABLE>
<CAPTION>
ROCK
TONNES
GOLD ------ GRADE
CLASS TONNES AG AU/T
-------- ------ (X10(6)) -------
<S> <C> <C> <C> <C>
Maidigen...................................... Block-D 1.549 0.688 2.25
E 0.775 0.344 2.25
Sujiaping..................................... Block-E 1.181 0.371 3.18
Yangliuwan.................................... Block-E 2.053 0.766 2.68
Baimachang.................................... Block-E 0.789 0.311 2.53
Jinchuan...................................... Block-E 1.112 0.305 3.64
Qiankuangbao.................................. Block-E 0.194 0.072 2.68
TOTAL............................... 7.668 2.857 2.68
----- ----- ----
</TABLE>
Class "D" mineralization is best considered equivalent to "probable" in
western terminology while class "E" material is best considered equivalent to
"possible" resources.
The Canadian engineering firm of H.A. Simons Ltd. has reviewed the
methodology of the resource calculation and has declared, " . . .(the reserves)
were calculated using a one gram gold per tonne cut-off, polygonal methods and
weighted averages. The techniques used are accepted in the mining industry and
the work has been carried out with the reasonable care and skill expected of the
engineering profession". H.A. Simons Ltd. did not undertake independent
investigations to validate the accuracy of the resource estimate. Because the
drill core recovery for the drill holes through the deposit did not meet the
required Chinese standards these resource numbers have not yet been approved by
the State Reserve Committee.
Two separate tests were carried out on the mineralization by the
Registrant. The first was carried out to test the Chinese chemistry analytical
methods used on the Chapuzi samples. One hundred drill core and underground
samples which spanned the grade range of the deposit were chosen by the
Registrant. Splits from the rejects of the original samples were ground and sent
to Vancouver for analyses. These samples were then fire assayed by Acme
Analytical Laboratories of Vancouver and the results compared with the original
results from the Chinese wet chemical method. The results showed that the two
sets of data were largely very similar and showed a very close correlation.
Statistics showed that for the underground samples and the drill core samples
the difference between the two sets of assays is +5% for the Canadian fire assay
method, i.e. the fire assays showed a 5% higher grade than the Chinese wet
chemical methods. When only the samples with greater than 0.5 grams gold/tonne
are compared, this difference rises to +10%.
The second test was to try to determine if the mineralization at Chapuzi is
heap leachable. This question cannot be definitively answered without performing
extensive column leach tests involving large samples of the potential ore
mineralization. However, indications of amenability of leaching are possible
from bench-scale bottle roll tests. Cominco Engineering Services Ltd.
environmental laboratory of Vancouver, at the request of H.A. Simons Ltd. of
Vancouver, provided facilities for a series of bottle roll tests on three
samples of mineralization from the Chapuzi Deposit. These samples were taken by
employees of the Registrant, with an H.A. Simons Ltd. geologist in attendance,
from the underground workings in the Maidigen Block of the Chapuzi Deposit
during July of 1995. These scoping tests were carried out to determine the
viability of various cyanide leach options. The main conclusions from these
tests were: (1) the main disseminated gold/pyrite mineralization may be
treatable by either a heap leach or by conventional milling, and (2) a sample of
vein mineralization shows a different mineralogy but may still be treated
conventionally or in a heap leach.
Proposed Exploration and Development Program
The Registrant has allocated $700,000 from the proceeds of its private
placement financings to conduct the work programs as recommended in the H.A.
Simons Report.
26
<PAGE> 27
The Registrant believes that the existing reserves would not be sufficient
in itself to justify construction of a mine at Chapuzi. Consequently, and before
any further work is carried out to firm-up the existing reserve categories on
the property, the issuer has initiated field programs to evaluate the potential
of the remainder of the property to host gold reserves.
A Phase I work program to help evaluate the southern 33 square kilometers
of the property, centered over the Chapuzi Formation, was begun in September,
1996. Regional geochemical surveys in this area have defined soil anomalies in
gold, copper, lead, zinc and arsenic. The Phase I work program consists of the
following:
PHASE I PROGRAM BUDGET:
<TABLE>
<S> <C>
Soil Sampling & Analyses
Grid of 20 m x 200 m and 20 m x 400 m
Total Samples = 5,400........................................ $ 88,000
Geological Mapping & Lithogeochemistry
Spot sampling at geochemical grid spacing on three lines 500
rock samples and analyses for 10 elements.................... 18,000
--------
Total Phase I Program................................... $106,000
========
</TABLE>
These surveys are designed to more closely define the anomalies for
follow-up investigations in Phase II of the program. The field work comprising
the Phase I work program has been completed and the results are being analyzed.
Phase II work programs will be initiated as soon as practicable after Phase
I results are analyzed and if found to be positive. It is anticipated that Phase
II would begin during the summer of 1997 and would be completed by the end of
1997.
The scope of the Phase II work program will depend on the results obtained
in Phase I and will likely consist of two stages to be conducted in 1997. The
first stage will involve trenching and detailed mapping of any new anomalies
generated by Phase I. The second stage will be dependent on the results of the
first stage but would likely involve underground investigation by aditing or
diamond drilling of any new anomalies. Any diamond drilling generated by this
work will be expanded to include a program to upgrade known reserves. It is
anticipated that the Phase II program will consist of the following:
<TABLE>
<S> <C>
PHASE II PROGRAM BUDGET
Geological and Metallurgical consulting........................... $ 50,000
Trenching program................................................. 57,000
Geophysics/IP surveys............................................. 25,000
Diamond drilling.................................................. 350,000
Aditing/Underground investigation................................. 150,000
Travel, accommodation, field equipment and transport
and report preparation.......................................... 30,000
Contingency....................................................... 38,000
--------
Total Phase II Program.................................. $700,000
========
</TABLE>
27
<PAGE> 28
To December 31, 1996, the Registrant has spent approximately $288,617 on
the investigation and exploration of the Chapuzi Property, as follows:
<TABLE>
<CAPTION>
EXPENDITURES AMOUNT
------------------------------------------------------------------ --------
<S> <C>
Property Investigation(1)......................................... $135,201
Geological Consulting............................................. 26,600
Travel and Accommodation.......................................... 7,198
Miscellaneous..................................................... 5,402
Geochemical Survey & Assay........................................ 114,216
--------
TOTAL................................................... $288,617
========
</TABLE>
- ---------------
(1) Expensed in the year ended December 31, 1995.
The Chapuzi Property does not contain a known body of commercial ore and
the Registrant's proposed work program is an exploratory search for ore only.
EMPEROR'S DELIGHT PROPERTY
Acquisition
The Emperor's Delight Property is a "Principal Property" of the Registrant
as the Registrant intends to expend a material portion of the net proceeds of
its 1996 private placements on such property.
The Registrant acquired its interest in the Emperor's Delight Property
pursuant to the PCR Agreement, the terms of which are described under the
heading "Acquisition of the Registrant's Chinese Properties" above. Of the
7,280,000 shares issued to PCR by the Registrant pursuant to the PCR Agreement,
2,400,000 shares not subject to escrow restrictions were issued at a deemed
value of $0.97 per share on the basis of a valuation of the Emperor's Delight
Property by A.C.A. Howe International Limited dated March 14, 1995. The
Emperor's Delight Property is the subject matter of a report prepared by Dr.
Wayne Ewert of A.C.A. Howe International Limited dated March 13, 1995 and
updated pursuant to an addendum dated December 9, 1996.
Joint Venture Agreement
The Emperor's Delight Property is the subject matter of the Emperor's
Delight Joint Venture Agreement between Temco and Geoexploration Corporation of
the First Geoexploration Bureau ("GEC-FGEB"), a subsidiary of the Ministry of
Metallurgical Industry. Pursuant to the terms of the Emperor's Delight Joint
Venture Agreement, the parties have agreed that the total initial investment and
registered capital of the Joint Venture is U.S.$8,000,000. GEC-FGEB has
contributed the exploration rights it holds in respect to the Emperor's Delight
Property as well as all geological data and research results relating thereto,
having a total deemed value of U.S.$3,600,000 (as determined by negotiations
between Temco and GEC-FGEB) and representing a 45% interest in the Joint
Venture. Temco has agreed to fund expenditures up to U.S.$4,400,000 on or before
five years from the date on which the Business License for the Joint Venture was
issued in order to earn a 55% interest in the Joint Venture. After the
investment of the initial total of U.S.$8,000,000, further expenditures will be
made by both parties to the extent of their interests in the Joint Venture.
Failure by a party to contribute its pro rata share of expenditures will result
in a dilution of such party's interests. If a party's interest in the Joint
Venture is diluted to a 10% interest or less, such party's interest shall be
converted to a 10% carried interest. At any particular point in time, Temco's
beneficial interest will be equal to the 55% multiplied by a fraction in which
the numerator is the total expenditures made by Temco to date and the
denominator is U.S.$4,400,000. GEC-FGEB's interest at such point in time will be
100% minus Temco's beneficial interest.
Notwithstanding that Temco's beneficial interest will not fully vest until
it has funded expenditures totalling U.S.$4,400,000 and provided that Temco
contributes expenditures in a timely fashion under the Agreement, Temco has and
shall continue to have a 55% voting interest in the Joint Venture.
28
<PAGE> 29
Temco has the right at any time to cap its contributions to the Joint
Venture by written election to GEC-FGEB. On the effective date of the election
to cap contributions, the beneficial interest of Temco shall be frozen at the
level calculated at the completion of the last work program towards which Temco
has completed its contribution. The voting interest of Temco in the Joint
Venture shall also be reduced to the percentage level at which its beneficial
interest has been capped. However, Temco's interest shall be subject to dilution
if it fails to contribute its share of expenditures after the effective date of
its election to cap contributions. In addition, an election by Temco to cap its
contributions will not relieve Temco from liability for its share of
expenditures required pursuant to a previously approved work program or budget.
The Emperor's Delight Joint Venture Agreement also provides Temco with a
right of first refusal with respect to any proposed disposition by GEC-FGEB of
the Wenjiagou Mine which is located adjacent to the Emperor's Delight Property.
Pursuant to the Emperor's Delight Joint Venture Agreement, Temco and
GEC-FGEB have created a co-operative joint venture as a separate legal entity,
operating under Chinese law, the English name of which is Chengde Huajia Mining
Industry Co., Ltd. ("Huajia"). The Board of Directors of Huajia, comprised of
four representatives of Temco and three representatives of GEC-FGEB, is
responsible for establishing and implementing policies and for approving
programs and budgets for the Joint Venture. Huajia has opened an office in
Chengde City to conduct the exploration program on the Emperor's Delight
Property. A resident manager and experienced exploration staff have been
seconded from GEC-FGEB to run the programs under the supervision of Colin
McAleenan, the Registrant's Vice President, Exploration. Funds advanced to
Huajia by Temco are advanced into an investment account maintained by Huajia,
the authorized signatures on such account being the Registrant's President, Ken
Cai, and a representative of GEC-FGEB, signing together. Funds from the
investment account are transferred as required and approved by the Board of
Directors of Huajia from time to time into an operator's account to fund ongoing
work on the Emperor's Delight Project. The term of the Emperor's Delight
Agreement is thirty (30) years and may be extended.
A title opinion in respect to the Emperor's Delight Property has not been
obtained by the Registrant.
Location and Description
The Emperor's Delight Property covers a 120 square kilometer area located
about 130 kilometers northeast of Beijing in north Chengde region, Hebei
Province. The property, which is easily accessible by road and is approximately
30 kilometers from a railhead, is adjacent to two gold-silver-polymetallic
mines. These two properties together contain reserves of 195 tonnes silver metal
(6.269 million ounces) and 8.3 tonnes gold metal (over 266,000 troy ounces).
Their average grades are 200 grams silver/tonne and 7.0 grams gold/tonne. The
Emperor's Delight Property covers strike extensions of the main structures
hosting these deposits. The main targets on the property are Archean lode gold
deposits or porphyry related gold deposits.
The Emperor's Delight Property lies along the northern margin of the Deep
Fault Zone ("DFZ"), a prominent geologic feature of northeast China, and covers
approximately 25 kilometers of strike length of a fracture system extending from
the village of Wenjiagou in the west to the mining camp of Dong Shan in the
east. The principal bedrock of the area consists of a succession of metamorphic
rocks of Archean age which predominate in the northern portion of the property
and hosts gold mineralization which is thought to predate later-stage volcanic
activity. Volcanic rocks, which are much later in age and lie to the south, host
silver-bearing, base metal mineralization found in veins. The Wenjiagou gold
deposit to the west and the Guzhigou base metal deposit to the northeast of the
property occur adjacent to the Emperors' Delight Property and are excellent
examples of two different styles of mineralization. Both of these deposits are
currently being mined but are not included in the Emperor's Delight Property.
Exploration and Development History
During the Japanese occupation of this part of China during the late 1930's
and early 1940's, several lead-zinc veins with high-grade silver values were
mined within the eastern part of the Emperor's Delight Property. Numerous pits,
adits and drifts were developed on many of the more substantive, but narrow,
high-grade veins which are common in the central and eastern part of the
property. These mineralized veins, although generally
29
<PAGE> 30
narrow, persist in strike length. Widths commonly vary from 0.5 to 3 meters
while strike lengths range from 0.5 to 2 kilometers. The ore recovered from
previous operations is reported to have been high-grade with values typically in
the range of 30-50% lead and 5,000 to 10,000 grams silver/tonne. The GEC-FGEB
investigated many of these veins during the 1994 and 1995 field seasons and
report silver assays in the range from nil to 17,250 grams silver/tonne and gold
values of about 5 grams/tonne. A site visit by A.C.A. Howe was made during a
most recent field trip to several of these old workings, as well as to recently
discovered parallel veins currently being worked by local independent miners. At
all the sites, the high-grade nature was confirmed by observation. Samples were
collected at these sites and sent to XRAL Laboratories, a Division of SGS
Canada, Inc. The assay values for grab samples, which are summarized in Table
1.1 below, ranged up to 9,910 grams silver/tonne, 0.9 grams gold/tonne, 8.85%
lead, 20.0% zinc and 0.25% copper. The best values were obtained from Vein #1a.
A sample of the sulphide ore from a typical high-grade vein returned values of
749 g silver/tonne, 0.7 grams gold/tonne, 5.92% lead, 23.0% zinc and 0.23%
copper over a width of 1.0 meter.
30
<PAGE> 31
<TABLE>
<CAPTION>
Au
SAMPLE LOCATION INTERVAL DESCRIPTION Ag g/t ppb Pb% Zn% Cu%
- ------ ----------------- --------- -------------------------------- -------- ------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
28198 Area I-1, TC-6 0.5m High grade sample in trench 264.0 119 0.42 0.42 0.03
chip across vein #5. 10-15% py, 3-5%
galena, <1% sph
28919 Area I-1, TC-6 1.0m Low grade material (alteration 3.4 11 <0.01 <0.01 <0.01
chip zone 1-2% py) from the middle of
the 10 m interval between Veins
#5 and #2
28920 Area I-1, TC-6 1.0m Sample of alteration zone <3.0 1 0.01 0.03 <0.01
chip immediately north of sample
#28919. 1-2% py
28921 Area I-1, TC-6 1.0m Channel sample across vein #2 27.2 24 0.16 0.44 0.05
chip containing 2-3% py, tr galena
and 1% sph.
28922 Area I-1, TC-6 Grab Select sample of sulphide rich 10.4 33 0.06 0.19 0.05
material (5-10% py) from vein #2
28923 Area I-1, TC-6 0.5m Sample across a small relatively <3.0 <1.0 <0.01 <0.01 0.04
chip unaltered vein 150 m south of
vein #5 (sample 28918)
containing 5-8% py
28924 Vein #19 2.0m Highly weathered vein material 8.3 <1.0 <0.01 0.02 <0.01
chip from trench across portion of
vein #19 reportedly anomalous in
gold
28925 Vein #19 2.0m Fairly fresh material exposed in 11.3 76 0.17 0.05 <0.01
chip trench across vein #19
containing 1-3% sulphides (py)
3.0 m NW of 28924
28926 Area I Vein #1a Grab High grade material from ore 9,910.0 906 8.85 20.0 0.25
pile in local farmers yard being
shipped to mill from vein #1a
near adit YM4. Semi- massive py,
sph, galena
28927 Area I Vein #1 0.5m High grade vein material (highly 300.0 41 0.71 2.01 0.08
chip weathered semi-massive
sulphides) at top of entrance to
adit YM 4
28928 Area I Vein #1a 1.0m High grade sulphides from newly 749.0 711 5.92 23.0 0.23
chip discovered vein being mined by
farmers 20 m SE of vein #1 (adit
YM4)
28929 Area I Vein #1 0.5m Semi-massive sulphides from vein 2,880.0 1,100 5.78 22.8 0.24
chip #1 exposed 10 m above entrance
to adit YM 4
28930 Area I Vein #3 0.25m Highly weathered and friable 61.2 28 0.21 0.62 <0.01
chip sulphide vein material (10-15%
galena, py, sph) from entrance
to adit YM1
28931 Area I Vein #3 Grab Select sample of waste dump 7,320.0 466 13.2 17.2 0.16
material (15-20% galena, py)
from previous high-grade mining
of Vein #3
</TABLE>
31
<PAGE> 32
Gold was first discovered on the Emperor's Delight Property in 1989 as a
result of the follow-up of a regional stream sediment geochemical survey. A
number of geochemical anomalies outlined by this survey were the basis for
originally establishing the Emperor's Delight Property. To date, over 30 gold
occurrences, hosted within altered and highly fractured zones, have been found
on the property.
The general trend of the mineralized zone can be traced for about 40
kilometers. A mineral zonation is clearly defined with silver tenors being
higher in the eastern Guzhigou mine region and gold being more predominant in
the Wenjiagou HS-141 study area to the west.
The precious and base metal deposit at Guzhigou is reported to contain 200
tonnes of silver at an average grade of 250 g silver/tonne, and 2 tonnes of
gold. It should be noted, however, that the Guzhigou mine does not form part of
the Registrant's Emperor's Delight Property. Base metal ores are being extracted
at the Guzhigou Mine which is located within a block excluded from the Emperor's
Delight Property. This base metal deposit is the largest in the area and is
fairly typical of the style of mineralization found in the base metal veins on
the Emperor's Delight Property.
A.C.A. Howe visited the Guzhigou Mine as part of the field examination of
the Emperor's Delight Property on September 18, 1994. A representative grab
sample of the high-grade sulphide mineralization assayed by XRAL Laboratories of
Toronto, Canada, yielded values of 157 oz silver/ton, 0.142 oz gold/ton, 57.5%
lead, 0.3% copper, and 0.18% zinc. The mine officials suggest values of around
3.94 grams gold/tonne exist in two drill holes which cut the ore mineralization
at around 390 meters. This indicates an increase in gold grades at depth.
The Guzhigou deposit was developed in 1989 but has yet to reach its planned
production rate of 100 tonnes ore/day. The mine workings were flooded at the
time of the A.C.A. Howe visit. The surface installations include a mill and
related facilities capable of handling the planned 100 tonnes per day
production. The mill contains cyanide, flotation and gravity equipment. Head
grades are reported to average 180 grams silver/tonne and tailings grade 30
grams silver/tonne. Using standard cyanide flotation and gravity circuits the
Guzhigou Mine can produce 160 tonnes of concentrate, grading 3,000 grams
silver/tonne, 8 grams gold/tonne and 55% combined lead-zinc, per month as well
as 80 tonnes of zinc concentrate. Average metallurgical recoveries are in the
order of 93% and the all inclusive operating cost is U.S.$20.50 per tonne.
Presently the mine is on stand-by due to a lack of capital needed to re-open it
following the flooding.
The silver and base metal mineralization at the Guzhigou deposit can be
traced intermittently along strike for over 15 kilometers on the Emperor's
Delight Property and regionally for over 40 kilometers. Although very little
exploration has been conducted along strike, there are local pits and trenches
along strike to the west which intermittently expose gold, silver and base metal
mineralization over widths of several meters. The potential for establishing
additional mineralized zones on the Emperor's Delight Property along strike on
the Guzhigou mine stratigraphy is considered excellent.
Most of the recent exploration efforts have been concentrated on the
Wenjiagou deposit (HS-141 detailed study area) located adjacent to the west end
of the Emperor's Delight Property. At present the Wenjiagou deposit is being
mined under terms of a mining permit issued to the local municipal government
which is mining but performing only a limited amount of development work.
Reserves reported down to the 300 meter level are 45 tonnes silver, 6.3 tonnes
gold, and 24,000 tonnes zinc. While the actual Wenjiagou Mine (mining permit
area) is not included as part of the Emperor's Delight joint venture property,
the strike projections of the mineralized zones into the Emperor's Delight
Property represent important exploration targets.
The 10 square kilometer detailed study area known as HS-141 (covering the
Wenjiagou deposit) is situated adjacent to the west end of the Emperor's Delight
Property where it straddles a NW-SE trending gold fracture zone with minor base
metal mineralization. This structure is divided into northwest and southeast
sections by a late north-south fault. To date, all of the detailed exploration
work on the Emperor's Delight Property has been conducted on the northwest side
of the fault. Limited on-going work on the southeast section of the fracture
zone continues to meet with encouragement. During the 1994 site visit by A.C.A.
Howe, both the surface expression and underground exposure of the northwest, or
No. 1, mineralized section
32
<PAGE> 33
on HS-141 were investigated. On surface the mineralized zone consists of a well
developed, 2 to 8 meter wide, 20 meter deep oxide cap which is currently being
mined and processed by heap leach. The sulphide zone is exposed on surface for
230 meters but on the 330 m level the length increases to over 560 meters. The
mineralization is hosted by altered felsic tuffs and breccias characterized by
locally intense kaolinization, sericitization, silicification, and pyritization.
The mineralization was examined underground in an exploration drift that
follows the strike of the sulphide vein for 150 meters. The vein structures
maintain a fairly constant 1.5 to 2 meter width along the entire length exposed
in the workings. The somewhat fractured and friable nature of the surface
exposures does not appear to be reflected underground at least not in the
non-oxidized portions of the ore body where the wall rocks are quite competent,
creating a stable mining environment. No samples were collected but it is
reported that the recent drifting carries about 5.4 grams gold/tonne over 2.7
meters.
The characteristics of the mineralization are summarized as follows:
GOLD ZONES Various zones range in width from 0.72 to 2.43 meters,
with the majority being over one meter wide at grades that range from 2.22
to 18.34 grams gold/tonne and that average 7 grams gold/ tonne.
SILVER ZONES Various zones with widths that vary from 0.60 to 3.4
meters and grades that range from 6.31 to 245 grams silver/tonne and that
average 174 grams silver/tonne.
ZINC ZONES Widths vary from 0.6 to 14.9 meters at grades ranging from
1.3 to 3.72% Zn and that average 2% zinc.
Although no metallurgical work on this mineralization is reported, the
visible characteristics are similar to the ore at the Guzhigou Mine. The oxide
ore being heap leached is reported to have "excellent metallurgical
characteristics".
The main No. 1 Gold Zone on HS-141 (Wenjiagou area) has been explored for
only a small portion of its 1,500 meter strike length. Evidence from
cross-sections suggests that the gold grade increases with depth. The strike
extension and to some extent the down dip potential of this zone remains
untested. While the ore reserves reported above are not within the Emperor's
Delight Property the strike extensions of the zones do fall within the property
so there is excellent potential to develop reserves of a similar tenor.
A felsic porphyry dike, 3 to 15 meters wide referred to as Vein #19 strikes
north-south immediately south of the Wenjiagou Mine (HS-141 area). Prospecting
and geological surveying during the 1994-95 field season successfully identified
several areas of silver and gold mineralization along the 1,500 meter strike
length of this dike. A mineralized zone was exposed by trenching along the
contact of the porphyry dike and the surrounding sulphide-bearing alteration
zone. Assay values of 305 grams silver/tonne and 0.6 grams gold/tonne over 1.0
meter are reported. Two samples of highly friable and weathered altered porphyry
containing 3 to 5% pyrite were collected from trench Tc 1900 and assayed by XRAL
Laboratories of Toronto. The samples returned values of 11.3 grams silver/tonne,
0.076 g gold/tonne over 2.0 meters and 8.3 grams silver/tonne, nil gold over
another 2.0 m interval. The single vertical hole drilled by GEC-FGEB adjacent to
trench Tc 1900 failed to intersect a mineralized interval comparable to that
exposed in the trench at surface. It would have been preferable to drill an
inclined hole directly under the trench in order to test the sub-vertical
mineralization, however this was not technically feasible. It is possible that
the target horizon was missed by the drill hole. A.C.A. Howe recommends that
Vein #19 be further investigated and tested by drilling inclined holes.
An area of trenching at what is known as the Porphyry Showing, several
kilometers along strike to the west of the Guzhigou Mine and mid-way between the
mine and HS-141 detailed study area, was examined during the 1994 property visit
by A.C.A. Howe. Trenching at the Porphyry Showing exposes a sequence of highly
fractured "quartz-eye" sericite schists. The entire sericite schist unit is
several hundreds of meters wide and hosts a core sericite-carbonate, sulphide
enriched alteration zone that is at least 25 meters wide.
Sulphide mineralization occurs locally as disseminations and in
semi-massive form within irregular veins 10 to 15 cm wide. No primary copper
mineralization is visible in specimens of this material although it is stained
with malachite. Representative grab samples of both the sericite schist and the
sulphides were
33
<PAGE> 34
collected by A.C.A. Howe in 1994 and taken to Canada for assay by XRAL
Laboratories of Toronto. Assays from the sulphide-rich mineralization yielded
values of 0.029 oz gold/ton and less than 0.1 oz silver/ton while a sample of
the sericite schist gave 0.079 oz gold/ton and less than 0.1 oz silver/ton.
During the 1994 and 1995 field seasons, GEC-FGEB drilled 3 vertical holes
immediately north of the Porphyry Showing in order to test the down dip
extension of high-grade gold values obtained in trenches. The mineralization,
which was interpreted as dipping steeply to the north, was not intersected in
any of the holes although sulphides and alteration were encountered. Given the
near-vertical dip of the mineralized zone it is possible that the vertical holes
missed their target. A.C.A. Howe feels that drill holes angled 60-70 degrees to
the south would have tested the zone better. Due to technical and other
considerations it was not possible to drill inclined holes and the zone remains
untested. Further testing of this showing and the strike projection is warranted
and additional work is recommended. It was not possible to view any of the core
from these drill holes but 24 select samples of assay reject material from the
three holes were obtained and submitted for assay to XRAL Laboratories of
Toronto. Samples are from the sulphide-rich alteration zones as well as the
unaltered country rock. Results of these assays showed no gold values of
interest.
Virtually no follow-up exploration has been conducted on other vein
structures in the area such as the Porphyry Showing, Vein #19, Zone I-1, Zone
I-2, Zones II, III, etc. It is noteworthy that these vein structures locally
contain wide, mineralized alteration zones that have been ignored in the quest
for high-grade ore zones. This observation seems to hold true for the
commercially significant deposits such as at the Guzhigou Mine, where the ore is
reported to be surrounded by 3-5 meter wide mineralized country rock. The
possibility for this and other mineralized structures to be developed as
commercially viable lower-grade ore zones over much greater widths presents an
excellent exploration opportunity.
Geology, Mineral Deposits and Reserves
Regionally, the Chengde area hosts base and precious metal mineralization
intimately associated with structural breaks. This region is located on the
north edge of the Hubei Cratonic Platform. The zone features regional scale
subsidence and is marked by the E-W trending Deep Fault Zone ("DFZ"). The
property is located on the south side of the DFZ in an area characterized by
extensive E-W faulting and magmatic activity. Archean age metamorphic rocks
dominate the north portion of the property and host lode-type Archean gold
mineralization. Mesozoic age volcanic rocks dominate the southern portion of the
property and act as hosts to secondary, structurally controlled, silver enriched
polymetallic vein mineralization. The Great Wall Formation, with its overlying
sandstone cap, is believed to have acted as an impermeable barrier to rising
mineralized fluids along the DFZ. All known deposits in the region are
associated with this formation.
Gold was first discovered on the property in 1989 as a result of a regional
stream sediment survey. A number of geochemical anomalies were outlined by this
survey and these formed the basis for establishing the Emperor's Delight
Property. To date most of the follow-up exploration work (including 22 diamond
drill holes and more than 780 meters of drifting) has concentrated on the
detailed study area HS-141 located just off the west end of the property. No
follow-up exploration work has been carried out on areas HS-143, HS-142 and
HS-151, also defined by extensive gold geochemical anomalies.
Area HS-141 contains all of the known reserves; i.e. 6.3 tonnes gold, 45
tonnes silver, 24,000 tonnes zinc, classified as "D and E Reserves", in the
Wenjiagou Mine area. There is potential to develop reserves similar in tenor to
the Wenjiagou deposit along strike in both directions from the mine.
Representative grab samples of high-grade sulphide mineralization collected from
the Guzhigou Mine, just to the east of the Emperor's Delight Property, yielded
values of 157 oz silver/ton, .142 oz gold/ton and 57.5% Pb. The reserve grades
at both mines reflect the established regional precious metal zoning pattern of
increasing gold/silver ratios to the west. This same precious metal zoning
pattern is believed to exist vertically where the Au/Ag ratio increases with
depth. Neither the Wenjiagou nor the Guzhigou mines form part of the Emperor's
Delight Property but the extensions of their host structures onto the Emperor's
Delight Property form excellent exploration targets.
The Porphyry Showing, located on the Emperor's Delight Property, is found
in an area between the Wenjiagou and the Guzhiagou deposits and is characterized
by a sequence of highly fractured and carbonate-altered, quartz-eye schists.
This altered schist unit (25 meters wide) contains irregular, semi-massive
sulphide
34
<PAGE> 35
horizons. The sulphide was sampled and returned values of 0.029 oz gold/ton
while the altered schist itself assayed 0.079 oz gold/ton. Some copper oxide
staining is present but the rocks have not been analyzed for copper. This
showing represents a low-grade gold, bulk tonnage exploration target on the
property.
The Yian Tong Shan area is in the central part of the Emperor's Delight
Property and contains at least four vein systems, I-1, I-2, I-3 and I-4, that
trend parallel to the DFZ and are characterized by silver, lead, zinc, and gold
mineralization. The vein systems extend for strike length of 1.5 kilometers and
have an overall widths of up to 400 m. Individual veins range in width from 0.4
to 1 meter and are spaced from 20 to 30 meters apart with veinlet and
disseminated sulphides throughout the intervening country rock. The intervening
sulphide alteration remains untested and no assay results are available. Much of
the area is covered by overburden and the strike continuity of many of the veins
has yet to be tested. Based on results obtained during the 1994 field season the
vein systems can be characterized as follows.
VEIN SYSTEM I-1 This system consists of 3 parallel veins with grades
in the range of:
20 to 47 grams silver/tonne
0.7 to 0.9 grams gold/tonne
0.3 to 2.08% zinc
0.12 to 2.18% lead
VEIN SYSTEM I-2 This system consists of a number of veins averaging 1
to 6 meters in width along a strike of 700 meters. Grades are in the range
of:
1 to 19 grams silver/tonne
Trace gold
0.01 to 0.31% zinc
to 1.39% lead
VEIN SYSTEM I-3 This system has a strike length of 300 meters and
consists of veins that range from 1 to 5 meters in width. The veins have
very low lead, zinc, gold values but are rich in silver with grades
commonly between 5 to 61 grams silver/tonne and higher values up to 431
grams silver/tonne.
VEIN SYSTEM I-4 Veins of this system extend for a strike length of
1,000 meters and contain tungsten and molybdenum mineralization. The veins
range in width from 10 to 40 meters and are mineralized mainly with pyrite
with occasionally visible molybdenum and tungsten mineralization over
widths of 3 to 7 meters. No grades for this mineralization have been
established.
The eastern portion of the Emperor's Delight Property contains a broad zone
of mineralization situated south of the main DFZ. Within this secondary
structural feature three significant zones of mineralization, I, II, and III,
were initially discovered by stream sediment sampling.
Area I Area I is defined by trenching along 1,800 meters of its strike
length. Mineralization is confined to a fracture zone ranging between
0.5 and 1 meter in width. Associated with this fracture is an
alteration zone ranging in width from 0.5 to 6.0 meters.
Mineralization consists of stringers of sulphides 1 to 3 mm wide
within which gold and silver-bearing minerals occur. The frequency
with which these fractures occurs is between 6 and 8 per meter of
width. Stringers less frequent and less well developed occur in the
overlying alterations. The GEC-FGEB collected 23 samples from 12
trenches dug along the 1,800 meter strike length of the zone. Spacing
of the trenches was between 80 to 200 meters. This mineralized
fracture zone is reported to contain between 16 to 40 grams
silver/tonne with little or no gold. Locally, high-grade material
grades between 105 and 560 grams silver/tonne.
Overall, the mineralized zone strikes in a westerly direction and dips
55 to 85 degrees to the north. The alteration of the wallrock consists
mainly of silicification and sericitization of the Mesozoic volcanic
host rocks. Only one sample was taken of wallrock alteration and it
yielded an assay of 9.84 grams gold/tonne and 560 grams silver/tonne.
Another sample is reported to have yielded an assay of 95 grams
silver/tonne and trace of gold. Further exploration is recommended
both on the
35
<PAGE> 36
fracture zone itself and the adjacent wall rock. Complete assay
results from the GEC-FGEB sampling are presented in Table 1.2 below.
Area II The mineralized zone in Area II is defined by a series of trenches
along 250 meters of strike length. The mineralization can be traced
sporadically on surface for over 800 meters. A grab sample of this
mineralization yielded 49.5 grams silver/tonne.
Area III Area III is defined by surface trenches for 450 meters along strike.
The mineralized zone consists of two parallel veins containing base
metal sulphides separated by 2 to 3 meters of faulted wallrock. A
third vein (Vein #1a), is reported to have been discovered in the last
24 months and is presently being mined by local independent miners.
This vein is situated between 5 and 10 meters south of Vein #1.
Samples of this new vein were assayed by GEC-FGEB and contained values
of up to 17,250 grams silver/tonne and 5.56 grams gold/tonne. During a
recent field visit, samples were collected from both the principal
veins as well as this new vein and analyzed by XRAL Laboratories of
Toronto, Canada. XRAL reported values of up to 9,910 grams
silver/tonne and 1 gram gold/tonne.
<TABLE>
<CAPTION>
SAMPLE WIDTH (m) Ag (g/t) Au (g/t)
---------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
VEINS # I AND II
K 16.......................................... 0.3m 16.5 0.0
K 17.......................................... 0.2m 27.5 0.0
T 7........................................... 0.3m 560.0 9.84
K 6........................................... 0.35m 4.0 0.0
K 7........................................... 0.2m 6.0 0.0
K 1........................................... 0.3m 38.5 0.0
K 2........................................... 0.2m 9.0 0.0
K 3........................................... 0.3m 4.0 0.0
K 4........................................... 0.2m 0.0 5.0
K 5........................................... 0.3m 220.0 0.0
K 8........................................... 0.3m 4.0 0.0
D 8........................................... 0.3m 105.0 0.0
T 10.......................................... 0.2m 4.0 0.0
T 11.......................................... 0.4m 1.5 0.0
T 12.......................................... 0.5m 25.0 0.0
T 12-2........................................ 0.5m 13.5 0.0
K 9........................................... 0.8m 11.0 0.0
K 11.......................................... 0.2m 42.0 0.0
K 19.......................................... Grab 95.0 0.0
K 18.......................................... 1.0m 142.0 0.0
T 6........................................... 0.8m 17.5 0.0
VEIN # III
D 6........................................... 0.2m 155.0 0.0
K 20.......................................... 0.2m 17,250 5.56
K 13.......................................... 0.5m 87.5 0.0
</TABLE>
The altered wallrock is reported to contain two generations of quartz
stringers that may or may not be mineralized. The predominant direction trends
parallel to the veins (70 to 80 degrees east of north) while a less well
developed set strikes 15 degrees from this direction. So far only the vein
systems have been sampled but it has been suggested that the altered wallrock
should also be assayed for silver and gold.
The mineralization observed in the two main veins consists of 0.5 to 2 m
wide, semi-massive to massive pyrite, galena and sphalerite. These veins have
not been evaluated in detail and results reported are considered
36
<PAGE> 37
only preliminary. Assay results from the GEC-FGEB sampling is presented in Table
1.2 below while Table 1.1 below summarizes the results of sampling done during
the trip made by Dr. Wayne Ewert of A.C.A. Howe to the Emperor's Delight
Property in 1995.
Because of the definition of reserves on structures along strike in
adjacent areas and the presence of untested gold geochemical anomalies, the
Emperor's Delight Property has real potential for new discoveries. In the A.C.A.
Howe Report a multi-phase exploration program has been recommended and is
described below.
Proposed Exploration and Development Program
A multiphased exploration program is proposed to explore the numerous
targets on the Emperor's Delight Property. The Registrant plans to carry out
programs of exploration largely as recommended in the A.C.A. Howe Report which
will be financed by the Registrant.
As pointed out in the A.C.A. Howe Report the strike extensions of those
structures which give rise to the known mineralized bodies adjacent to the
property (the Guzhigou and Wenjiagou deposits) are the prime areas of potential
to host precious and base metals on the Emperor's Delight Property. Also, as
indicated in the A.C.A. Howe Report, the area has only been examined from the
perspective of high-grade vein type mineralization by the local explorers. The
potential for large, lower-grade deposits has not been examined.
With these main considerations in mind, the Registrant has targeted two
areas for more detailed study; the Qiujiayiang Area and the area east of the
Guzhigou Mine.
Qiujiayiang Area (7 km.(2))
This area lies east of the Wenjiagou polymetallic mine and is situated
between two major faults. There are some geochemical signatures based on widely
spaced sampling. The purpose of this phase of work is to collect data in
sufficient detail to allow definition of mineralized structures for follow up
with diamond drilling and/or adit entry underground cross-cutting. The following
work is planned:
- Six profiles will be measured across the structural strike in the area
320 m apart.
- Samples of bedrock will be taken at 10 m intervals within each profile.
Where geology dictates, sample spacing will be tightened to 2-5 meters.
- IP surveys will be conducted along each profile.
- Samples of mercury vapor will be collected along each profile.
- A soil sampling grid at 100 m x 20 m will be established outside the
central area to provide coverage for a total of 7 km.(2) area.
East Guzhigou (4 km.(2))
This area contains an extension of the main E-W structure being mined at
the Guzhigou Polymetallic Mine. Work planned here is designed primarily to
define the structure under the overburden and to test a significant length of it
for mineralization.
- Establish a 100 m x 20 m grid across the main trend.
- IP survey (100 m x 20 m).
- Soil geochemical sampling on the same grid.
All samples collected will be analyzed by atomic absorption methods
followed by a full assay method for values exceeding certain minimum values. A
follow-up diamond drilling program based on positive results is envisaged.
The field work relating to these detailed studies on the aforementioned two
areas of the Emperor's Delight Property has substantially been completed and the
Registrant is currently awaiting analytical results of
37
<PAGE> 38
the samples taken during such field work. An evaluation of the results of the
field work program will be completed in 1997 after all analytical results are
obtained by the Registrant. If warranted, an attempt to mobilize a follow-up
drilling program is anticipated later in 1997.
To December 31, 1996, on a consolidated basis, the Registrant has spent
approximately $451,392 on exploration of the Emperor's Delight Property, as
follows:
<TABLE>
<CAPTION>
EXPENDITURES AMOUNT
-------------------------------------------------- --------
<S> <C>
Assaying.......................................... 39,847
Drilling.......................................... 79,363
Trenching......................................... 73,557
Site Vehicles..................................... 25,968
Field Office Rent................................. 20,421
Miscellaneous Equipment........................... 35,239
Geological Consulting............................. 7,820
Travel and Accommodation.......................... 59,856
Labor............................................. 55,319
Project Management................................ 10,953
Engineering....................................... 16,614
Field-office administration....................... 26,435
--------
TOTAL................................... $451,392
========
</TABLE>
The Emperor's Delight Property does not contain a known body of commercial
ore and the Registrant's proposed work program is an exploratory search for ore
only.
CHANGBA-LIJIAGOU PROPERTY
Acquisition
The Changba-Lijiagou Property is a "Principal Property" of the Registrant
as the Registrant intends to expend a material portion of the net proceeds of
its 1996 private placements on this property.
Baiyin Non-Ferrous Metals Company ("Baiyin") is the largest subsidiary of
the China National Non-ferrous Metals Industry Corporation (CNNC) and last year
had revenues exceeding $500 million. Baiyin was seeking foreign partners with
capital and expertise to expand production at its mining and smelting operations
and, in response to same, the Registrant, through the PCR Agreement, became
involved in the Changba-Lijiagou project.
The Registrant acquired its interest in the Changba-Lijiagou Property
pursuant to the PCR Agreement, the terms of which are described under the
heading "Acquisition of the Registrant's Chinese Properties" above. The
consideration payable to PCR by the Registrant for the Changba-Lijiagou, the
Stone Lake and the Crystal Valley Properties consisted primarily of 4,880,000
escrow shares which will only be released upon the Registrant satisfying certain
earn-out requirements (see Item 4 -- "Performance Shares or Escrow Securities").
The Changba-Lijiagou Property is the subject matter of a report prepared by
H.A. Simons, Ltd. entitled "Technical Site Visit to Smelters and Mine Facilities
of Baiyin Non-Ferrous Metals Corporation, Ganzu Province, People's Republic of
China" dated December 9, 1996 (the "Simons Report").
The original letter of intent which comprised the CBLG Agreement and which
was assigned to the Registrant pursuant to the PCR Agreement has been replaced
by a Co-operation Agreement dated October 18, 1996 made between the Registrant
and Baiyin (the "CBLG Co-operation Agreement"). Teck Exploration Ltd. which was
a party to the original CBLG Agreement has elected not to become a party to the
CBLG Co-operation Agreement and has waived all interest in the property. Cominco
Ltd., which also had an interest in the properties, has waived all rights to
such interests.
38
<PAGE> 39
The CBLG Co-operation Agreement grants the Registrant an exclusive right to
acquire a 60% interest from Baiyin in the large Changba-Lijiagou lead-zinc
deposits located in Gansu Province, China. Under the CBLG Co-operation
Agreement, Baiyin has agreed to prepare a detailed application for approval of a
joint venture to the appropriate governmental authorities. After approval of the
joint venture, the Registrant will be able to earn a 60% equity interest in the
joint venture company by investing a yet-to-be defined amount in the project.
The amount will be determined following an independent valuation of the project
to be conducted after receiving appropriate governmental approvals to enter into
the joint venture agreement. Upon completion of the valuation, the parties will
enter into an equity joint venture through a new Chinese limited liability
company. The joint venture agreement, once established, will have a term of 30
years.
A title opinion in respect to the Changba-Lijiagou Property has not been
obtained by the Registrant.
Location and Description
The Changba-Lijiagou lead-zinc deposits are located approximately 350
kilometers east of Lanzhou, the provincial capital of Gansu Province. This
region has temperate climate. The area attains elevations of approximately 2,000
meters with local relief of between 800 to 1,000 meters. The hills are vegetated
and terraced and the valleys are fertile.
Infrastructure is generally well developed in the region. Power is made
available to the Changba mill site from the national power grid. Water supply is
plentiful. The town of Changba existed prior to the mine but has been enlarged
to accommodate the 800 employees and their families. Services supported by the
mine include schools and a hospital.
The deposits consist of a series of moderately to steeply dipping massive
and semi-massive sulphide lenses contained within a Devonian age sequence of
metamorphosed carbonate and clastic rocks. The primary sulphide minerals are
pyrite, sphalerite and galena.
The open pit Changba Mine is located two kilometers south of the
concentrator facilities. A two kilometer haulage tunnel is used to transport the
ore to the concentrator from the pit. The Lijiagou deposits are located less
than two kilometers east of the Changba pit and under a large waste dump
currently planned for Changba. Alternate waste dump locations would be required
to make an open pit operation viable for the Lijiagou deposit.
The concentrator comprises a conventional flotation circuit producing
selective lead and zinc concentrates from the treatment of the Changba ore. The
present capacity is being expanded to handle 3,500 tonnes of ore per day. The
ore is comprised of 1,000 tpd of Changba Type 2 sulphides, 1,000 tpd of Changba
Type 1 sulphides and 1,500 tonnes of Changba Type 1 oxides. The expansion forms
part of the planned Phase II expansion and is scheduled to be completed in
mid-1997. The mill grinding circuit, however, was designed to handle the
anticipated 5,500 tonnes per day to be ultimately generated in a Phase III
expansion and will continue to be under-utilized until then.
Concentrates are transported to a railhead by truck and then on to Baiyin's
smelters by rail, a total distance of 400 kilometers from the minesite.
Concentrate from the mill is first hauled approximately 138 kilometers to the
Tian Shui railway transfer station located a few kilometers east of Tian Shui.
This haulage is presently handled by 5 to 8 tonne trucks with a round trip of
eight hours. Truck size and axle loading is limited by a number of bridges along
the route and the extremely narrow and winding road. Although it is understood
that the State is planning to upgrade the road over the next five years, the
exact timing of the upgrade is unclear. Also, the rail line, as with other rail
lines in China, is at or near capacity and a quota is required from the
government to ship product. The transfer station has an annual capacity of
200,000 tonnes of concentrate. Baiyin is planning to construct a new 500,000
tonne annual capacity facility. Ten alternate sites are currently being
considered.
In its report, H.A. Simons Ltd. has concluded that open pit mining costs
are reasonable in spite of extremely poor equipment utilization and
productivities. Also, it has concluded that haulage from Changba to Tian Shui
could be constrained by the 8 tonne load limit.
39
<PAGE> 40
Exploration and Development History
Baiyin has been operating in the area since its foundation in 1943 when
they were exploiting two open pit copper deposits. These open pit copper mines
have long since gone underground and reserves are practically exhausted.
Attempts to find additional copper reserves in the area have failed and more
recently Baiyin has been concentrating on developing the lead-zinc resources of
the region.
Phase I of the Changba project was completed in 1988. The production
capacity is being raised to 3,500 tonnes ore per day as part of the Phase II
capital expansion program which is expected to be completed by mid-1997. The
underground reserves at Lijiagou are not currently in production but form part
of the Phase III expansion expected to be in operation early in the next
century. A shaft is presently being sunk on the property to access the Lijiagou
deposits.
Geology, Mineral Deposits and Reserves
The Changba and Lijiagou deposits consist of a series of massive to
semi-massive sulphide lenses (of up to 40 meters thickness) contained within a
metamorphosed sequence of Devonian age carbonate and clastic rocks. The deposits
are considered by some geologists to be "Sedex Type" and by others to be
"Mississippi Valley Type". The main sulphides are pyrite, sphalerite, and galena
in a gangue of quartz, mica and calcite. Other contained metallic elements are
silver, cadmium, gallium, germanium, indium and tellurium.
Baiyin's estimates, which are considered by H.A. Simons Ltd. to be somewhat
in doubt, of the proven reserves for Changba and the probable and possible
reserves for Lijiagou as of January, 1995 are grouped under "mineable" as
follows:
BAIYIN ESTIMATE OF "MINEABLE RESERVES"
<TABLE>
<CAPTION>
TONNES (MILLIONS) % Pb % Zn CUT-OFF USED
----------------- ---- ---- ------------
<S> <C> <C> <C> <C>
Changba (Open Pit)............................... 19.5 1.5 9.3 1.2% Zn
+0.7% Pb
Lijiagou (Underground)........................... 13.5 2.1 12.5 4% Zn
---- --- ----
Total.................................. 33.0 1.7 10.6
</TABLE>
Silver occurs with galena in both deposits and averages 15.9 grams/tonne in
the Changba and 5.2 to 9.3 grams/tonne at Lijiagou.
The Lijiagou deposit is essentially the strike extension of the Changba
deposit across an off-setting fault structure. Baiyin is developing the
Changba-Lijiagou deposits in three distinct phases. Phase 1 is essentially
complete and comprises the existing Changba open pit and a 1,000 tonnes per day
("tpd") mill complex. Phase 2 is the expansion of the Changba pit and mill
facilities to 3,500 tpd capacity and is planned to be completed by mid-1997.
Funding permitting, Phase 3 will be the introduction of mill feed from
underground operations on the Lijiagou deposit and expansion of the mill to
5,500 tpd. Phase 3 is planned to go into effect in 1998 and the development work
for this phase has just begun with the collaring of a shaft to access the
Lijiagou deposits.
H.A. Simons Ltd. has recently estimated Resources for both deposits as
follows:
ESTIMATED RESOURCES
<TABLE>
<CAPTION>
TONNES (MILLIONS) % Pb % Zn CUT-OFF USED
----------------- ---- ---- ------------
<S> <C> <C> <C> <C>
Changba (Open Pit).............................. 44.4 1.31 6.8 2% Zn+Pb
Lijiagou (Underground).......................... 18.2 1.43 8.14 4%Zn
---- --- ---
Total................................. 62.6 1.34 7.17
</TABLE>
The resources in both the Changba and Lijiagou deposits are open to depth.
The deposits are located on the north limb of a large antiform and near the
contact zone between a carbonate unit and an overlying clastic
40
<PAGE> 41
sequence. The sequence that hosts the mineralization can be traced for a strike
length of 23 kilometers east of the mine on the north limb of the fold and is
also present on the south limb of the fold. Numerous showings occur to the east
of the mine and a volcanogenic Cu-Pb-Zn mine is located in a position on the
south limb of the fold.
Approximately 33 million tonnes of resources are indicated within five
other producing deposits in the vicinity of Changba. These deposits are; Qing
Yang Xia (1.3 million tonnes), Jianergou (3 million tonnes), Deng Jia Shan (13
million tonnes), Bi Jia Shan (4 million tonnes), Laoba (12.5 million tonnes).
These deposits are being operated by local governments and do not form a part of
the mineral properties covered by the CBLG Co-operation Agreement. Illegal
underground mining is being conducted by local farmers on eastward strike
extensions of the Lijiagou deposit but none of this mineralization has been
drill-tested. Thus, the entire region is prospective for lead and zinc.
Proposed Exploration and Development Program
The Registrant has allocated $600,000 from the proceeds of its 1996 private
placements to conduct preliminary assessments of the Changba and Lijiagou
deposits as recommended in the CBLG Technical Report. These pre-feasibility
studies will include evaluation of the accuracy of the current estimated
resources as well as the need for, and the extent of, an infill diamond drilling
program on the deposits. More detailed recommendations are contained in the
report prepared by H.A. Simons Ltd. titled "Proposed Development Strategy for
the Lijiagou Underground Mine":
The recommendations are broken into two groups or phases. The first phase
encompasses those activities which should be undertaken to enable the completion
of a preliminary economic analysis of the property. All costs are estimates
only.
The second group encompasses those activities which would form the logical
"next step" for the investigation of the property, provided the economic
analysis is favorable. These activities are not yet costed but could ultimately
lead toward a full feasibility study.
PHASE I
<TABLE>
<S> <C> <C>
Metallurgical.... $120,000
Geology.......... $260,000 (including limited diamond drilling to confirm Baiyin drilling,
to provide core for geotechnical core logging, ore body
definition and continuity and geological and grade modelling of
the deposit)
Mining........... $ 70,000
Geotechnical..... $ 40,000
Revenue Study.... $ 10,000
Other............ $ 90,000 (concentrate haulage and infrastructure studies)
--------
$590,000
</TABLE>
This work is expected to extend over a period of 12-18 months. It is
anticipated that the work will commence in the summer of 1997.
41
<PAGE> 42
To December 31, 1996, the Registrant has spent approximately $27,965 on the
exploration and development of the Changba-Lijiagou Property, as follows:
<TABLE>
<CAPTION>
EXPENDITURES AMOUNT
--------------------------------------------------- -------
<S> <C>
Geological Consulting.............................. $10,862
Travel and Accommodation........................... 0
Labor.............................................. 0
Licenses & Permits................................. 0
Property Investigation............................. 0
Assaying........................................... 0
Engineering........................................ 17,103
-------
TOTAL.................................... $27,962
=======
</TABLE>
The Changba-Lijiagou Property is known to contain commercial lead-zinc
deposits. The Registrant's work program is designed to assess the accuracy of
the current estimated reserves and to identify additional reserves.
STONE LAKE PROPERTY
Acquisition
The Stone Lake Property is considered a "Principal Property" of the
Registrant as the Registrant intends to expend a material portion of the net
proceeds of its 1996 private placements on such property.
The Registrant acquired its interest in the Stone Lake Property pursuant to
the PCR Agreement, the terms of which are described under the heading
"Acquisition of the Registrant's Chinese Properties" above. The consideration
payable to PCR by the Registrant for the Stone Lake, Changba-Lijiagou and
Crystal Valley Properties consisted primarily of 4,880,000 escrow shares which
will only be released upon the Registrant satisfying certain earn-out
requirements (see "Item 4 -- "Performance Shares or Escrow Securities"). The
Stone Lake Property is the subject matter of a report prepared by Dr. Wayne
Ewert of A.C.A. Howe International Limited dated March 13, 1995 and updated
pursuant to an addendum dated December 9, 1996.
As discussed under the heading "Emperor's Delight Property" above, the
Registrant has certain rights in respect to this property under the GEC-FGEB
Co-operation Agreement. This agreement provides Temco with an "exclusive right"
to negotiate and enter into a Joint Venture Contract with GEC-FGEB with respect
to the Stone Lake Property located in Hebei Province, China (as well as the
Emperor's Delight and Crystal Valley prospects) providing for a 55% interest in
the project in favor of Temco. Detailed study of this area has just begun
pursuant to the GEC-FGEB Co-operation Agreement and the likelihood of finding
additional reserves is considered strong. The expenditure requirements on the
Stone Lake Property are to be formulated in a Joint Venture Agreement to be
negotiated with GEC-FGEB in 1997 (for further details regarding the FGEB
Co-operation Agreement see "Emperor's Delight Property"). Although it is
currently the unwritten policy of the Chinese government that Chinese entities
be given preference to foreign entities in developing high-grade easily mineable
ore deposits, such as the Stone Lake deposit it is expected that new regulations
to be formulated in early 1997 pursuant to the new Mineral Resources Law of
China will remove such restrictions on foreign investment.
A title opinion in respect to the Stone Lake Property has not been obtained
by the Registrant.
Location and Description
The Stone Lake Property lies about 320 kilometers south of Beijing in the
northwest part of Lingshou county, Hebei Province, and is situated about 96
kilometers northwest of Shijiazhuan city, the capital of Hebei province.
Shijiazhuan is a major train station on the Jin-Guan railway and two major
roads, the Shijiazhuan-Datong and Shijiazhuan-Fuping highways, pass within
several kilometers of the property. Secondary roads off these main highways
provide excellent access to the property. The local infrastructure is
acceptable.
42
<PAGE> 43
The property covers a 120 square kilometer area, consisting of the
following three detailed study sections: Shihu, Tolin, and Dahuang Shang.
The property lies at the central portion of the Taihang mountain chain at
an altitude varying from 600 to 995 meters above sea level. The region is
characterized by medium to low mountainous terrain and a continental, semi-arid
climate. Vegetation is not well developed due to a poor soil cover and
widespread exposure of bedrock.
The property contains state-approved reserves of 22 tonnes of gold
(>700,000 oz.) contained in quartz-vein type structures and mineralized felsic
dikes related to the emplacement of a felsic intrusive. The reserves,
categorized as "C" and "D", have an average grade of 12 grams gold/tonne and
have been established from a total of 51,000 meters of diamond drilling, 3,750
meters of underground drifting and 5,200 cubic meters of trenching completed on
the property to date. For a discussion of the various Chinese reserve
categories, refer to subheading "Chinese Resource Classification System of Ore
Reserves" above.
Regionally, the geology of the area is dominated by the intrusion of four
major plutonic complexes. These intrusive rocks are late tectonic features and
are relatively undeformed despite being within the most active portions of the
DFZ. Each of the competent intrusions has pressure shadow fracture systems and
related dike swarms associated with it. Late stage, gold-bearing quartz vein
systems are associated with these dike swarms.
Locally, the project area is located along the southeast margin of the
Mapong Intrusive and features an extensive mineralized network of felsic dikes
and related auriferous quartz vein systems. Of the 23 gold-bearing quartz veins
known on the property only those few falling within three "detailed study areas"
have been investigated in any detail.
The 3.1 square kilometer Shihu study area contains the No. 101 Vein (14.24
tonnes gold) and the No. 116 Vein (8.04 tonnes gold). Average grades for the 101
Vein include 9.45 grams gold/tonne, 24 grams silver/tonne, 2.12% lead and 2.03%
zinc. A total of 93% of the gold is recoverable from a flotation and gravity
produced concentrate using standard cyanide techniques.
This deposit has been classified as "Gold-Polymetallic Sulphide" type. The
No. 116 Vein (grading 15.76 grams gold/tonne) deposit is higher grade than the
No. 101 but is similar in all other respects. Both structures dip at
approximately 65 degrees.
Another study area within the property, Dahuang Shang, is receiving
detailed level work at present. Early indications are that this area contains
higher-grade veins than the No. 101 Vein.
The Stone Lake Project displays significant local and regional exploration
potential and a multi-phase exploration program has been recommended by A.C.A.
Howe in its Evaluation Report dated March 13, 1995.
Exploration and Development History
In the early 1980's, the GEC-FGEB conducted a regional geological
prospecting and mapping survey over a 35 square kilometer area south of the
Mapong intrusive to search for gold-bearing quartz veins.
From 1981 to 1983 the study was successful in identifying approximately 23
major vein structures including the No. 101 and No. 116 Veins, the two most
prospective structures discovered to date. Subsequently, the survey area was
expanded and a reconnaissance exploration program was undertaken to document the
distribution, size, quality and quantity of all quartz veins within the 120
square kilometer area surrounding the Stone Lake Property. In total, over 242
individual vein structures have been discovered. Only reconnaissance exploration
has been conducted on any of these peripheral veins. Virtually all exploration
efforts have concentrated on delineating potential ore reserves on the No. 101
and No. 116 Veins. Detailed geological, geophysical and geochemical exploration
on these two veins was carried out from 1984 to 1987. Diamond drilling and
underground exploration of vein No. 101 and vein No. 116 was conducted
intermittently from 1988 to 1993. The proven reserves are 14.24 tonnes of gold,
grading 9.45 grams gold/tonne for Vein No. 101, and 8.04 tonnes of gold, grading
15.76 grams gold/tonne for Vein No. 116 (class C and D reserves).
43
<PAGE> 44
Geology, Mineral Deposits and Reserves
The Stone Lake Property is situated within that region of China known as
the Fuping Domes. This region is an active tectonic domain characterized by the
regional intrusion of four major plutonic complexes into the continental Deep
Fault Zone ("DFZ") that runs across the northeastern part of China. These
igneous intrusions are late tectonic features and yet remain relatively
undeformed despite being situated within the most active portions of the fault
zone. Each of these intrusions has acted as a competent buttress and so allowed
development of "pressure shadow" fracture systems and related dike swarms. Late
stage gold-bearing quartz veins are associated with these dike swarms and these
may attain strike lengths of several kilometers.
The Stone Lake Property is located along the southeast margin of the Mapong
Intrusive, the southwestern most of the intrusive complexes, and is underlain by
an extensive mineralized network of felsic dikes and related auriferous quartz
veins. Less than 15% of the over 240 mineralized veins identified around the
south margin of the Mapong Intrusive have been investigated. At present, on the
Stone Lake Property only those select few gold-bearing quartz vein zones falling
within three "detailed study areas" have been investigated in any detail. In
total these three study areas, Dahuang Shang, Tolin and Shihu, comprise less
than 5 square kilometers of the 120 square kilometer Stone Lake Property. The
3.1 square kilometer Shihu study area contains the Nos. 116 and 101 Veins which
have attracted the bulk of the exploration effort.
The property contains state-approved dike-vein hosted reserves of over 22
tonnes gold. These reserves have been categorized as "C + D" and have been
established from a total of 51,000 meters of diamond drilling, 3,750 meters of
underground drifting and 5,200 cubic meters of trenching completed on the
property to date. The reserves have an average grade of 12 grams gold/tonne. The
reserves accepted by the State Reserve Committee are 14.24 tonnes of gold in
material grading 9.45 grams gold/tonne for Vein No. 101, and 8.04 tonnes of gold
in material grading 15.76 grams gold/tonne for Vein No. 116.
Typically, and in a similar manner in which reserves are calculated in
North America, the reserves are calculated by first constructing polygons around
sample points. A cross sectional area of the mineralized zone for each polygon
is computed. The average width is used to derive a volume and this is used
together with the specific gravity of the mineralization to derive a tonnage for
each polygon. The tonnage and grade of each polygon is carried half the distance
to the next cross section where the process of calculating the tonnage and grade
is repeated. The weighted average grade (by tonnes) for each polygon is used to
derive the average grade of the deposit as a whole.
Vein No. 101 which is located in the middle of the Shihu study area was
investigated as part of the field site visit by A.C.A. Howe. This vein which is
the most intensely studied vein on the property was examined both on surface and
underground on one of several exploration drifts established at 40 meter
elevation intervals. Two ore zones, zone Nos. 2 and 4, are developed on the
hanging and footwall contact, respectively of a granodiorite dike and measure
about 1.2 to 2.5 meters in width. The host intrusive dike is about 3,200 meters
long and 10 to 40 meters wide. Gold-bearing quartz veins of the ore zones, along
with silicified, chloritized, and pyritized wall rock generally extends for a
few meters outward from the veins. The combined widths of the mineralization and
its alteration varies from 3 to 42 meters.
The No. 4 zone has an overall average grade of 9.45 grams gold/tonne with
silver, lead and zinc as recoverable by-products. The reported silver grade of
the ore is 24 grams silver/tonne, the lead grade 2.12% and the zinc grade 2.03%.
A check assay grab sample taken from an underground ore station was returned to
Toronto, Canada and assayed by XRAL Laboratories using standard assay
procedures. An assay value of 1.61 oz gold/ton, 4.7 oz silver/ton, 0.15% copper,
3.0% zinc and 1.0% lead was obtained from what appeared to be a typical and
representative ore sample.
The No. 101 Vein "C" and "D" reserves were calculated from sixteen cross
sections at 40 meter spacing through the deposit. A minimum average mining width
of 1.0 meter and a cut-off grade of 3.0 grams gold/ tonne was used in the
calculation of the reserve of 14.24 tonnes of gold. An average grade of 9.45
grams gold/ tonne was obtained from the calculation using these parameters.
Assays from detailed sampling from diamond drilling at 40 meter spacing and
underground drifting on three levels at 40 meters apart were used for this
calculation.
44
<PAGE> 45
Similarly, the No. 116 vein has a calculated reserve of 8.04 tonnes of gold
at an average grade of 15.76 grams gold/tonne and an average true width of 1.43
meters. This is a blind mineralized body located about 400 meters northeast of
Vein No. 101. It contains a smaller tonnage at a higher gold grade than Vein No.
101 and is richer in base metals. In all other aspects it is very similar to
vein No. 101.
The Chinese classify the ore as gold-polymetallic sulphide ore. The ore
mineralogy consists mainly of electrum in intergranular and fracture-filling
forms. The sulphide-related gold is recovered as a flotation concentrate which
is then treated with cyanide. Seventy-seven percent of the gold is recovered in
this way with the remainder recovered by gravity techniques. Overall recoveries
of around 93% are claimed. By products include lead, zinc and silver.
The 1.6 square kilometer Dahuang Shang study area is located southwest of
the Shihu area. It contains two major veins, No. 302 and No. 330, that are the
object of current exploration work. A surface examination of the No. 302 vein
was conducted as part of the Stone Lake Property visit by A.C.A. Howe. Vein Nos.
302 and 330 were being exposed by trenching. In addition, the excavation of an
adit was underway on Vein No. 302. The examination of dike outcrops shows that
they are thicker and laterally more extensive than the intrusive at Shihu.
Reported assays from the adit are reported to yield values of 10.29 grams
gold/tonne across a width of 0.75 meters and 10.11 grams gold/tonne across a
width of 0.90 meters.
Proposed Exploration and Development Program
The A.C.A. Howe Report concludes that the Stone Lake Property displays
significant local and regional exploration potential and it is recommended that
a U.S.$1,550,000 two-phased exploration program be conducted on the property. It
is envisioned that this program would be related to the No. 101 and No. 116
Veins of the Shihu detailed study area and the No. 302 and No. 330 Veins of the
Dahuang Shang area. Phase I of the program has been designed to confirm the
existing reserves and provide a preliminary economic evaluation of the
mineralized veins. The Phase I work program also provides for a reconnaissance
exploration program designed to test other known veins and evaluate remaining
untested targets on the property. The estimated total cost of the Phase I work
program is $770,000. The Phase I program will consist of the following:
PHASE I PROGRAM
Exploration Program Budget
<TABLE>
<S> <C>
Geological consulting........................................... $ 53,000
Diamond drilling................................................ 336,000
Travel, accommodation, fees, field equipment and transport,
report preparation, translation and management fees........... 115,000
Contingency..................................................... 15,000
--------
Subtotal................................................... $519,000
--------
Reconnaissance Exploration Program Budget
Airphoto, landsat imagery and office compilation................ 36,000
Geological consulting........................................... 73,000
Travel, accommodation, field equipment and transport, report
preparation and management fees............................... 100,000
Sampling, assaying and mechanized trenching..................... 21,000
Contingency..................................................... 21,000
Subtotal................................................... $251,000
--------
Phase I Total......................................... $770,000
========
Registrant's portion.................................. $770,000
</TABLE>
45
<PAGE> 46
The Registrant anticipates that following the signing of a Co-operation
Agreement with the MMI on the Stone Lake Property in 1997, work can commence on
the recommended Phase I. This phase of the work is expected to take
approximately four months.
Once the economic attractiveness of the reported reserves is confirmed, the
A.C.A. Howe Report recommends a Phase II program consisting of continued
drilling and underground exploration to further define and expand the reserves.
Phase II also includes a reconnaissance exploration program designed to test the
other known veins and evaluate remaining untested targets on the property. The
estimated cost of the Phase II work program is U.S.$1,000,000.
The Registrant has allocated funds for the Phase I program. Funds expended
on the Stone Lake Property will be financed by the Registrant as to 100% of the
required expenditures. The Registrant will not expend significant funds nor will
it allocate further funds to the Stone Lake Property until such time as it has
had an opportunity to review and assess the proposed new regulations expected to
be passed by the PRC in 1997 dealing with the exploitations of high-grade,
easily mineable ore deposits by foreign entities. Previously, foreign entities
have been excluded from participating in exploitation of such deposits.
To December 31, 1996, the Registrant has spent no funds on the acquisition
and exploration of the Stone Lake Property.
Although the Stone Lake Property does contain C and D class reserves, there
is no surety that this material may be mined and metals produced therefrom at a
profit, therefore the Registrant cannot state that the property contains a known
body of commercial ore. The Registrant's proposed work program is a confirmatory
and exploratory search only.
CRYSTAL VALLEY PROPERTY
Acquisition
The Crystal Valley Property is considered a "Principal Property" of the
Registrant as the Registrant intends to expend a material portion of the net
proceeds of its 1996 private placements on such property.
The Registrant acquired its interest in the Crystal Valley Property
pursuant to the PCR Agreement, the terms of which are described under the
heading "Acquisition of the Registrant's Chinese Properties" above. The
consideration payable to PCR by the Registrant for the Crystal Valley, the
Changba-Lijiagou and the Stone Lake Properties consisted primarily of 4,880,000
escrow shares which will only be released upon the Registrant satisfying certain
earn-out requirements (see Item 4 -- "Performance Shares or Escrow Securities").
The Crystal Valley Property is the subject matter of a report prepared by Dr.
Wayne Ewert of A.C.A. Howe International Limited dated March 13, 1995 and
updated pursuant to an addendum dated December 9, 1996.
As discussed under the heading "Emperor's Delight Property" above, PCR has
certain rights in respect to this property under the GEC-FGEB Co-operation
Agreement. This agreement provides Temco with an "exclusive right" to negotiate
and enter into a Joint Venture Contract with GEC-FGEB with respect to the
Crystal Valley Property in Hebei Province, China (as well as the Emperor's
Delight and Stone Lake prospects) providing for a majority interest in the
project in favor of Temco. The Crystal Valley Property area is located in one of
China's most prolific gold camps and the potential for adding to the total
reserve is considered excellent. The expenditure requirements are to be set
forth in a Joint Venture Agreement to be negotiated with the GEC-FGEB in 1997
(for further details regarding the FGEB Co-operation Agreement see "Emperor's
Delight Property"). Although it is currently the unwritten policy of the Chinese
government that Chinese entities be given preference to foreign entities in
developing high-grade easily mineable ore deposits, such as the Crystal Valley
deposit, it is expected that new regulations to be passed pursuant to the
Mineral Resources Law of China in early 1997 will remove such restrictions on
foreign investment.
A title opinion in respect to the Crystal Valley Property has not been
obtained by the Registrant.
46
<PAGE> 47
Location and Description
The Crystal Valley Property consists of a 120 square kilometer area granted
to the Ministry of Metallurgical Industry, the Chinese ministry responsible for
much of China's gold production, that is located approximately 110 kilometers
north of Beijing in Chongli County, Hebei Province. Road access to the property
is very good and the local infrastructure such as electricity, water,
transportation and labor is adequate.
The Crystal Valley Property lies in a semi-arid mountainous terrain at an
altitude that varies from 1,000 to 1,600 meters above sea level. The Qinshui
river which lies 1.5 kilometers east of the property provides the area with a
stable, year round water supply. The region has a moderately severe winter
season which produces a maximum freezing depth of 2 meters. Agriculture is the
predominant form of employment in the region although there is a locally diverse
mining and manufacturing base including gold mines, coal mines and large cement
plants, which are all operated by local governments.
The property contains quartz-vein hosted, state approved reserves of 19
tonnes of gold metal. These reserves are based on the 6,000 meters of drifting,
21,000 meters of diamond drilling and the 7,700 cubic meters of trenching
completed on the property to date.
Exploration and Development History
The Crystal Valley Property is located on the south side of the Deep Fault
Zone ("DFZ") referred to above. This fault zone controls the distribution of
secondary structures as well as the general stratigraphic orientation in the
region. The district has a long history of igneous activity, including the
emplacement of large acidic and alkalic plutons during Cretaceous times. Gold
mineralization is often associated with these intrusions, making this region one
of China's most productive gold camps. Currently stated reserves in excess of
150 tonnes (>4.8 million ounces) of gold are reported by mines within a 60
kilometer radius of the Crystal Valley project. It should be noted that these
reserves are those currently approved by the State for known deposits and they
do not necessarily reflect the ultimate reserve potential of the region. The
Dong Ping Deposits are worked by the largest mines in the area where reserves of
70 tonnes of gold are reported from material having an average grade of 13 grams
gold/tonne (0.38 oz gold/ton).
Early reconnaissance work in this region (1986) consisted mainly of a
regional stream sediment surveys. The results of these surveys indicated that
gold deposits in this region are closely related to the stream sediment
anomalies. The Crystal Valley Property was established as a result of a regional
survey in order to investigate one of the larger anomalies. Based on the
magnitude of the geochemical anomalies, the area is considered to have excellent
potential to host important gold mineralization.
To date a total of over 20 major veins have been identified on the Crystal
Valley property with 10 of these initially selected for further detailed
evaluation or "exploration stage" work. To date, this work has concentrated on
the No. 2 and No. 3 veins. Most of the 19 tonnes of gold ore reserves reported
for the Crystal Valley Property are based on these two veins.
Geology, Mineral Deposits and Reserves
Regionally, the area sits on the south side of the Deep Fault Zone
mentioned above. The region is one of China's most prolific gold camps with
current, state-approved reserves of greater than 150 tonnes of gold being
reported by mines within a 60 kilometer radius of Crystal Valley. The largest
deposit in the region hosts 2.5 million oz. of gold. The gold reserves are
contained predominantly in high-grade, vein type deposits usually associated
with Cretaceous age igneous intrusive rocks. The intrusives gained egress to the
upper crustal levels along the DFZ.
On the Crystal Valley Property, current reserves are estimated at 19 tonnes
(>600,000 oz.) of gold hosted in quartz-vein type deposits grading 8 grams
gold/tonne. The reserves are categorized as "C and D" reserves in the Chinese
reserve classification system. The "C" category for this vein type deposit
requires drill hole centers at not greater than 40 meter X 40 meter, underground
sampling levels at 40 meters apart and the
47
<PAGE> 48
same surface trench spacing. The "D" reserves require a maximum spacing of 80
meters X 80 meters and underground sampling levels at 80 meters apart and
surface trenching at the same spacing.
On the property, the mineralized structures dip at approximately 70 degrees
and are persistent features with strike lengths of up to 3,000 meters and have
average widths of about 1-3 meters. There have been twenty such structures
identified on the property and no reserve definition work has been attempted on
eighteen of these. Only the No. 2 Vein and parts of the No. 3 Vein, have been
fully explored and, in keeping with traditional Chinese practice, just to a
depth of 300 meters. The average grade for the veins is 7 to 8 grams gold/tonne
(0.20 to 0.23 oz gold/t) with the eastern veins tending to have a higher average
gold content of around 10 grams gold/tonne (0.30 oz gold/t).
Both the surface exposure and underground drifts on the No. 2 Vein were
inspected by A.C.A. Howe as part of the on-site visit to the Crystal Valley
Property on September 13, 1994. The vein, which consists of a 1.5 to 2.0 meter
wide siliceous, sulphide-bearing shear structure containing higher grade
auriferous quartz veins, stringers and veinlets, is exposed in detail by
drifting on six levels spaced 40 meters apart. A representative grab sample
taken at the -- 40 m level of the more sulphide-rich (25%-30% pyrite) ore with
minor quartz stringers was assayed by XRAL Laboratories in Toronto to yield
values of 1.03 oz gold/ton and 8.65 oz silver/ ton.
Six ore bodies have been delineated on the No. 2 Vein. Ore body No. 1, the
largest, is 680 meters long, varies in width from 0.5 to 2.3 meters (average
0.86 meters), and has an average grade of 8.35 grams gold/ tonne (0.24 oz
gold/ton). Reserves reported on this vein are about 5 tonnes of gold. The
mineralized zones contain chalcopyrite, galena, native gold and secondary
electrum. Oxidized portions also contain limonite.
A reconnaissance survey by the Chinese exploration group was carried out on
veins No. 1, No. 4, No. 5, No. 8, and No. 10. Veins No. 8 and No. 10 are
presently being investigated in detail. The preliminary results of this work
indicates that the mineralization is more or less continuous and appears to be
of consistent grade over the entire strike length exposed of these veins. Vein
No. 8 has a strike length of over 3,000 meters and an average grade of 6.88
grams gold/tonne over 1.83 meter width. Vein No. 10 consists of a 5,000 meter
long quartz vein that varies in width from 0.5 to 20.0 meters and has an average
grade of 5.63 grams gold/tonne over 1.36 meters. Both veins are in the initial
stages of exploration and are considered to display excellent potential for the
delineation of reserves although no reserves have been calculated for these
structures to date.
Proposed Exploration and Development Program
Given the potential of the vein systems on the Crystal Valley Property,
A.C.A. Howe recommends that a U.S.$1,525,000 two-phased exploration program be
conducted to further test and define reserves on the known zones of
mineralization. Phase I of the proposed work program will concentrate on the
present reserves both along strike and down dip on the established veins where
current reserves have been defined and would initially consist of detailed
surface and underground drilling. The estimated cost of the Phase I work program
is $735,000 and will consist of the following:
<TABLE>
<CAPTION>
PHASE I PROGRAM
------------------------------------------------------------------
<S> <C>
Exploration Program Budget
Geological consulting............................................. $ 53,000
Diamond drilling.................................................. 336,000
Travel, accommodation, fees, field equipment and transport, report
preparation, translation and management fees.................... 115,000
Contingency....................................................... 14,000
--------
Subtotal..................................................... $518,000
========
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
RECONNAISSANCE EXPLORATION PROGRAM BUDGET
------------------------------------------------------------------
<S> <C>
Airphoto, landsat imagery and office compilation.................. 36,000
Geological consulting............................................. 54,000
Travel, accommodation, field equipment and transport, report
preparation and management fees................................. 90,000
Sampling, assaying and mechanized trenching....................... 21,000
Contingency....................................................... 16,000
Subtotal..................................................... $217,000
--------
Phase I Total........................................... $735,000
========
Registrant's portion (100%)............................. $735,000
</TABLE>
The Registrant anticipates that following the signing of a Co-operation
Agreement with the MMI on the Crystal Valley Property in 1997 work can commence
on the recommended Phase I. This phase of the work is expected to take
approximately four months. If warranted by the preliminary results, additional
underground drilling and development work is recommended by A.C.A. Howe as part
of a Phase II work program. Phase II will also include a reconnaissance
exploration program designated to test the other known veins and evaluate
remaining untested targets on the property. The estimated cost of the Phase II
work program is U.S.$1,000,000.
The Registrant has allocated funds for the Phase I program. Funds expended
on the Crystal Valley Property will be financed by the Registrant as to 100% of
the required expenditures. The Registrant will not expend significant funds nor
will it allocate further funds to the Crystal Valley Property until such time as
it has had an opportunity to review and assess the proposed new regulations
expected to be passed by the PRC in early 1997 dealing with the exploitations of
high grade, easily mineable ore deposits by foreign entities. Previously,
foreign entities have been excluded from participating in exploitation of such
deposits.
To December 31, 1996, the Registrant has spent no funds on the acquisition
and exploration of the Crystal Valley Property.
Although the Crystal Valley Property does contain C and D class reserves,
there is no surety that this material can be mined and metals produced therefrom
at a profit; therefore the Registrant cannot state that the property contains a
known body of commercial ore. The Registrant's proposed work program is a
confirmatory and exploratory search only.
OTHER PROPERTIES OF THE REGISTRANT
The following properties are not considered "Principal Properties" of the
Registrant as the Registrant does not intend to expend a material portion of the
net proceeds of its 1996 private placements on such properties.
Tian Shan (or "Heavenly Mountains") Properties
The May 27, 1996 Co-operation Agreement with the Xinjiang Bureau of the
Ministry of Geology and Mineral Resources ("MGMR-Xinjiang") gives the Registrant
an exclusive right to choose specific areas, from within six property areas
covering over 36,000 square kilometers of the Tian Shan, or "Heavenly
Mountains", on which to negotiate joint venture agreements.
Xinjiang Uygur Autonomous Region of Northwestern China is a neighbor to the
Central Asian Republics of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
This area of Asia, and in particular the geologic terrane known as the Tian Shan
Orogenic Belt, hosts exceptional mineral deposits such as Muruntau, at 140
million oz. the largest gold deposit in the world outside of South Africa;
Kumtor, 13 million oz. gold; Daugystau/Amentaytau, 9 million oz. gold; and
Kalmakyr, the giant porphyry copper deposit containing 26 million oz. gold and
13 million tonnes of copper.
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<PAGE> 50
In the Chinese Tian Shan, the six properties cover relatively unexplored,
yet highly prospective ground which has the same geologic terrane that hosts the
world-class mineral deposits in the neighboring Central Asian Republics. In this
region of China, however, very little mineral exploration has taken place.
To date, The limited work completed by the MGMR-Xinjiang resulted in the
1994 discovery of the Sawayaerdun deposit on which a resource, which is still
open at depth and along strike, estimated to contain at least 5 million oz. gold
has been defined. For the most part, however, only limited mineral exploration
has taken place on the Chinese portion of the Tian Shan and just a few foreign
companies, mostly majors such as Barrick Gold Corporation, BHP, and Cameco Inc.
have realized the potential of this region and have been aggressively seeking
properties.
The six designated property areas in Tian Shan are defined by the following
sets of coordinate points:
<TABLE>
<CAPTION>
APPROXIMATE
AREA LATITUDE/LONGITUDE POINTS SIZE
AREA NAME NUMBER ON BOUNDARY (km(2))
- ---------------- ----------- ------------------------------------- -----------
<S> <C> <C> <C>
Wulansayi 1 N42 DEGREES00'00"/E84 DEGREES45'00" 11,000
N42 DEGREES37'00"/E86 DEGREES00'00"
N42 DEGREES37'00"/E84 DEGREES00'00"
N42 DEGREES00'00"/E86 DEGREES00'00"
N42 DEGREES57'00"/E84 DEGREES41'00"
N42 DEGREES25'00"/E84 DEGREES45'00"
Baluntai 2 N43 DEGREES00'00"/E86 DEGREES00'00" 2,950
N42 DEGREES40'00"/E86 DEGREES00'00"
N43 DEGREES00'00"/E86 DEGREES30'00"
N42 DEGREES40'00"/E86 DEGREES30'00"
Aikendaban 3 N43 DEGREES37'00"/E84 DEGREES00'00" 9,200
N43 DEGREES00'00"/E84 DEGREES00'00"
N43 DEGREES00'00"/E86 DEGREES00'00"
N43 DEGREES20'00"/E86 DEGREES00'00"
Kushitai 4 N42 DEGREES19'00"/E81 DEGREES05'00" 6,750
N42 DEGREES36'00"/E82 DEGREES00'00"
N43 DEGREES13'00"/E82 DEGREES45'00"
N42 DEGREES26'00"/E82 DEGREES00'00"
N42 DEGREES41'00"/E82 DEGREES45'00"
N42 DEGREES45'00"/E81 DEGREES05'00"
Muzhate 5 N42 DEGREES46'00"/Ntl. Boundary with 3,590
Kazakhstan
N42 DEGREES16'00"/Ntl. Boundary with
Kazakhstan
N42 DEGREES46'00"/E81 DEGREES00'00"
N42 DEGREES16'00"/E81 DEGREES00'00"
Yishijilike 6 N42 DEGREES46'00"/Ntl. Boundary with 2,750
Kazakhstan
N42 DEGREES16'00"/Ntl. Boundary with
Kazakhstan
N42 DEGREES46'00"/E81 DEGREES00'00"
N42 DEGREES16'00"/E81 DEGREES00'00"
Approximate total area = 36,240 Km(2)
</TABLE>
To the best knowledge of the Registrant, the MGMR-Xinjiang is the single
largest player in Tian Shan and believes that most of the ground covered by the
six properties is under the control of the MGMR-
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<PAGE> 51
Xinjiang. The Registrant's agreement with the MGMR-Xinjiang protects these six
areas from encroachment by other foreign companies and open ground and existing
MGMR-Xinjiang projects within these areas can be the subject of joint ventures
with the Registrant after the Registrant has reviewed all available Chinese
data, generated its own data and ultimately makes a decision regarding which
specific detailed areas are to be applied for at the 1:10,000 scale. Once the
Registrant chooses the specific detailed project areas, each constituting blocks
of approximately 100 square kilometers area, applications will be filed with the
authorities in Xinjiang and with the Central Government in Beijing. Upon
approvals, these areas will be fully protected and the Registrant can explore
for and develop mineral deposits on the property.
This co-operation agreement gives the Registrant the exclusive right to
negotiate and enter into joint venture contracts wherein the Registrant can earn
a 76% equity interest in joint ventures relating to the specific chosen detailed
project areas by investing yet-to-be defined amounts in these projects. The
amounts will be determined following an independent valuation of the projects to
be conducted after receiving appropriate governmental approvals to enter into
the joint venture agreements.
The Registrant has agreed to examine all available data and information
with respect to the properties in a timely fashion and confirm to MGMR-Xinjiang
its level of interest in the properties. The Registrant has assembled as much
data as possible on each of the designated areas covered by the agreement. This
data acquisition included: regional scale geochemical data from the MGMR; remote
sensing data from Canadian, American and/or Chinese suppliers; and the
processing of this data to generate new information on these areas. The
Registrant has combined all of the ground information with the satellite remote
sensing data to help choose the specific areas for joint venture agreements with
the MGMR. The Registrant cannot formulate proposals for field programs until it
knows what work has been completed to date. Much of this information will be
available after the Registrant signs the next agreements with the MGMR-Xinjiang.
To date, the Registrant's geologists have extensively reviewed Landsat TM
remote sensing satellite data to help define exploration targets. This work has
lead to the expedient and cost-effective identification of eleven specific
detailed project areas having iron-oxide and clay alteration anomalies; features
which are commonly associated with gold mineralization. Most of these alteration
zones are coincident with structural features (also visible on the Landsat
imagery) and with regional geochemical gold anomalies previously identified by
the MGMR-Xinjiang.
As its contribution in the joint ventures, for a 24% interest, MGMR will
contribute its interest in the properties including the exploration permits for
the properties, and the data and results which have been collected or created to
date on the properties. The Registrant will contribute to the joint ventures
certain advanced equipment and technology for mineral exploration, development
and production phases. After a feasibility study has been conducted, all capital
required will be contributed as to 19% by MGMR-Xinjiang and as to 81% by the
Registrant in order to maintain their respective 24% and 76% equity interest in
each joint venture. The term of the joint ventures shall continue for a period
of thirty years from the date upon which the joint ventures is established.
The Registrant has paid a "seriousness" bond of U.S.$50,000 to the
MGMR-Xinjiang with regard to this agreement. It is understood that the
Registrant will be reimbursed this amount once field work begins on any property
within the designated areas.
Until agreements have been advanced to the joint venture status, the
Registrant has no immediate plans to carry out extensive work programs on the
Tian Shan Properties but has allocated approximately $250,000 from the proceeds
of its 1996 private placements for investigative costs.
A title opinion in respect to the Tian Shan Properties has not been
obtained by the Registrant.
51
<PAGE> 52
To December 31, 1996, the Registrant has spent and deposited for further
expenditures a total of approximately $153,303 for the exploration of the Tian
Shan Properties, as follows:
<TABLE>
<CAPTION>
EXPENDITURES AMOUNT
-------------------------------------------------- --------
<S> <C>
Deposit........................................... $ 68,801
Remote Sensing.................................... 22,528
Geological Consulting............................. 31,420
Travel and Accommodation.......................... 24,572
Other Expenditures................................ 5,982
-------
TOTAL................................... $153,303
=======
</TABLE>
The Tian Shan Property does not contain a known body of commercial ore and
the Registrant's proposed work program is an exploratory search only.
Xifanping Property
In October of 1996, the Registrant entered into a Letter of Intent with the
Sichuan Bureau of the Ministry of Geology and Mineral Resources ("MGMR-Sichuan")
regarding the Xifanping copper-gold porphyry project in southwest Sichuan
Province (the "Xifanping Project"). This Letter of Intent marks the second
agreement between the Registrant and MGMR-Sichuan, the first agreement being in
respect to the Chapuzi Property.
The Xifanping Project covers a 50 square kilometer area hosting numerous
porphyry systems and is located about 130 kilometers southwest of the city of
Zichang in south central China. The property is situated within the same
mineralization belt that hosts the Yulong copper porphyry deposit, one of the
world's largest undeveloped copper deposits.
Pursuant to the Letter of Intent, the MGMR-Sichuan will immediately begin a
program of detailed geological mapping, soil sampling and induced polarization
surveys to cover the entire Xifanping Project area. The Registrant will provide
consulting and direction to the programs, which are scheduled for completion in
1997. The Registrant has until August, 1997 to review all data and make a
decision regarding further participation in this project. If the Registrant
elects to proceed with the project, the Registrant will be granted an exclusive
right to the project. The Registrant anticipates that an agreement similar to
the Chapuzi property agreement may be reached, whereby the Registrant can earn a
75% interest by placing the property into production.
The Registrant does not intend to expend a material portion of the proceeds
of its 1996 private placements on the Xifanping Project over the next twelve
months.
The Xifanping Property does not contain a known body of commercial ore and
the Registrant's proposed work program is an exploratory search only.
Gala Property
The Registrant holds first rights of refusal on all Sichuan Province
projects owned or generated by the Sichuan Bureau of the Ministry of Geology and
Mineral Resources ("MGMR-Sichuan"). Pursuant to these rights, the Registrant has
entered into a Letter of Agreement with the MGMR-Sichuan wherein the Registrant
has been granted an exclusive option, subject to its completion of an initial
technical due diligence study, to enter into a co-operation agreement with the
MGMR-Sichuan regarding the acquisition of an interest in the Gala Property. The
initial due diligence study is now being performed and the final terms of
acquisition should be concluded by mid-1997. The Registrant is also currently
reviewing the acquisition of other projects in Sichuan Province.
The Gala Property includes the Gala Mine, a small gold producer. The mine
is located approximately 15 kilometers from the city of Ganzi in Sichuan
Province, China, and has been in production since 1993. The Registrant is
currently conducting due diligence on this property and the following data has
yet to be
52
<PAGE> 53
confirmed. It has been reported to the Registrant, by the MGMR-Sichuan that the
Gala Mine contains probable and possible reserves of 645,000 ounces of gold as
calculated from 16 diamond drill holes and 2,000 meters of underground
exploration to a depth of 100 meters. Current production from this ore-bearing
zone which averages 4.46 grams (0.143 ounces) gold per tonne, has an average
width of 7.5 meters and may attain widths of up to 26 meters. To date, this zone
has only been tested along a strike length of 1340 meters and is open both along
strike and down-dip. Since the heap-leachable, oxide ore mineralization extends
beyond the 100 meter depth, testing the strike and dip extensions of the ore
body would be the immediate focus of an exploration program should the
Registrant's due diligence lead to the Registrant entering into a co-operation
or joint venture agreement on the property.
The Gala Property does contain a known body of commercial ore. The
Registrant believes that the Gala Property has excellent potential to contain
significantly greater reserves than currently stated. On the 550 square
kilometer license area, data from trenching and surface sampling shows that
there are a number of other zones having good potential for further gold
discoveries along a 16 kilometer trend.
Unless due diligence warrants the Registrant to enter into further
co-operation or joint venture agreements on the Gala Property, the Registrant
does not intend to expend a material portion of the proceeds of its 1996 private
placements on the Gala Property over the next twelve months.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Registrant, or any of
its subsidiaries, is a party to, or to which any of their properties is subject.
ITEM 4. CONTROL OF REGISTRANT.
As far as known to the Registrant, and except as disclosed herein, the
Registrant is not directly or indirectly owned or controlled by another
corporation(s) or by any foreign government. As disclosed below, Pacific Canada
Resources Inc., a private company controlled by a director and a former director
of the Registrant, owns approximately 49.5% of the issued and outstanding shares
of the Registrant's common stock.
The following table sets forth, as of February 28, 1997, information with
respect to (i) any person who is known to the Registrant to be the owner of more
than 10% of any class of the Registrant's outstanding voting securities and (ii)
the total amount of any class of the Registrant's voting securities owned by the
officers and directors as a group.
<TABLE>
<CAPTION>
TITLE OF CLASS IDENTITY OF HOLDER AMOUNT OWNED PERCENT OF CLASS
- -------------- -------------------------------- ------------ ----------------
<S> <C> <C> <C>
Common Shares Pacific Canada Resources Inc.(1) 7,280,000 49.5%
Common Shares All officers and directors as a 7,780,167(2) 50.7%
group, (seven persons)
</TABLE>
- ---------------
(1) Ken Cai a director and officer of the Registrant, and Donald Hicks, a former
director and officer of the Registrant, collectively are the beneficial
owners of 56% of Pacific Canada Resources Inc., a private company. See Item
10 and Item 13.
(2) Includes Ken Cai's and Donald Hicks's 56% beneficial interest in shares
owned by Pacific Canada Resources, Inc.
PERFORMANCE SHARES OR ESCROW SECURITIES
Currently, there are a total of 5,442,500 common shares of the Registrant
held at Montreal Trust Company of Canada, 510 Burrard Street, Vancouver, British
Columbia, subject to escrow share restrictions under a Performance Escrow
Agreement dated August 17, 1995 (the "1995 Escrow Agreement") and an
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<PAGE> 54
Escrow Agreement dated February 19, 1996 (the "1996 Escrow Agreement"). The
escrow shares represent 35.51 % of the total issued and outstanding shares of
the Registrant.
<TABLE>
<CAPTION>
NAME OF ESCROW SHAREHOLDER NUMBER OF ESCROW SHARES
-------------------------------------------------------- -----------------------
<S> <C>
PETER TSAPARAS, Chairman, Chief Financial Officer and
Director.............................................. 262,500
COLIN MCALEENAN, Vice-President, Explorations and
Director.............................................. 90,000
FOTIOS KANDIANIS, Past Director......................... 60,000
PETROS TSAPARAS, Past Director.......................... 60,000
HANS WICK, Director..................................... 90,000
PACIFIC CANADA RESOURCES INC............................ 4,880,000
</TABLE>
Each of the holders of escrow shares subject to the 1995 Escrow Agreement
qualify or have in the past qualified as a principal as defined in Local Policy
Statement 3-07 of the British Columbia Securities Commission as they are all
directors or former directors of the Registrant as of the date of receipt of the
escrow shares. In addition, the terms of the 1995 Escrow Agreement provide that
an escrow shareholder who ceased to be a principal, dies or becomes bankrupt,
shall be entitled to retain any escrowed shares then held by him and shall not
be obligated to transfer or surrender the escrowed shares to the Registrant or
any other person. These escrow shares are subject to the direction and
determination of the British Columbia Securities Commission and the Exchange
(the "Regulatory Authorities"). The release of the 1995 Escrow Shares will be
based on expenditures made by the Registrant on the exploration and development
of its mineral properties.
Pursuant to the 1996 Escrow Agreement, 4,880,000 escrow shares are held by
Pacific Canada Resources Inc. ("PCR"), a private Ontario company in respect of
which Ken Cai and Donald Hicks collectively own 56% of the issued and
outstanding shares.
The escrow shares held by PCR hereunder shall be released to PCR, subject
in each case to the prior consent of the Vancouver Stock Exchange, on the
following basis:
1. one escrow share for each $0.97 in the value of the interests in
the mineral properties acquired by the Registrant from PCR pursuant to the
PCR Agreement (the "PCR Properties"), based on a valuation report to be
prepared by a qualified independent consultant, less any expenditures
required to be made by the Registrant, pursuant to the PCR Agreement or
otherwise, in order to earn its interests in the PCR Properties (provided
that all required Chinese governmental approvals in order to perfect the
interests to be acquired by the Registrant hereunder have been obtained for
each of the PCR Properties that are the subject of the valuation report);
2. one escrow share for each $0.97 in the value of the interest in any
new mineral properties acquired by the Registrant pursuant to the PCR
Agreement or the TCIP Agreements ("New Projects"), such value to be
determined on the same basis and subject to the same provisions as
described in 1 above;
3. one escrow share for every $1.81 expended by the Registrant, PCR,
Teck, Cominco, Temco or any other third party expending monies on
exploration and development of the PCR Properties or of any New Projects,
exclusive of general and administrative expenses, determined in accordance
with the provisions applicable to natural resources issuers under Local
Policy Statement #3-07 of the British Columbia Securities Commission; and
4. one escrow share for every $0.97 in cumulative Cash Flow, as
hereinafter defined, from the operations of the Registrant on the PCR
Properties and any New Projects and as determined in accordance with
generally accepted accounting principles and by reference to the
Registrant's annual audited financial statements, provided that each PCR
Property and each New Project will be considered separately without taking
into account any negative cash flow that may exist in any other PCR
Property or New Project.
For the purposes of the foregoing, "Cash Flow" means net profit for a
fiscal year of the Registrant adjusted for the following add backs:
depreciation, amortization of goodwill, deferred income taxes, and amortization
of research and development costs, plus any other capitalization charges as may
be permitted by the Vancouver Stock Exchange. Cumulative Cash Flow, less any
amounts used in prior escrow share releases,
54
<PAGE> 55
divided by $0.97 per share, equals the total number of escrow shares which may
be released under the 1996 Escrow Agreement in any twelve-month period.
If all of the escrow shares are not released to PCR within ten years of
issuance, all unreleased escrow shares shall be forfeited by PCR and cancelled.
The foregoing escrow shares are held subject to the direction and determination
of the Regulatory Authorities.
The material terms of the 1995 and 1996 Escrow Agreements require that the
escrow shares may not be dealt with in any manner (including transfer or release
from escrow) without the prior consent of the Vancouver Stock Exchange, that the
escrow shares may be voted by the registered holder at all meetings of
shareholders and that the escrow shareholders will have all of the rights,
benefits and ownership of the forgoing escrow shares as they pertain to all
shareholders of the Registrant save and except that while the shares are subject
to the 1995 and 1996 Escrow Agreements, as the case may be, the holders may not
vote the escrow shares on any resolution to cancel such shares and in respect of
such escrow shares and may not receive any dividends or participate in any
distribution of assets by the Registrant.
ITEM 5. NATURE OF TRADING MARKET.
The common shares of the Registrant (the "Common Shares") are listed on the
Vancouver Stock Exchange ("VSE"), in British Columbia, Canada. On September 20,
1996 the Registrant's Common Shares began trading during the VSE's extended
evening hours which link the Asia Pacific stock markets, including Australia and
Hong Kong, with North America. This extended trading day is pursuant to
Vancouver International Securities Trading Access or "VISTA". With VISTA, the
VSE re-opens for real time trading between the hours of 6:30 p.m. to 8:30 p.m.
Pacific Daylight Time or 5:30 p.m. to 7:30 p.m. Pacific Standard Time to
coincide with the early hours of the Hong Kong and Australian exchanges. The
trading symbol for the Common Shares of the Registrant is MMM.
The Registrant's shares are not currently trading on any U.S. stock
exchange or in the over-the-counter market, and accordingly, there is currently
no public market for the common stock of the Registrant in the United States.
There can be no assurance that such a market will develop after the
effectiveness of this registration statement. Since a portion of the
Registrant's shares are held by agents in street name, the Registrant is unaware
of how many of its outstanding common shares are held by United States
residents. As of February 28, 1997, the Registrant's share register indicates
that 382,583 of the issued and outstanding shares were held by eighteen
shareholders with addresses in the United States.
The following table sets forth the reported high and low prices for the
Common Shares as quoted on the Vancouver Stock Exchange for each full quarterly
period, commencing from the first quarter of 1995:
<TABLE>
<CAPTION>
YEAR AND QUARTER HIGH LOW
----------------------------------------------- ---- ----
<S> <C> <C>
1997 -- First Quarter.......................... 3.05 1.35
1996 -- Fourth Quarter......................... 3.15 2.25
1996 -- Third Quarter.......................... 3.55 2.50
1996 -- Second Quarter......................... 4.20 2.70
1996 -- First Quarter.......................... 2.84 1.10
1995 -- Fourth Quarter......................... 1.30 0.95
1995 -- Third Quarter.......................... 1.50 1.00
1995 -- Second Quarter......................... 1.25 0.70
</TABLE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
PEOPLE'S REPUBLIC OF CHINA
See the discussion in Item 1, under the captions "China -- Currency" and
"China -- Foreign Investment," as to matters involving Chinese law.
55
<PAGE> 56
CANADA
There is no law, governmental decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to a non-resident holder of common shares, other than
withholding tax requirements. Any such remittances to United States residents
are subject to withholding tax. See "Taxation."
There is no limitation imposed by the laws of Canada or by the charter or
other constituent documents of the Registrant on the right of a non-resident to
hold or vote the Common Shares, other than as provided in the Investment Canada
Act, (the "Investment Act"). The following discussion summarizes the principal
features of the Investment Act for a nonresident who proposes to acquire the
common shares. It is general only, it is not a substitute for independent advice
from an investor's own advisor, and it does not anticipate statutory or
regulatory amendments.
The Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture (each an "entity") that is not a "Canadian"
as defined in the Investment Act (a "non-Canadian"), unless after review, the
Director of Investments appointed by the minister responsible for the Investment
Act is satisfied that the investment is likely to be of net benefit to Canada.
An investment in the Common Shares by a non-Canadian other than a "WTO Investor"
(as that term is defined by the Investment Act, and which term includes entities
which are nationals of or are controlled by nationals of member states of the
World Trade Organization) when the Registrant was not controlled by a WTO
Investor, would be reviewable under the Investment Act if it was an investment
to acquire control of the Registrant and the value of the assets of the
Registrant, as determined in accordance with the regulations promulgated under
the Investment Act, was $5,000,000 or more, or if an order for review was made
by the federal cabinet on the grounds that the investment related to Canada's
cultural heritage or national identity, regardless of the value of the assets of
the Registrant. An investment in the Common Shares by a WTO Investor, or by a
non-Canadian when the Registrant was controlled by a WTO Investor, would be
reviewable under the Investment Act if it was an investment to acquire control
of the Registrant and the value of the assets of the Registrant, as determined
in accordance with the regulations promulgated under the Investment Act was not
less than a specified amount, which for 1996 was any amount in excess of Cdn
$168 million. A non-Canadian would acquire control of the Registrant for the
purposes of the Investment Act if the non-Canadian acquired a majority of the
Common Shares. The acquisition of one third or more, but less than a majority of
the Common Shares would be presumed to be an acquisition of control of the
Registrant unless it could be established that, on the acquisition, the
Registrant was not controlled in fact by the acquirer through the ownership of
the Common Shares.
Certain transactions relating to the Common Shares would be exempt from the
Investment Act, including: (a) an acquisition of the Common Shares by a person
in the ordinary course of that person's business as a trader or dealer in
securities; (b) an acquisition of control of the Registrant in connection with
the realization of security granted for a loan or other financial assistance and
not for a purpose related to the provisions of the Investment Act; and (c) an
acquisition of control of the Registrant by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the Registrant, through the ownership of the Common
Shares, remained unchanged.
ITEM 7. TAXATION.
PEOPLE'S REPUBLIC OF CHINA
See the discussion in Item 1, under the caption "China -- Foreign
Investment" as to matters involving Chinese law.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of Common Shares in the
capital of the Registrant by a holder of Common Shares who is resident in the
United States of America and not in Canada, and who holds Common Shares solely
as
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<PAGE> 57
capital property (a "U.S. Holder"). This summary is based on the current
provisions of the Income Tax Act (Canada) (the "Tax Act"), the regulations
thereunder, all amendments thereto publicly proposed by the government of
Canada, the published administrative practices of Revenue Canada, Customs,
Excise and Taxation, and on the current provisions of the Canada-United States
Income Tax Convention, 1980, as amended (the "Treaty"). Except as otherwise
expressly provided, this summary does not take into account any provincial,
territorial or foreign (including without limitation, any U.S.) tax law or
treaty. It has been assumed that all currently proposed amendments will be
enacted substantially as proposed and that there is no other relevant change in
any governing law or practice, although no assurance can be given in these
respects.
This summary is of a general nature and is not, and should not be construed
as, advice to any particular U.S. Holder as to Canadian tax consequences
applicable to such U.S. Holder. Each U.S. Holder is advised to obtain tax and
legal advice applicable to such U.S. Holder's particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every
dividend that is or is deemed to be paid or credited to the U.S. Holder on the
U.S. Holder's Common Shares. The statutory rate of withholding tax is 25% of the
gross amount of the dividend paid. The Treaty reduces the statutory rate with
respect to dividends paid to a U.S. Holder who is a resident of the United
States for the purposes of the Treaty. Where applicable, the general rate of
withholding tax under the Treaty is 15% of the gross amount of the dividend, but
if the U.S. Holder is a company that owns at least 10% of the voting stock of
the Registrant and beneficially owns the dividend, the rate of withholding tax
is 5% for dividends paid or credited after 1996 to such corporate U.S. Holder.
The Registrant is required to withhold the applicable tax from the dividend
payable to the U.S. Holder, and to remit the tax to the Receiver General of
Canada for the account of the U.S. Holder.
Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian
capital gains tax on any capital gain realized on an actual or deemed
disposition of a Common Share, including a deemed disposition on death, provided
that the U.S. Holder did not hold the Common Share as capital property used in
carrying on a business in Canada, and that neither the U.S. Holder nor persons
with whom the U.S. Holder did not deal at arms length (alone or together) owned
or had the right or an option to acquire 25% or more of the issued shares of any
class of the Registrant at any time in the five years immediately preceding the
disposition.
UNITED STATES TAX CONSIDERATIONS
Passive Foreign Investment Companies
The Treaty essentially calls for taxation of shareholders by the
shareholder's country of residence. In those instances in which a tax may be
assessed by the other country, a corresponding credit against the tax owed in
the country of residence is generally available, subject to limitations.
Under sec.1296, of the Internal Revenue Code of the United States, a
foreign investment corporation is treated as a passive foreign investment
company (a "PFIC") if it earns 75% or more of its gross income from passive
sources or if 50% or more of the value of its assets produce passive income.
Each U.S. shareholder of the Registrant should consult a tax advisor with
respect to how the PFIC rules may affect such shareholder's tax situation. In
particular, a U.S. shareholder should determine whether such shareholder should
elect to have the Registrant be treated as a Qualified Electing Fund if the
Registrant is a PFIC. This might avoid adverse U.S. federal income tax
consequences that may otherwise result from the Registrant should it be treated
as a PFIC.
Other Considerations
To the extent a shareholder is not subject to the tax regimes outlined
above with respect to foreign corporations that are PFICs, the following
discussion describes the United States federal income tax consequences arising
from the holding and disposition of the Registrant's Common Shares.
U.S. Holders
As used herein, a "U.S. Holder", includes a holder of Common shares who is
a citizen or resident of the United States, a corporation created or organized
in or under the laws of the United States or of any political
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<PAGE> 58
subdivision thereof and any other person or entity whose ownership of Common
Shares is effectively connected with the conduct of a trade or business in the
United States. A U.S. Holder does not include persons subject to special
provisions of federal income tax laws, such as tax exempt organizations,
qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
nonresident alien individuals or foreign corporations whose ownership of Common
Shares is not effectively connected with the conduct of a trade or business in
the United States and shareholders who acquired their stock through the exercise
of employee stock options or otherwise as compensation.
Distribution of Common Shares
U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to the Registrant's Common Shares are required to
include in gross income for United States federal income tax purposes the gross
amount of such distribution to the extent that the Registrant has current or
accumulated earnings or profits, without reduction for any Canadian income tax
withheld from such distributions. Such Canadian tax withheld may be credited,
subject to certain limitations, against the U.S. Holder's United States federal
income tax liability or, alternatively, may be deducted in computing the U.S.
Holder's United States federal income tax by those who itemize deductions. (See
more detailed discussions at "Foreign Tax Credit" below). To the extent that
distributions exceed current or accumulated earnings and profits of the
Registrant, they will be treated first as a return of capital up to the U.S.
Holder's adjusted basis in the Common shares and thereafter as gain from the
sale or exchange of such shares. Preferential tax rates for the longterm capital
gains are applicable to a U.S. Holder which is an individual, estate or trust.
There are currently no preferential tax rates for long-term capital gains for a
U.S. Holder which is a corporation.
Dividends paid on the Registrant's Common Shares will not generally be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A U.S. Holder which is a
corporation may, under certain circumstances, be entitled to a 70% deduction of
the United States source portion of dividends received from the Registrant if
such U.S. Holder owns shares representing at least 10% of the voting power and
value of the Registrant. The availability of this deduction is subject to
several complex limitations which are beyond the scope of this discussion.
Foreign Tax Credit
A U.S. Holder who pays (or has withheld from distribution) Canadian income
tax with respect to the ownership of the Registrant's common shares may be
entitled, at the option of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a tax credit, because a credit reduces United States
federal income taxes on a dollar-for-dollar basis, while a deduction merely
reduces the taxpayer's income subject to tax. This election is made on a
year-by-year basis and generally applies to all foreign income taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. complex rules govern this
classification process. There are further limitations on the foreign tax credit
for certain types of income, such as "passive income", "high withholding tax
interest", "financial services income", "shipping income", and certain other
classifications of income. The availability of foreign tax credit and the
application of the limitations on the credit are fact specific and holders and
prospective holders of Common Shares should consult their own tax advisors
regarding their individual circumstances.
Disposition of Common Shares
A U.S. Holder will recognize gain and loss upon the sale of the Common
shares equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received and (ii) the shareholder's tax basis
in the Common Shares. The gain or loss will be capital gain or loss if the
shares are a
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<PAGE> 59
capital asset in the hands of the U.S. Holder, and will be a short-term or
long-term capital gain or loss depending on each U.S. Holder's holding period.
Gains and losses are netted and combined according to special rules in arriving
at the overall capital gain or loss for a particular tax year. Deductions for
net capital losses are subject to significant limitations. For U.S. Holders who
are individuals, any unused portion of such net capital loss may be carried over
to be used in later tax years until such net capital loss is thereby exhausted.
For U.S. Holders which are corporations (other than corporations subject to
Subchapter S of the Code), an unused capital loss may be carried back three
years from the loss year and carried forward five years from the loss year to be
offset against capital gains until such net capital loss is thereby exhausted.
The foregoing discussion is based upon the sections of the Code, Treasury
Regulations, published Internal Revenue Service rulings, published
administrative positions of the Internal Revenue Service and court decisions
that are currently applicable, any or all of which could be materially adversely
changed, possibly on a retroactive basis, at any time. In addition, this
discussion does not consider the potential effects, both adverse and beneficial,
of recently proposed legislation which, if enacted could be applied, possibly on
a retroactive basis, at any time. The foregoing discussion is for general
information only and is not intended to be, nor should it be construed to be,
legal or tax advice to any holder or prospective holder of the Registrant's
Common Shares and no opinion or representation with respect to the United States
federal income tax consequences is expressed hereby to any such prospective
holders of the Registrant's Common Shares. A holder or prospective holder of the
Registrant's Common Shares should consult his or her own tax advisors about
federal, state, local and foreign tax consequences of purchasing, owning and
disposing of the Common Shares of the Registrant.
ITEM 8. SELECTED FINANCIAL DATA.
FINANCIAL STATEMENTS
The following selected financial information for the fiscal years ended
December 31, 1996, 1995, 1994, 1993 and 1992 are derived from the financial
statements of the Registrant and should be read in conjunction with such
financial statements and the notes thereto included elsewhere in this
Registration Statement. The Registrant's financial statements are prepared in
accordance with Canadian Generally Accepted Accounting Principles ("GAAP") and
the financial information presented in the following tables is presented in
accordance with Canadian GAAP. Canadian GAAP conforms to GAAP in the United
States in most respects. The only significant differences which are relevant
here are in calculation of the loss per share. United States GAAP requires
escrow shares which are contingently cancelable to be excluded from the
calculation of loss per share. The loss per share shown in the following tables
is accordingly calculated according to both Canadian and United States GAAP.
Total assets, total liabilities and loss for the following years calculated
according to United States GAAP is not materially different from the amounts
determined in accordance with Canadian GAAP. To date, the Registrant has not
paid any cash or other dividends on its common shares. All amounts are stated in
Canadian dollars.
BALANCE SHEETS AT DECEMBER 31
<TABLE>
<CAPTION>
1996(1) 1995 1994(2) 1993(2) 1992
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total assets............................. 8,326,356 257,186 140,026 102,204 116,010
Total Liabilities........................ 763,008 99,908 58,550 28,254 92,043
Share Capital............................ 8,662,468 3,026,474 2,526,474 2,416,474 2,290,224
Deficit.................................. 1,099,120 2,869,196 2,444,998 2,342,524 2,266,257
</TABLE>
59
<PAGE> 60
OPERATING STATEMENTS FOR YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996(1) 1995 1994(2) 1993(2) 1992
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue.................................. 119,190 9,289 2,795 1,400 7,340
Income (loss)............................ (1,087,924) (424,198) (102,274) (76,267) (160,672)
Income (loss) from continuing
operations............................. (1,087,924) (424,198) (102,274) (76,267) (160,672)
Income (loss) from continuing operations
per common share (Canadian GAAP)....... (0.11) (0.17) (0.04) (0.04) (0.04)
Income (loss) from continuing operations
per common share (United States
GAAP)(3)............................... (0.20) (0.18) (0.06) (0.05) (0.05)
</TABLE>
- ---------------
(1) In February of 1996, the Registrant completed an acquisition of a 60%
interest in Triple Eight Minerals Corporation, ("Temco") which has been
treated for accounting purposes as a reverse takeover, and the financial
statements for 1996 have been restated to treat Temco as the parent. This
affects comparability of information for the years before and after such
acquisition. See Item 1 -- "Pacific Canada Resources Agreement" and Item
7 -- "Notes to Financial Statements."
(2) The Registrant was reorganized in 1993, following a period of inactivity.
Such reorganization involved a one-for-three share consolidation, a change
of name and change of management. There is essentially no continuity between
the activities and operations of the Registrant before and after such
reorganization. See Item 1 "Business of the Registrant -- Organization and
Subsidiary."
(3) The weighted average number of shares for purposes of calculating loss per
share according to United States GAAP was as follows: 1996 -- 5,582,498;
1995 -- 2,386,900; 1994 -- 1,798,593; 1993 -- 1,660,873; 1992 -- 3,274,284.
EXCHANGE RATES
On April 14, 1997, the Bank of Canada noon rate for Canadian dollars was
$1.00 U.S.:$1.3985 Cdn.
The following table sets forth, for the periods and dates indicated,
certain information concerning exchange rates of United States dollars and
Canadian dollars:
<TABLE>
<CAPTION>
END OF
YEAR ENDING DECEMBER 31, PERIOD AVERAGE HIGH LOW
---------------------------------------------- ------ ------- ------ ------
<S> <C> <C> <C> <C>
1992.......................................... 1.2714 1.2143 1.2885 1.1420
1993.......................................... 1.3255 1.2939 1.3443 1.2428
1994.......................................... 1.4018 1.3659 1.4090 1.3085
1995.......................................... 1.3640 1.3274 1.4627 1.3275
1996.......................................... 1.3706 1.3636 1.3865 1.3287
</TABLE>
The above information was obtained from the Bank of Canada and is
understood by the Registrant to closely approximate the rates certified for
customs purposes by the Federal Reserve Bank in New York. The high and low
figures are selected from monthly average figures.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This discussion and analysis of the operating results and the financial
position of the Registrant for each of the three years ended December 31, 1996,
1995 and 1994 should be read in conjunction with the Consolidated Financial
Statements and the related Notes included in Item 17.
GENERAL
Since the signing of its first Co-operation Agreement on a property in
China in July of 1995 the Registrant has concentrated on building a portfolio of
mineral projects in the emerging economies of Asia, with its efforts being
directed to the People's Republic of China.
60
<PAGE> 61
On February 19, 1996 the Registrant acquired all of the property interests
in China of Pacific Canada Resources Inc. under the terms of the PCR Agreement.
Also in February, 1996 the Registrant closed an Investment and Participation
Agreement with Teck Corporation and Cominco Ltd. See Item 1 -- "Pacific Canada
Resources -- Teck Corporation -- Cominco, Ltd. Transaction". By these
transactions, the Registrant acquired interests in various properties. As part
of the Teck-Cominco transaction, the Registrant received cash investments from
two private placements of its common shares. See "Liquidity and Capital
Resources," below, Item 1 -- "Recent Financing" and Item 17 -- Notes to
Financial Statements.
(a) LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Registrant maintained adequate liquidity. At year end, the
Registrant had working capital of $7,238,944. Also during 1996, the year end
change in cash or cash position increased from $229,304 to $6,832,801. Operating
and administrative activities used $1,236,295, and $786,076 was expended on the
exploration and development of the Registrant's Chinese properties. Financing
activities included $8,594,811 (net of share issuance costs) received from the
issuance of 1,250,000 units, each unit comprised of one common share and one
fifth of a share purchase warrant, pursuant to a private placement completed in
February, 1996; the issuance of 3,200,000 units, each unit comprised of one
common share and one half of a share purchase warrant, pursuant to a private
placement completed June 26, 1996, an Exchange Offering Prospectus dated
December 20, 1996 qualifying those units issued pursuant to the June 26, 1996
private placement; and the exercise of 2,000 options at a price of $1.00 per
common share. After December 31, 1996, and before the end of February, 1997,
125,000 share purchase warrants were exercised at a price of $1.20 per share,
for net proceeds of $150,000.
At February 28, 1997, the Registrant had working capital of approximately
$6,806,604. Management considers the Registrant to have adequate liquidity to
conduct its business activities as planned for 1997.
The Registrant's capital resources continue to comprise primarily private
investors, consisting of wealthy individuals, resource investment groups, senior
mining companies and public financing through the facilities of the Vancouver
Stock Exchange. There can, however, be no assurance that the Registrant's future
capital requirements can be met in the long term. The Registrant's access to
capital is always dependent upon future financial market conditions, especially
those which pertain to venture capital situations such as mining exploration
companies. There can be no guaranty that the Registrant will be successful in
obtaining future financing, when necessary, on economically acceptable terms, or
at all.
(b) RESULTS OF OPERATIONS
To date the Registrant has not entered into a final agreement on a
producing property. Consequently, the Registrant has not generated a cash flow
from operations. In management's opinion, given that the nature of the
Registrant's business consists of mineral exploration, development and the
evaluation of resource properties, meaningful financial information consists
primarily of the Registrant's liquidity and solvency. The results of operations
of an exploration company are almost entirely measured by the extent and quality
of the mineralization discovered compared with the related costs of such
discoveries. Estimates of mineralization are not contained in the financial
statements.
On November 28, 1996, the Registrant announced that it had revised the
accounting treatment given to its acquisition of various mineral property
interests from Pacific Canada Resources, Inc. pursuant to an agreement dated
February 19, 1996 which acquisition included a 60% equity interest in Triple
Eight Mineral Corporation ("Temco"), a British Virgin Island company. See Item
1 -- "Pacific Canada Resources Agreement." For accounting purposes, the
acquisition is now being treated as a reverse take-over, with Temco being
treated as the Registrant's parent. Financial statements previously issued
incorrectly treated Temco as a subsidiary for accounting purposes. As such, the
Registrant retracted its quarterly report and financial statements for the
three-month period ended March 31, 1996 and for the six-month period ended June
30, 1996. The change of accounting method reduced the book value of the
Registrant's mineral property interests by approximately $2,000,000, share
capital by approximately $5,000,000 and deficit by approximately
61
<PAGE> 62
$3,000,000. The Registrant has revised its March 31, 1996 and June 30, 1996
financial statements to effect these changes and has reissued them.
In summary, the net effect of treating Temco as the parent instead of
treating it as a subsidiary for accounting purposes is the following: The book
value of the mineral interests owned by Temco were previously recorded at a
deemed value of approximately $2,000,000, the book value of these mineral
interests will now be carried at Temco's cost of $100.00. Similarly, under this
new accounting treatment, the Registrant's accumulated deficit of approximately
$3,000,000 at the date of the share exchange (February 19, 1996) has been
eliminated and deducted from the Registrant's share capital.
The above changes pertain to accounting procedures only and have no effect
as to the Registrant's current cash position and asset value, nor do they have
any impact on the business of the Registrant. The Registrant's audited financial
statements for the year ended December 31, 1996 show current assets of
$7,460,563, total assets of $8,326,356, current liabilities of $221,619 and
Shareholders' equity of $7,563,348.
FISCAL 1996 COMPARED WITH FISCAL 1995
The Registrant's loss per share of $0.17 per share in 1995 decreased to a
loss per share of $0.11 in fiscal 1996, based on a net loss for the year of
$1,087,924 compared with a net loss of $424,198 in 1995. The number of common
shares issued and outstanding increased from 2,785,873 in 1995 to 15,202,123 in
1996. Due to increased operating activities during 1996, general and
administrative expenses increased during the year to $1,236,295 compared to
$433,487 in 1995. Interest revenue increased from $8,754 in 1995 to $119,190 in
1996 due to increased cash and cash equivalent balances resulting from financing
activities.
FISCAL 1995 COMPARED WITH FISCAL 1994
The Registrant's loss per share of $0.04 in 1994 increased to a loss per
share of $0.17 in fiscal 1995 based on a net loss for the year of $424,198
compared with a net loss of $102,474 in 1994. The number of common shares issued
and outstanding increased from 2,285,873 in 1994 to 2,785,873 in 1995. Due to
increased operating activities during 1995, general and administrative expenses
increased to $433,487 in 1995, compared to $105,269 in 1994. Interest revenue
increased from $2,795 in 1994 to $8,754 in 1995.
EXPENDITURES ON PROPERTIES OF THE REGISTRANT
The single largest commitment made on mineral properties over the past
twelve months by the Registrant was to the Temco Joint Venture. This joint
venture involved the Geoexploration Corporation of the First Geoexploration
Bureau ("GEC-FGEB"), a subsidiary of China's Ministry of Metallurgical Industry
(the "MMI")) as to 45% and Temco (the Registrant's wholly-owned subsidiary)
which holds a 55% interest. Temco and the MMI have formed a co-operative joint
venture enterprise known as Chengde Huajia Mining Industry Co. Ltd. ("Huajia" )
based in Hebei Province. The issued capital of Huajia is held by MMI with Temco
holding the right to acquire a 55% interest in Huajia upon making certain
expenditures (see "Emperor's Delight Project"). Huajia is to operate the
Emperor's Delight gold-silver project and to acquire and explore additional
properties such as Stone Lake and Crystal Valley gold projects. According to the
Chinese regulations, where capital contributions are to be made in installments,
the first installment must consist of not less than 15% of the total registered
capital, must be contributed within 90 days after the issue of the business
license and is nonrefundable. The capital contribution has been made and the
Registrant is the operator of the joint venture.
The Registrant's share of the start-up costs for Huajia and the Emperor's
Delight Property was $330,330 to the date of acquisition, representing costs of
acquisition, investigation and exploration. Some additional expenditures have
been made by the Registrant relating to the Emperor's Delight Project (which
will be reimbursed by Temco) that bring the total to $448,859 as of December 31,
1996. Huajia received a total of approximately $900,900 from the Registrant and
China Clipper Gold Mines Ltd. Of this amount a total of approximately $472,535
has been spent on exploration on the Emperor's Delight property as of December
31, 1996. The balance remains for additional exploration programs on the
Emperor's Delight or other properties (see Item 2 -- "Emperor's Delight
Property").
62
<PAGE> 63
On the Chapuzi Property a total of $153,416 has been spent on exploration
and metallurgical testing as of December 31, 1996. To fully earn its 51%
interest in the property the Registrant will be required to spend $5,000,000.
The Registrant can earn an additional 24% of the property interest, for a total
of 75%, by spending the funds required to put the property into commercial
production (see Item 2 -- "Chapuzi Property").
On the Changba-Lijiagou Property a total of $27,965 has been spent on
property investigation as of December 31, 1996 (see Item 2 -- "Changba-Lijiagou
Property").
On the Stone Lake Property no funds were spent on exploration as of
December 31, 1996 (see Item 2 -- "Stone Lake Property").
On the Crystal Valley Property no funds were spent on exploration as of
December 31, 1996 (see Item 2 -- "Crystal Valley Property").
On the Tian Shan Properties a total of $153,303 has been spent on the
property investigation as of December 31, 1996 (see "Tian Shan Properties").
On the Gala Property no funds were spent on property exploration as of
December 31, 1996 (see Item 2 -- "Gala Property").
On the Xifanping Property no funds were spent on the property exploration
as of December 31, 1996 (see "Xifanping Property").
OUTLOOK
The Registrant at present has no material income from its operations. The
Registrant's ability to finance the exploration and development of its mineral
properties, to make concession payments and to fund general and administrative
expenses in the medium and long term is therefore dependent upon the
Registrant's ability to secure equity financing. The equity markets for junior
mineral exploration companies are unpredictable. Alternatively, the Registrant
may enter into cost sharing arrangements through joint venture agreements, but
while management believes that the quality of the concessions now held by the
Registrant will attract joint venture partners in the short term and medium
term, there is no guarantee that the terms would be as favorable as management
would like. While as of the date of this Registration Statement, the Registrant
has sufficient working capital to fund the exploration work commitments on the
currently held property concessions for the next two years, it cannot be
determined what the funding requirements will be beyond that time and the
Registrant will require additional financing to meet such requirements.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following table sets forth all current directors and executive officers
of the Registrant, with each position and office held by them in the Registrant,
their terms of office and the period of service as such:
<TABLE>
<CAPTION>
OFFICER OR TERM OF
NAME POSITIONS HELD DIRECTOR SINCE: OFFICE
--------------------------- --------------------------- --------------- --------------
<S> <C> <C> <C>
Ken Z. Cai................. President, Chief Executive February, 1996 3 years
Officer and Director
Peter P. Tsaparas.......... Chairman Chief Financial May, 1992 3 years
Officer and Director
Colin McAleenan............ Vice June, 1995 1 year
President -- Explorations
and Director
Wayne Spilsbury............ Director February, 1996 1 year
Hans Wick.................. Director February, 1997 1 year
Robert Callander........... Director September, 1996 1 year
</TABLE>
Mr. Peter P. Tsaparas, Dr. Ken Z. Cai., Mr. Colin McAleenan and Mr. Donald
Hicks were elected to their positions as officers and directors pursuant to a
shareholders agreement dated February 19, 1996, between Mr. Tsaparas, Mr.
McAleenan, the Registrant and Pacific Canada Resources, which was entered into
in connection with the PCR Agreement discussed in Item 1 of this Registration
Statement. Pursuant to such
63
<PAGE> 64
shareholders' agreement, which has a term of one year, the parties bound
themselves to vote for Mr. Cai and Mr. Tsaparas as directors and officers of the
Registrant for terms of three years, and to vote for Mr. McAleenan and Mr. Hicks
as directors and officers of the Registrant for terms of one year. Mr. Tsaparas
and Mr. McAleenan served as officers and directors of the Registrant prior to
such agreement.
Mr. T. Wayne Spilsbury was elected a director of the Registrant pursuant to
an agreement dated February 19, 1996, between the Registrant, Teck Corporation
and Cominco, Ltd., discussed in Item 1 of this Registration Statement. Teck and
Cominco are jointly entitled to name one director of the Registrant pursuant to
the terms of such agreement.
The business background and principal occupations of the Registrant's
officers and directors for the preceding five years are as follows:
Peter P. Tsaparas; Mr. Tsaparas has been a director of the Registrant
since May 1, 1992 and holds an Earth Science Degree from the University of
Athens, Greece. Mr. Tsaparas is a Professional Engineer registered with the
Professional Engineers and Geoscientists of British Columbia with 35 years of
exploration experience in North America and abroad. During the past five years,
Mr. Tsaparas has served as a director of several publicly-traded junior resource
companies.
Ken Z. Cai, Mr. Cai holds a Ph.D. in mineral economics from Queens
University in Kingston, Ontario, Canada. Mr. Cai is a geologist and has 12 years
of experience as a project geologist in China and North America. He has been
largely responsible for identifying the Registrant's Chinese projects and
negotiating the agreements with Chinese entities resulting in the property
rights now held by the Registrant. During the past five years, Mr. Cai has, in
addition to working as an independent geological consultant, served as a
research assistant at Queens University while completing his Ph.D.
Colin H. McAleenan, Mr. McAleenan holds an Honors Geology Degree from
Trinity College, University of Dublin, Ireland. Mr. McAleenan is a Professional
Geologist registered with the Professional Engineers and Geoscientists of
British Columbia and has 18 years of exploration and mining geology experience
as a full-time employee with a number of major and junior mining companies.
T. Wayne Spilsbury, Mr. Spilsbury holds an M.Sc. in Applied Geology from
Queens University, Kingston, Ontario, Canada. Mr. Spilsbury is a professional
geologist and since 1990 has served as a Vice-President with Teck Exploration
Ltd. based first in Vancouver and subsequently in Singapore. He has worked in
the industry for 23 years.
Robert Callander, Mr. Callander holds an MBA from York University,
Toronto, Ontario, Canada as well as a CFA from the Institute for Investment
Management, Charlotte, Virginia. Mr. Callander has worked for Caldwell
Securities Ltd. since 1992 and currently serves as a Vice-President with that
firm. Prior to his engagement with Caldwell Securities Ltd., Mr. Callander
served as a corporate finance analyst with Nesbitt Burns. He has worked in the
investment industry for 25 years.
Hans J. Wick, Mr. Wick of Zurich, Switzerland has rejoined the board of
directors of the Company. Mr. Wick, an independent portfolio manager who has
held senior management positions with a Swiss bank, brings to the board an
in-depth knowledge of international finance, particularly as it relates to the
development of mineral resource projects.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
The aggregate direct or indirect remuneration paid to the directors and
officers of the Registrant, as a group during the fiscal year ended December 31,
1996, for service to the Registrant in all capacities, was
64
<PAGE> 65
$346,908. Certain information about payments to particular officers and
directors is set out in the following table:
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY COMPENSATION COMPENSATION
- ------------------------------------------------------- ------ ------------ ------------
<S> <C> <C> <C>
KEN CAI, President, Chief Executive Officer and
Director............................................. Nil $8,333/Month Nil
PETER P. TSAPARAS, Chairman, Chief Financial Officer
and Director......................................... Nil $2,000/Month Nil
COLIN MCALEENAN, Vice-President -- Explorations and
Director............................................. Nil $7,000/Month Nil
DONALD HICKS, former Director and Former
Vice-President -- Corp. Development.................. Nil $6,600/Month Nil
</TABLE>
During the fiscal year of the Registrant ended December 31, 1996, no
amounts were set aside or accrued by the Registrant or its subsidiaries during
such year to provide pension, retirement or similar benefits for directors and
officers of the registrant, pursuant to any existing plan provided or
contributed to by the Registrant or its subsidiaries.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
The following table set forth, as of December 31, 1996, all outstanding
options to purchase common shares of the Registrant, there are no options to
purchase shares of any other class of security:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTION HOLDER SHARES PRICE EXPIRATION DATE
- ------------------------------------------------------ ---------- -------- ----------------
<S> <C> <C> <C>
Ken Z. Cai............................................ 333,500 $ 1.85 March 5, 2001
Peter Tsaparas........................................ 191,000 $ 1.85 March 5, 2001
Donald Hicks.......................................... 191,000 $ 1.85 March 5, 2001
T. Wayne Spilsbury.................................... 191,000 $ 1.85 March 5, 2001
Colin McAleenan....................................... 143,500 $ 1.85 March 5, 2001
Robert Callander...................................... 100,000 $ 2.90 October 8, 2001
Hans Wick............................................. 100,000 $ 2.49 March 6, 2002
Naomi Rochus.......................................... 8,000 $ 2.49 June 2, 2000
All officers and directors as a group (7 persons)..... 1,250,000 $ 1.85 March 5, 2001
</TABLE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
During 1996, the Registrant entered into an agreement, "the PCR Agreement",
with Pacific Canada Resources Inc., a private, British Virgin Island corporation
controlled by Ken Cai and Donald Hicks, pursuant to which the Registrant
acquired interests in mineral properties in the People's Republic of China. The
consideration paid by the Registrant to Pacific Canada Resources Inc. for these
property interests was 7,280,000 common shares of the Registrant and was
established pursuant to arms length negotiations between the Registrant and
Pacific Canada Resources Inc. Of these shares, 4,880,000 shares are subject to
the terms of an escrow agreement and will only be released upon the Registrant
satisfying certain earn out requirements (see Item 4 -- "Performance Shares or
Escrow Securities"). The balance of 2,400,000 shares issued to Pacific Canada
Resources Inc. were issued at a deemed price of $0.97 per share based on a
valuation of the Emperor's Delight Property prepared by A.C.A. Howe
International dated March 13, 1995. Upon the completion of the acquisition of
the Chinese mineral properties from Pacific Canada Resources Inc., Ken Cai and
Donald Hicks became directors and officers of the Registrant (see Item
10 -- "Directors and Officers of the Registrant"). In addition, the Registrant
agreed to reimburse PCR for a total of $97,800 in legal, accounting and
consulting fees paid by PCR. Included in this amount is a total of $75,800 in
consulting fees paid to Kaisun Group (Canada) Inc. and 1066098 Ontario Inc.,
private companies controlled by Ken Cai and Donald Hicks, respectively.
65
<PAGE> 66
During the twelve-month period ended December 31, 1996, the Registrant
incurred the following expenses to its directors or corporations controlled by
its directors:
Accounting -- $7,100;
Management fees & Consulting -- $292,488;
Salary -- $40,300;
Rent -- $7,020.
In addition, during 1996, the Registrant was a party to the following
agreements involving its officers and directors:
1. Consulting Agreement dated as of June 25, 1996 between the
Registrant and a private company controlled by Ken Cai, the Registrant's
current President and Chief Executive Officer, under the terms of which
such company receives $8,333 per month in exchange for consulting,
management and supervision services in connection with the development of
overall corporate strategy. The term of the Consulting Agreement expires on
June 25, 1999.
2. Consulting Agreement dated as of June 25, 1996 between the
Registrant and Peter Tsaparas, the Registrant's current Chairman and Chief
Financial Officer, under the terms of which the Chairman and Chief
Financial Officer receives $2,000 per month in exchange for consulting,
management and supervision services in connection with the development of
overall corporate strategy. The term of the Consulting Agreement is month
to month. In addition to this Consulting Agreement, the Registrant has
entered into an Employment Agreement dated November 1, 1996 with the
Chairman and Chief Financial Officer under which the Chairman and Chief
Financial Officer receive $2,000 per month for serving as the Registrant's
Chairman on a part-time basis.
3. Consulting Agreement dated as of June 25, 1996 between the
Registrant and Colin McAleenan, the Registrant's current Vice-President,
Exploration under the terms of which the Vice-President, Exploration
receives $7,000 per month in exchange for consulting, management,
supervision and resource exploration and development services. The term of
the Consulting Agreement expires on June 25, 1997.
4. Consulting Agreement dated as of June 25, 1996 between the
Registrant and a private company controlled by Donald Hicks, the
Registrant's former Vice-President, Corporate Development under the terms
of which such company received $6,600 per month in exchange for consulting,
management, supervision and administration services. The term of the
Consulting Agreement expired on December 31, 1996.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
(a) CAPITAL STOCK TO BE REGISTERED.
The Registrant's common shares without par value are the only class of
capital stock to be registered. Pursuant to an amendment to the Registrant's
Articles of Incorporation adopted June 29, 1996 the Registrant has 100,000,000
common shares authorized, of which 15,202,123 were issued and outstanding as of
December 31, 1996 and 15,327,123 as of April 15, 1997.
Each of the common shares has equal dividend, liquidation and voting
rights. Voters of the common shares are entitled to one vote per share on all
matters that may be brought before them. Holders of the common shares are
entitled to receive dividends when declared by the Board of Directors from funds
legally available therefor. The common shares are not redeemable, have no
conversion rights and carry no pre-emptive or other rights to subscribe for
additional shares. The outstanding common shares are fully paid and
nonassessable.
66
<PAGE> 67
Certain regulations of British Columbia and the Vancouver Stock Exchange
create a distinction between "free trading common shares," "restricted shares"
and common shares required to be placed in escrow or in a "pool."
"Free trading" common shares are not subject to any restrictions on resale,
and can be traded without regulatory approval. Free trading shares are generally
qualified by prospectus and issued to the public.
Shares issued by way of "private placement" to certain investors and not to
the public are usually subject to a one-year holding period and cannot be traded
until the relevant holding period has expired. Once the holding period expires,
the shares would become free trading shares. As of March, 31, 1997, all
previously issued restricted outstanding shares had become free trading. See
Item 1 -- "Recent Financing."
5,442,500 of the currently outstanding Common Shares are held in escrow,
subject to release or cancellation upon certain conditions. See Item 4
"Performance Shares or Escrow Securities."
The transfer agent and registrar for the common shares of the Registrant is
Montreal Trust Company of Canada, 510 Burrard Street, Vancouver, B. C. V6B 5A1.
(b) DEBT SECURITIES TO BE REGISTERED
Not applicable
(c) AMERICAN DEPOSITORY RECEIPTS
Not applicable
(d) OTHER SECURITIES TO BE REGISTERED
Not applicable
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
Not applicable
PART IV
ITEM 17. FINANCIAL STATEMENTS.
The following financial statements of the Registrant are attached to this
Registration Statement.:
Consent of Independent Accountants
Auditors' Report
Consolidated Balance Sheets at December 31, 1996 and 1996
Consolidated Statements of Operations and Deficit for the years ending
December 31, 1995 and
December 31, 1996
Consolidated Statement of Changes in Financial Position for the years
ending December 31, 1995 and
December 31, 1996
Notes to Consolidated Financial Statements Consolidated Schedule of
Deferred Exploration Costs.
67
<PAGE> 68
ITEM 18. FINANCIAL STATEMENTS.
Not applicable
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------- ----
<S> <C> <C>
1a Articles of Incorporation and all amendments
1b Bylaws
3a Assignment of Contracts and Share Purchase Agreements Between Registrant and
Pacific Canada Resources, Inc., dated February 19, 1996
3b Sale and Purchase Agreement between Registrant and China Clipper Gold Mines,
Ltd., dated February 27, 1997
3c Cooperation Agreement Between Registrant and Baiyin Non-Ferrous Metals Company
dated October 18, 1996 regarding the Changba-Lijiagou Lead-Zinc Deposit
3d Cooperation Agreement Between Pacific Canada Resources, Inc., Patrician Gold
Mines, Ltd. and the First Geoexploration Bureau of Ministry of Metallurgical
Industry dated November 17, 1994
3e Joint Venture Agreement between Geoexploration Corporation of the First
Geoexploration Bureau and Triple Eight Minerals Corporation dated December 25,
1995
3f Cooperation Agreement Between Sichuan Bureau of Geology and Mineral Resources
and Registrant dated July 27, 1996
3g Cooperation Agreement Between Registrant and Bureau of Geology and Mineral
Resources of Xinjiang Uygur Autonomous Region dated May 27, 1996
3h Letter of Intent Among Pacific Canada Resources, Inc., Teck Exploration Ltd.
and Baiyin Non-Ferrous Metals Corporation dated June 6, 1995
3i Investment and Participation Agreement dated February 20, 1996 Among the
Registrant, Teck Corporation and Cominco Ltd.
3j Letter of Intent Between Sichuan Bureau of Geology and Mineral Resources and
Registrant dated October 15, 1996
3k Consulting Agreement dated June 25, 1996 between Registrant and Kaisun Group
Canada, Inc.
3l Consulting Agreement dated June 25, 1996 between Registrant and Peter Tsaparas
3m Employment Agreement dated November 1, 1996 between Registrant and Peter
Tsaparas
3n Consulting Agreement dated June 25, 1996 between Registrant and Colin McAleenan
3o Consulting Agreement dated June 25, 1996 between Registrant and 1066098
Ontario, Inc.
3p Stock Option Agreement between Registrant and Petros Tsaparas dated June 2,
1995. Identical, except for price and number of shares to stock option
agreements entered into between Registrant and other officers and directors
3q Stock Escrow Agreement dated December 24, 1993 between Montreal Trust Company
of Canada, Consolidated Caprock Resources, Ltd. and certain shareholders of
Consolidated Caprock Resources, Ltd.
3r Performance Shares Escrow Agreement dated August 17, 1995 between Registrant,
Montreal Trust Company of Canada and certain shareholders of Registrant
3s Consent of Independent Accountants
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------------- ----
<S> <C> <C>
3t Consent of Independent Geological Consultant -- A.C.A. Howe International,
Limited
3u Consent of Independent Geological Consultant -- H.A. Simons, Ltd.
3v Consent of XRAL Laboratories -- a Division of SGS Canada, Inc.
3w Consent of Cominco Engineering Services, Ltd.
</TABLE>
69
<PAGE> 70
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement [annual
report] to be signed on its behalf by the undersigned, thereunto duly
authorized.
MINCO MINING & METALS CORPORATION
--------------------------------------
(REGISTRANT)
/s/ KEN Z. CAI
--------------------------------------
(SIGNATURE)
KEN Z. CAI, PRESIDENT AND C.E.O.
--------------------------------------
(PRINT NAME AND TITLE OF SIGNING
OFFICER)
DATE: APRIL 29, 1997
-------------------------------------------------------
70
<PAGE> 71
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Registration Statement on Form 20F of our
report dated January 27, 1997 relating to the consolidated balance sheets of
MINCO MINING & METALS CORPORATION as at December 31, 1996 and 1995 and the
consolidated statements of operations and deficit and changes in financial
position for the periods then ended.
/s/ ELLIS FOSTER
--------------------------------------
Chartered Accountants
Vancouver, Canada
January 27, 1997
71
<PAGE> 72
MINCO MINING & METALS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
INDEX
Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Operations and Deficit
Consolidated Statement of Changes in Financial Position
Notes to Consolidated Financial Statements
Consolidated Schedule of Deferred Exploration Costs
72
<PAGE> 73
AUDITORS' REPORT
To the Shareholders of
MINCO MINING & METALS CORPORATION
We have audited the consolidated balance sheets of MINCO MINING & METALS
CORPORATION as at December 31, 1996 and 1995 and the consolidated statements of
operations and deficit and changes in financial position for the periods then
ended. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at December 31,
1996 and 1995 and the results of its operations and the changes in its financial
position for the periods then ended in accordance with generally accepted
accounting principles.
CHARTERED ACCOUNTANTS
VANCOUVER, CANADA
JANUARY 27, 1997
73
<PAGE> 74
MINCO MINING & METALS CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -------------
(SEE NOTE 2)
------------
<S> <C> <C>
ASSETS
Current
Cash and temporary investments................................... $ 6,832,801 $ --
Funds restricted for mineral exploration (Note 3a)............... 537,500 --
Refundable tax credits........................................... 21,454 --
Prepaid expenses and deposits.................................... 68,808 39,072
---------- --------
7,460,563 39,072
Mineral interests (Note 3)....................................... 786,476 --
Capital assets (Note 4).......................................... 79,317 --
---------- --------
$ 8,326,356 $ 39,072
========== ========
LIABILITIES
Current
Accounts payable and accrued liabilities......................... $ 221,619 $ 49,458
---------- --------
Minority interest (Note 1b)...................................... 541,389 --
---------- --------
SHARE CAPITAL AND DEFICIT
Share capital (Note 5)........................................... 8,662,468 810
Deficit.......................................................... (1,099,120) (11,196)
---------- --------
7,563,348 (10,386)
---------- --------
Commitments (Note 7).............................................
$ 8,326,356 $ 39,072
========== ========
Approved by the Directors: -------------------------------- --------------------------------
Director Director
</TABLE>
74
<PAGE> 75
MINCO MINING & METALS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
<S> <C> <C>
Interest income.............................................. $ 119,190 $ --
Administrative expenses
Accounting and audit....................................... 79,809 --
Advertising................................................ 31,143 --
Amortization............................................... 23,708 --
Automobile................................................. 11,784 --
Computer software.......................................... 21,559 --
Conference................................................. 50,608 --
Investor relations
-- consulting.......................................... 65,087 --
-- entertainment....................................... 16,939 --
-- printing............................................ 29,223 --
-- promotion........................................... 59,477 --
-- travel.............................................. 81,960 --
Legal...................................................... 108,170 11,736
Listing, filing and transfer agents........................ 24,943 --
Management fees............................................ 261,845 --
Office and miscellaneous................................... 49,633 --
Property investigation -- travel and other................. 188,468 --
Rent....................................................... 70,205 --
Salaries and benefits...................................... 43,496 --
Telephone.................................................. 40,451 --
Foreign exchange gain...................................... (22,213) --
----------- --------
1,236,295 11,736
----------- --------
Net loss before minority interest............................ (1,117,105) (11,736)
Minority interest (Note 1b).................................. 29,181 540
----------- --------
Net loss for the period...................................... (1,087,924) (11,196)
Deficit, beginning of period................................. (11,196) --
----------- --------
Deficit, end of period....................................... $ (1,099,120) $(11,196)
=========== ========
Loss per share............................................... $ (0.11) $ (0.00)
=========== ========
</TABLE>
75
<PAGE> 76
MINCO MINING & METALS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
<S> <C> <C>
Cash provided by (used for) operating activities
Net loss for the period.................................... $ (1,087,924) $ (11,196)
Items not involving cash:
-- amortization......................................... 23,708 --
-- minority interest's share of net loss................ (29,181) (540)
----------- ---------
(1,093,397) (11,736)
Net change in non-cash working capital............. 120,971 10,386
----------- ---------
(972,426) (1,350)
----------- ---------
Cash provided by financing activities
Shares issued for the acquisition of subsidiary............ 66,847 --
Shares issued for cash, net of issuance costs.............. 8,594,811 1,350
Exploration fund contributed by minority interest.......... 570,570 --
----------- ---------
9,232,228 1,350
----------- ---------
Cash used for investing activities
Acquisition of capital assets.............................. (78,816) --
Acquisition of mineral interests........................... (300) --
Acquisition of capital assets and mineral interests of
subsidiary.............................................. (24,309) --
Deferred exploration costs................................. (786,076) --
Funds restricted for mineral exploration................... (537,500) --
----------- ---------
(1,427,001) --
----------- ---------
Increase in cash position.................................... 6,832,801 --
Cash position, beginning of period........................... -- --
----------- ---------
Cash position, end of period................................. $ 6,832,801 $ --
=========== =========
</TABLE>
76
<PAGE> 77
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SIGNIFICANT ACCOUNTING POLICIES
11 Consolidation
These consolidated financial statements include the accounts of Minco
Mining & Metals Corporation ("Minco") and its 60% owned British Virgin Island
subsidiary, Triple Eight Mineral Corporation ("Temco"). Temco was incorporated
on September 1, 1995 and commenced active business on October 1, 1995. All
material inter-company balances have been eliminated.
As disclosed in Note 2, Temco is the accounting parent. The consolidated
statement of operations includes Temco's results of operations from October 1,
1995 and Minco's results of operations from the effective date of the reverse
takeover, being February 19, 1996.
12 Minority Interest
Since these consolidated financial statements include 100% of the accounts
of Temco, the minority shareholders' proportionate interest in Temco is
calculated as follows:
<TABLE>
<CAPTION>
1996 1995
-------- -----
<S> <C> <C>
Funds contributed by the minority shareholders........... $570,570 $ 540
Share of operating loss in Temco......................... (29,181) (540)
-------- -----
Balance.................................................. $541,389 $ --
======== =====
</TABLE>
13 Capital Assets
Amortization is provided as follows:
<TABLE>
<S> <C>
30% per annum, declining-balance
Computer equipment................... basis
20% per annum, declining-balance
Office equipment and furniture....... basis
Leasehold improvement................ 20% per annum, straight-line basis
</TABLE>
14 Conduct of Business
At present, the Company conducts its mineral exploration activities in
China through joint ventures. All of its joint venture agreements require the
Company to spend certain minimum amounts on exploration expenditures to earn
interests in mineral properties. Therefore, on a project-by-project basis, the
Company spends and records 100% of the exploration expenditures until the
interest is earned.
15 Mineral Interests
The Company follows the method of accounting for its mineral interests
whereby all costs related to acquisition, exploration and development are
capitalized by project. These costs will be amortized against revenue from
future production or written off if the interest is abandoned or sold. These
costs will also be written down if the net carrying amount exceeds the estimated
net recoverable amount.
On the commencement of commercial production, net costs are charged to
operations on the unit-of-production method by project based upon estimated
recoverable reserves.
The amounts shown for mineral interests represent costs incurred to date,
less recoveries, and do not necessarily reflect present or future values. The
recoverability of amounts shown for mineral interests is dependent upon the
discovery of economically recoverable reserves, confirmation of the Company's
interest in
77
<PAGE> 78
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the underlying mineral claims, the ability of the Company to obtain financing to
complete development of the projects, and on future profitable production or
proceeds from the disposition thereof.
The Company does not accrue the estimated costs of maintaining its mineral
interests in good standing.
16 Property Option Agreements
From time to time, the Company may acquire or dispose of properties
pursuant to the terms of option agreements. Due to the fact that options are
exercisable entirely at the discretion of the optionee, the amounts payable or
receivable are not recorded. Option payments are recorded as resource property
costs or recoveries when the payments are made or received.
17 Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated
into Canadian dollars at exchange rates in effect at the balance sheet date for
monetary items and at exchange rates prevailing at the transaction dates for
non-monetary items. Revenues and expenses are translated at average exchange
rates prevailing during the period except for amortization which is translated
at historical exchange rates.
Gain and losses on translation are included as income for the period except
for those arising on translation of long-term monetary items of Canadian and
integrated foreign operations which are deferred and amortized over the lives of
those items.
2. ACQUISITION OF TRIPLE EIGHT MINERAL CORPORATION ("TEMCO")
Pursuant to an assignment of contracts and share purchase agreement dated
February 19, 1996, the Company issued 2,400,000 free-trading shares and
4,880,000 escrow shares in exchange for 60% of the issued and outstanding shares
of Temco and certain contractual interests. Temco owns certain contractual
rights in respect of the following mineral properties in China:
<TABLE>
<C> <S>
01 Emperor's Delight
02 Crystal Valley
03 Stone Lake
</TABLE>
This transaction resulted in the 60% former shareholder of Temco owning the
majority of the issued and outstanding shares of the Company. Accounting
principles applicable to reverse takeovers have been applied to record this
acquisition using the purchase method of accounting. Under this basis of
accounting, Temco has been identified as the acquirer and, accordingly, the
consolidated entity is considered to be a continuation of Temco with the net
assets of the Company deemed to have been acquired by Temco for a fair market
value of $66,847.
The net assets of Minco acquired by Temco are summarized as follows:
<TABLE>
<S> <C>
Cash.............................................. $142,446
Mineral interests................................. 100
Capital assets.................................... 24,209
Current liabilities............................... (99,908)
-------
$ 66,847
=======
</TABLE>
78
<PAGE> 79
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations of Minco, the accounting subsidiary, for the
period January 1, 1996 to February 19, 1996 are summarized as follows:
<TABLE>
<S> <C>
Interest income................................... $ 1,167
------
Expenses
Amortization.................................... 893
Filing and listing.............................. 3,560
Investor relations.............................. 6,935
Professional fees............................... 40,132
Property investigation.......................... 2,817
Salaries and benefits........................... 16,317
Management fees................................. 3,333
General administration.......................... 17,611
------
91,598
------
Loss for the period............................... $(90,431)
======
</TABLE>
3. MINERAL INTERESTS
<TABLE>
<CAPTION>
DEFERRED
ACQUISITION EXPLORATION TOTAL
DECEMBER 31, 1996 COSTS COSTS COSTS
------------------------------------------ ----------- ----------- --------
(SCHEDULE)
<S> <C> <C> <C>
Emperor's Delight......................... $ 100 $ 451,392 $451,492
Crystal Valley............................ 100 -- 100
Stone Lake................................ 100 -- 100
Changba Lijiagou Lead-Zinc Deposit........ 100 27,965 28,065
Chapuzi Gold Deposit...................... -- 153,416 153,416
Heavenly Mountains........................ -- 153,303 153,303
---- -------- --------
$ 400 $ 786,076 $786,476
==== ======== ========
</TABLE>
31 The Emperor's Delight property is located in Hebei Province, China.
Pursuant to the Emperor's Delight Joint Venture Agreement, Temco can
earn a 55% interest in the property by spending US$4.4 million over a
five-year period. The $537,500 funds restricted for mineral
explorations, as shown in the financial statements, are funds restricted
for this joint venture.
32 The Crystal Valley and Stone Lake properties are located in Hebei
Province and the Changba Lijiagou Lead-Zinc Deposit is located in Gansu
Province. These projects are subject to the approval of the appropriate
Chinese government authorities.
33 The Chapuzi Gold Deposit is located in Sichuan Province, China. The
Company has entered into a cooperative agreement with the Sichuan Bureau
of the Ministry of Geology and Mineral Resources which is the holder of
the exploration rights to Chapuzi Gold Deposit.
Pursuant to the agreement, the Company shall have the right to earn a
51% interest by spending $5 million on exploration and development. The
Company may earn a 75% interest by placing the project into production.
The joint venture is subject to the approval of the appropriate Chinese
government authorities.
79
<PAGE> 80
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
34 The Heavenly Mountains properties are located in Xinjiang Province. The
Company has an exclusive right to negotiate and enter into a joint
venture contract and to invest in certain mineral properties located in
Xinjiang Uygur Autonomous Region in China.
As at December 31, 1996, the Company has paid $68,801 (US$50,000) as a
deposit towards this project. This deposit will be refunded once
exploration work is carried out on one of the properties. If no
exploration work is carried out on any of the properties, the deposit
will not be refunded.
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
DECEMBER 31, 1996 COST AMORTIZATION VALUE
------------------------------------------- -------- ----------- --------
<S> <C> <C> <C>
Computer equipment......................... $ 37,774 $11,012 $26,762
Office equipment and furniture............. 39,604 7,567 32,037
Leasehold improvements..................... 25,648 5,130 20,518
-------- ------- -------
$103,026 $23,709 $79,317
======== ======= =======
</TABLE>
5. SHARE CAPITAL
51 Authorized: 100,000,000 common shares without par value.
52 Issued:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- -----------
<S> <C> <C>
Balance, December 31, 1995....................... *2,785,873 $ *810
Shares issued to effect the acquisition of
subsidiary plus 100,000 shares for finder's
fee............................................ **7,380,000 **66,847
Issue of escrow shares at $0.01 per share........ 437,500 4,375
Issued pursuant to exercise of options at $1.00
per share...................................... 148,750 148,750
Issued pursuant to a private placement at $0.80
per share...................................... 1,250,000 1,000,000
Issued pursuant to an Exchange Offering
Prospectus at $2.55 per share, net of
commission and professional fees of $718,314... 3,200,000 7,441,686
----------- ----------
Balance, December 31, 1996....................... 15,202,123 $ 8,662,468
=========== ==========
</TABLE>
- ---------------
* The number of shares equals the shares outstanding in Minco and the capital
amount equals that of Temco (see Note 2).
** The $66,847 represent the fair market value of Minco's net assets (see Note
2).
53 5,442,500 of the shares issued are held in escrow, the release of which
is subject to the direction of the regulatory authorities.
54 Stock options outstanding as at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
- ---------------- -------------- ------------------
<S> <C> <C>
8,000 $ 1.00 June 2, 2000
1,050,000 $ 1.85 March 5, 2001
100,000 $ 2.90 October 18, 2001
1,158,000
</TABLE>
80
<PAGE> 81
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
55 Warrants outstanding as at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
- ---------------- -------------- ------------------
<S> <C> <C>
250,000 $ 1.20 February 20, 1997
$ 1.38 February 20, 1998
1,600,000 $ 2.55 December 31, 1997
</TABLE>
6. RELATED PARTY TRANSACTIONS
61 During the year ended December 31, 1996, the Company incurred the
following expenses to its directors or corporations controlled by its
directors:
<TABLE>
<S> <C>
Administrative expenses:
-- Accounting.................................................... $ 7,100
-- Management fees and salaries.................................. 275,078
-- Property investigation........................................ 27,408
-- Rent.......................................................... 7,020
Deferred exploration costs:
-- geological consulting......................................... $27,902
-- project management............................................ 2,400
</TABLE>
The above amounts included expenses incurred by Minco for the period
January 1, 1996 to February 19, 1996 (see Note 2).
62 Account payable of $49,458 (1995 -- $49,458) is due to a corporation
controlled by a director of the Company.
7. COMMITMENTS
The Company has commitments in respect of office leases requiring minimum
payments of $507,529 within the next five years, as follows:
<TABLE>
<S> <C>
1997.............................................. $131,713
1998.............................................. 132,072
1999.............................................. 85,448
2000.............................................. 85,448
2001.............................................. 72,848
--------
$507,529
========
</TABLE>
8. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
These financial statements are prepared in accordance with Canadian
generally accepted accounting principles ("GAAP") which conforms with the GAAP
in United States in most aspects. Total assets and total liabilities computed in
accordance with U.S. GAAP are not materially different from the amounts
determined in accordance with Canadian GAAP. The only significant differences
are as follows:
81 Under U.S. GAAP, stock compensation expense under stock option plan is
computed as the excess between the market value of shares and the
option's exercise price times the number of shares issuable when the
option is granted. The amount is then recognized in the operations
statement over the vesting period. Under Canadian GAAP, no such
compensation expense is recorded.
81
<PAGE> 82
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
----------- --------
<S> <C> <C>
Net loss for the period
(Canadian GAAP)................................... $(1,087,924) $(11,196)
Stock compensation expense.......................... (17,800) --
------------ ---------
Net loss for the period (U.S. GAAP)................. $(1,105,724) $(11,196)
============ =========
Share capital (Canadian GAAP)....................... 8,662,468 810
Stock options outstanding, net of deferred stock
compensation expense.............................. 17,800 --
------------ ---------
Share capital (U.S. GAAP)........................... $ 8,680,268 $ 810
============ =========
</TABLE>
82 Loss Per Share
U.S. GAAP requires escrow shares, which are contingently cancelable, to
be excluded from the calculation of loss per share. The loss per share
calculated under the U.S. GAAP, including adjustment made in (a) above,
would be as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Loss per share........................................ $ 0.20 $ 0.00
========= =========
Weighted average number of shares for purpose of loss
per share........................................... 5,582,498 2,386,900
========= =========
</TABLE>
83 U.S. GAAP requires additional disclosures of stock options, as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE EXPIRY DATE
--------- -------------- ----------------
<S> <C> <C> <C>
Balance, December 31, 1994..... --
Options granted.............. 156,750 $1.00 June 2, 2000
Balance, December 31, 1995..... 156,750
Options granted.............. 1,050,000 $1.85 March 5, 2001
Options granted.............. 100,000 $2.90 October 18, 2001
Options exercised............ (148,750) $1.00
Balance, December 31, 1996..... 1,158,000 (see Note 5d)
</TABLE>
84 Consolidated Statement of Changes in Financial Position and Consolidated
Statement of Cash Flows
U.S. GAAP requires the statement of cash flows to disclose supplemental
non-cash activities. In 1996, certain share issuance costs, consisting
of finder's fees and the acquisitions of net assets of the subsidiary,
valued at $255,000 and $66,847 respectively, were paid by way of issuing
common shares of the Company. For Canadian GAAP, these transactions were
included as part of the issuance of share capital for the acquisition of
subsidiary in the financing activities section of the statement of
changes in financial position.
82
<PAGE> 83
MINCO MINING & METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated statement of cash flows, as required by U.S. GAAP is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
<S> <C> <C>
Cash provided by (used for) operating activities
Net loss for the period...................................... $ (1,087,924) $(11,196)
Items not involving cash:
-- amortization............................................ 23,708 --
-- minority interest's share of net loss................... (29,181) (540)
------------ ---------
(1,093,397) (11,736)
Change in non-cash working capital:
-- refundable tax credits.................................. (21,454) 49,458
-- prepaid expenses and deposits........................... (29,736) (39,072)
-- accounts payable........................................ 72,253 --
------------ ---------
(1,072,334) (1,350)
------------ ---------
Cash provided by financing activities
Cash balance of subsidiary when acquired..................... 142,446 --
Shares issued for cash, net of issuance costs................ 8,594,811 1,350
Exploration fund contributed by minority interest............ 570,570 --
------------ ---------
9,307,827 1,350
------------ ---------
Cash used for investing activities
Acquisition of capital assets................................ (78,816) --
Acquisition of mineral interests............................. (300) --
Deferred exploration costs................................... (786,076) --
Funds restricted for mineral exploration..................... (537,500) --
------------ ---------
(1,402,692) --
------------ ---------
Increase in cash position.................................... 6,832,801 --
Cash position, beginning of period........................... -- --
------------ ---------
Cash position, end of period................................. $ 6,832,801 $ --
============ =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
<S> <C> <C>
Schedule of non-cash investing and financing activities
Share issued for the acquisition of subsidiary................ $ 66,847 $ --
Shares issued for finder's fees............................... 255,000 --
Acquisition of capital assets and mineral interest of
subsidiary.................................................. (24,309) --
--
--------
$297,538 $ --
======== ==
</TABLE>
83
<PAGE> 84
MINCO MINING & METALS CORPORATION
CONSOLIDATED SCHEDULE OF DEFERRED EXPLORATION COSTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------
EMPEROR'S HEAVENLY
DELIGHT CHAPUZI CHANGBA MOUNTAINS TOTAL
--------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Assaying............................. $ 39,847 $ 4,273 $ -- $ 1,065 $ 45,185
Deposit.............................. -- -- -- 68,801 68,801
Drilling and trenching............... 79,363 -- -- -- 79,363
Engineering.......................... 16,614 -- 17,103 -- 33,717
Equipment............................ 35,239 1,901 -- 528 37,668
Field office administration.......... 26,435 -- -- -- 26,435
Field office rent.................... 25,968 -- -- -- 25,968
Field office start-up costs.......... 17,480 -- -- -- 17,480
Geochemical survey................... -- 109,943 -- -- 109,943
Geological consulting................ 7,820 26,600 10,862 31,420 76,702
Labor................................ 55,319 -- -- -- 55,319
Miscellaneous........................ 2,941 3,501 -- 4,389 10,831
Project management................... 10,953 -- -- -- 10,953
Remote sensing....................... -- -- -- 22,528 22,528
Site transportation vehicles......... 73,557 -- -- -- 73,557
Travel and transportation............ 59,856 7,198 -- 24,572 91,626
-------- -------- ------- -------- --------
Total...................... $ 451,392 $153,416 $27,965 $ 153,303 $786,076
======== ======== ======= ======== ========
</TABLE>
84
<PAGE> 1
Exhibit la
NUMBER: 256465
[LOGO]
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I HEREBY CERTIFY THAT
CONSOLIDATED CAPROCK RESOURCES LTD.
has this day changed its name to
MINCO MINING & METALS CORPORATION
ISSUED under my hand at Victoria, British Columbia
on February 08, 1993
/s/ JOHN S. POWELL
[STAMP]
JOHN S. POWELL
A/REGISTRAR OF COMPANIES
<PAGE> 2
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
256465
[LOGO]
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
CAPROCK ENERGY LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
CONSOLIDATED CAPROCK RESOURCES LTD.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 14TH DAY OF SEPTEMBER, 1989
/s/ DAVID W. BOYD
[STAMP]
DAVID W. BOYD
REGISTRAR OF COMPANIES
<PAGE> 3
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
256465
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE OF INCORPORATION
I HEREBY CERTIFY THAT
CAPROCK ENERGY LTD.
HAS THIS DAY BEEN INCORPORATED UNDER THE COMPANY ACT
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 5TH DAY OF NOVEMBER, 1982
[STAMP]
/s/ M. A. JORRE DE ST. JORRE
M. A. JORRE DE ST. JORRE
REGISTRAR OF COMPANIES
<PAGE> 4
PROVINCE OF BRITISH COLUMBIA
"COMPANY ACT"
ARTICLES
OF
MINCO MINING AND METALS CORPORATION
PART 1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART: ARTICLE: PAGE:
----- -------- -----
<S> <C> <C>
1 TABLE OF CONTENTS Front Page
2 INTERPRETATION 1
3 SHARES 1
4 BRANCH REGISTERS 2
5 TRANSFERS AND TRANSMISSION OF SHARES 2
6 PURCHASE AND REDEMPTION OF SHARES 3
7 GENERAL MEETINGS 4
8 VOTING OF MEMBERS 5
9 DIRECTORS 7
10 POWERS AND DUTIES OF DIRECTORS 9
11 DISCLOSURE OF INTEREST OF DIRECTORS 9
12 PROCEEDINGS OF DIRECTORS 10
13 EXECUTIVE AND OTHER COMMITTEES 11
14 OFFICERS 12
15 INDEMNITY AND PROTECTION OF DIRECTORS,
OFFICERS AND EMPLOYEES 12
16 DIVIDENDS AND RESERVE 13
17 DOCUMENTS, RECORDS AND REPORTS 14
18 NOTICES 14
19 SEAL 16
</TABLE>
<PAGE> 5
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PART 2
INTERPRETATION
2.1 These Articles are subject to the provisions of the "Company Act".
2.2 In these Articles, unless there is something in the subject or
context inconsistent therewith:
"Board" and "Directors" or "directors" mean the Directors or sole Director of
the Company for the time being.
"Company Act" means the Company Act of the Province of British Columbia from
time to time in force and includes the regulations made pursuant thereto.
"registered owner", "registered holder", "owner" or "holder" when used with
respect to a share in the authorized capital of the Company means the person
registered in the register of the members in respect of such share.
2.3 A reference to writing includes any visible form of representing or
reproducing words.
2.4 Words importing the singular include the plural and vice versa, and
words importing male persons include female persons and words importing persons
shall include corporations.
2.5 The meaning of any words or phrases defined in the Company Act
shall, if not inconsistent with the subject or context, bear the same meaning in
these Articles.
PART 3
SHARES
3.1 The shares of the Company shall be under the control of the
Directors who may, subject to the rights of the holders of shares for the time
being issued, issue, allot, sell or otherwise dispose of, or grant options on or
otherwise deal in shares authorized but not outstanding at such times, to such
persons (including Directors), in such manner, upon such terms and conditions,
and at such price or for such consideration, as they, in their absolute
discretion, may determine.
<PAGE> 6
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3.2 The Directors, on behalf of the Company, may pay a commission or
allow a discount to any person in consideration of his subscribing or agreeing
to subscribe, whether absolutely or conditionally, for any shares in the Company
or procuring or agreeing to procure subscriptions, whether absolutely or
conditionally, for any such shares.
3.3 Except as required by law or these Articles, no person shall be
recognized by the Company as having any interest whatsoever in any share except
the registered holder thereof.
3.4 If a share is registered in the names of two or more persons they
shall be joint holders.
3.5 Delivery of a share certificate to one of several joint registered
holders or to his duly authorized agent shall be sufficient delivery to all.
Neither the Company nor any transfer agent shall be liable for any loss
occasioned to the member owing to any share certificate being lost in the mail
or stolen.
3.6 A share certificate or debt obligation bearing the printed or
mechanically reproduced signature of a person shall not be invalid at its date
of issue by reason of the fact that such person shall have ceased to hold the
office he is stated to hold on such certificate or debt obligation.
PART 4
BRANCH REGISTERS
4.1 Unless prohibited by the Company Act, the Company may keep or cause
to be kept one or more branch registers of members or debentureholders at such
place or places as the Directors may from time to time determine.
PART 5
TRANSFER AND TRANSMISSION OF SHARES
5.1 Subject to the provisions of the Memorandum and of these Articles,
a member may transfer any of his shares by instrument in writing executed by or
on behalf of such member and delivered to the Company or its transfer agent. The
instrument of transfer may be in the form, if any, on the back of the share
certificate representing the shares, or in such other form as the Directors may
from time to time approve. Except to the extent that the Company Act may
otherwise provide, the transferor shall be deemed to remain the holder of the
shares until the name of the transferee is entered in the register of members or
a branch register of members in respect thereof.
<PAGE> 7
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5.2 The signature of the registered owner of any shares, or of his duly
authorized attorney, upon the instrument of the transfer shall constitute a
complete and sufficient authority to the Company, its directors, officers and
agents to register in the name of the transferee as named in the instrument of
transfer, in the name of the person on whose behalf any certificate for the
shares to be transferred is deposited with the Company for the purpose of having
the transfer registered, the number of shares specified in the instrument of
transfer or, if no number is specified, all the shares represented by all share
certificates deposited with the instrument of transfer.
5.3 Neither the Company nor any Director, officer or agent thereof
shall be bound to inquire into the title of the person named in the instrument
of transfer as transferee, or, if no person is so named, of the person on whose
behalf the certificate is deposited for the purpose of having the transfer
registered, or be liable to any person for registering or not registering the
transfer, and the transfer when registered shall confer upon the person in whose
name the shares have been registered a valid title to the shares.
5.4 Every instrument of transfer shall be executed by the transferor
and left for registration at the registered office of the Company or at the
office of its transfer agent or registrar together with the share certificate
for the shares to be transferred and such other evidence, if any, as the
Directors or the transfer agent or registrar may require to prove the title of
the transferor to, or his right to transfer, the shares and the right of the
transferee to have the transfer registered. If the transfer is registered all
instruments of transfer and evidence shall be retained by the Company or its
transfer agent or registrar and, if the transfer is not registered, they
together with the share certificate shall be returned to the person depositing
them.
5.5 There shall be paid to the Company in respect of the registration
of any transfer such sum, if any, as the Directors may from time to time
determine.
5.6 In the case of the death of a member, his legal personal
representative, or if he was a joint holder the surviving joint holder, shall be
the only person recognized by the Company as having any title to his interest in
the shares. Before recognizing a person as a legal personal representative the
Directors may require him to obtain from a court of competent jurisdiction a
grant of letters probate or letters of administration.
PART 6
PURCHASE AND REDEMPTION OF SHARES
6.1 The Company may purchase any of its shares unless the special
rights and restrictions attached thereto otherwise provide.
<PAGE> 8
- 4 -
6.2 If the Company proposes to redeem some but not all of the shares of
any class, the Directors may, subject to the special rights and restrictions
attached to such class of shares, decide the manner in which the shares to be
redeemed are to be selected.
PART 7
GENERAL MEETINGS
7.1 The date, time and place of all general meetings of the Company
within the Province of British Columbia shall be fixed by the Directors.
7.2 All business that is transacted at a general meeting shall be
special, except, in the case of an annual general meeting, the conduct of, and
voting at, such meeting, the consideration of the financial statements, the
report of the Directors and Auditor, a resolution to elect two or more directors
by a single resolution, the election of Directors, the appointment of the
Auditor, the fixing of the remuneration of the Auditor and such other business
as by these Articles or the Company Act may be transacted at a general meeting
without prior notice thereof being given to the members or any business which is
brought under consideration by the report of the Directors, and in the case of
any other general meeting, such business as related to the conduct of or voting
at that meeting.
7.3 Except as otherwise provided by the Company Act, where any special
business to be considered at a general meeting includes considering, approving,
ratifying, adopting or authorizing any document or the execution thereof or the
giving of effect thereto, the notice convening the meeting shall be sufficient
if, with respect to such document, it states that a copy of the document is or
will be available for inspecion by members at the registered office or records
office of the Company or at such other place in British Columbia designated in
the notice during usual business hours up to the date of such general meeting.
7.4 No business, other than the election of the chairman or the
adjournment of the meeting, shall be transacted at any general meeting unless
there is a quorum at the commencment of the meeting, but the quorum need not
continue throughout the meeting.
7.5 If within half an hour from the time appointed for a general
meeting a quorum is not present, the meeting, if convened upon the requisition
of members, shall be dissolved. In any other case, except in the case of a
final general meeting called by a liquidator, it shall stand adjourned, at the
discretion of the chairman, to either the next day, or the same day in the next
week, at the same time and place. If at the adjourned meeting a quorum is not
present within half an hour from the time appointed for the meeting, the person
or persons present and being or representing by proxy a member or members
entitled to attend and vote at the meeting, shall be a quorum.
<PAGE> 9
- 5 -
7.6 The Chairman of the Board, if any, or in his absence the President
of the Company or in his absence a Vice-President of the Company, if any, shall
be entitled to preside as chairman at every general meeting of the Company.
7.7 If at any general meeting neither the Chairman of the Board nor the
President nor a Vice-President is present within fifteen minutes after the time
appointed for holding the meeting or if present is not willing to act as
chairman, the Directors present shall choose a chairman; but if all the
Directors present decline to take the chair or fail so to choose or if no
Director is present, the members present shall choose a chairman. The chairman
need not be a member.
7.8 The chairman may, and shall if so directed by the meeting, adjourn
the meeting from time to time and from place to place. It shall not be necessary
to give any notice of an adjourned meeting or of the business to be transacted
at an adjourned meeting.
7.9 The Directors and any other person permitted by the chairman of the
meeting shall be entitled to attend any general meeting.
7.10 No motion proposed at a general meeting need be seconded and the
chairman may propose a motion.
7.11 Unless the Company Act, the Memorandum or these Articles otherwise
provide, any action to be taken by a resolution of the members may be taken by
an ordinary resolution.
7.12 If there is only one member, a quorum is one person present and
being, or representing by proxy or other proper authority, such member. If there
is more than one member, a quorum is two members entitled to attend and vote at
the meeting who may be represented by proxy or other proper authority.
PART 8
VOTING OF MEMBERS
8.1 Subject to any special voting rights or restrictions attached to
any class of shares and the restrictions on joint registered holders of shares,
on a show of hands every member who is present in person and entitled to vote
thereat shall have one vote and on a poll every member present in person or
represented by proxy or other proper authority shall have one vote for each
share of which he is the registered holder.
8.2 A member, being a corporation, may appoint a proxyholder and may
also appoint a representative to act for it by delivering to the
<PAGE> 10
- 6 -
Company a copy of a resolution of its directors or other governing body naming a
person as its representative. Such representative, subject to any restrictions
contained in the resolution, shall be entitled to exercise the same powers on
behalf of the corporation as the corporation could exercise if it were an
individual member. If the corporation is a subsidiary of the Company its shares
may not be voted and its proxyholder or representative or the proxyholder of the
representative may not be counted to make a quorum.
8.3 In the case of joint registered holders of a share the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall be
accepted to the exclusion of the votes of the other joint registered holders;
and for this purpose seniority shall be determined by the order in which the
names stand in the register of members. Two or more legal personal
representatives of a deceased member whose shares are registered in his sole
name shall for the purpose of this Article be deemed joint registered holders.
8.4 A member of unsound mind entitled to attend and vote, in respect of
whom an order has been made by any court having jurisdiction, may vote, whether
on a show of hands or on a poll, by his committee, curator bonis, or other
person in the nature of a committee or curator bonis appointed by that court,
and any such committee, curator bonis, or other person may appoint a
proxyholder.
8.5 Any member may by proxy appoint a proxyholder to vote for him on a
poll.
8.6 In the case of an equality of votes, whether on a show of hands or
on a poll, the chairman of the meeting at which the show of hands takes place or
at which the poll is demanded shall, if he is a member of the Company, be
entitled to a second or casting vote.
8.7 No poll may be demanded on the election of a chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll demanded
on any other question shall be taken as soon as, in the opinion of the chairman,
is reasonably convenient, but in no event later than seven days after the
meeting and at such time and place and in such manner as the chairman of the
meeting directs. The result of the poll shall be deemed to be the resolution of
and passed at the meeting at which the poll was demanded. Any business other
than that upon which the poll has been demanded may be proceeded with pending
the taking of the poll. A demand for a poll may be withdrawn. In any dispute as
to the admission or rejection of a vote the decision of the chairman made in
good faith shall be final and conclusive.
8.8 On a poll a person entitled to cast more than one vote need not, if
he votes, use all his votes or cast all the votes he uses in the same way.
8.9 A member holding more than one share in respect of which he is
entitled to vote shall be entitled to appoint one or more (but not more than
two) proxyholders to attend, act and vote for him on the same occasion. If such
a member should appoint more than one proxyholder for the same occasion he shall
specify the number of shares each proxyholder shall be entitled to vote. A
<PAGE> 11
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member may also appoint one or more alternate proxyholders to act in the place
and stead of an absent proxyholder.
8.10 A form of proxy shall be in writing under the hand of the
appointor or his attorney duly authorized in writing, or, if the appointor is a
corporation, either under the seal of the corporation or under the hand of a
duly authorized officer or representative of or attorney for the corporation. A
proxyholder shall be a member of the Company unless
(i) the Company is at the time a reporting company, or
(ii) the member appointing the proxyholder is a corporation, or
(iii) the Company shall have at the time only one member, or
(iv) the persons present in person or by proxy and entitled to vote
at the meeting by resolution permit the proxyholder to attend
and vote; for the purpose of such resolution the proxyholder
shall be counted in the quorum but shall not be entitled to
vote.
8.11 Unless otherwise provided by the Directors, or otherwise set out
in the notice convening the meeting or in the information circular relating
thereto, a form of proxy and the power of attorney or other authority, if any,
under which it is signed or a notarially certified copy thereof, shall be
deposited at the registered office of the Company, or at such other place as is
specified for the purpose in the notice convening the meeting or in the
information circular relating thereto, not less than 48 hours, excluding
Saturdays and holidays, before the time of the meeting.
8.12 Except as otherwise provided by law or these Articles, a proxy may
be in any form the Directors or the chairman of the meeting approve.
8.13 A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving the proxy
or the revocation of the proxy or of the authority under which the form of proxy
was executed or the transfer of the share in respect of which the proxy is
given, provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered office of the
Company or by the chairman of the meeting or adjourned meeting for which the
proxy was given before the vote is taken.
PART 9
DIRECTORS
9.1 The members, except as otherwise restricted by the Memorandum or
Articles, shall be entitled to elect Directors at the annual general
<PAGE> 12
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meetings, but the number to be elected shall be determined by the Directors.
Failing such determination, the number to be elected shall be the same as the
number of Directors whose terms expire at the meeting.
9.2 The Directors may from time to time appoint additional Directors.
9.3 A Director's term of office shall expire on the date fixed at the
time of his appointment or election but, in the absence thereof, it shall expire
on the date of the Company's annual general meeting next following his
appointment or election or on the date of the consent in writing in lieu of such
meeting, as the case may be.
9.4 A retiring Director shall be eligible for re-election.
9.5 Any Director may by written notice to the Company appoint any
person to be his alternate to act in his place at meetings of the Directors at
which he is not present or by these Articles deemed to be present unless the
Directors shall have reasonably disapproved the appointment of such person and
given notice to that effect to the Director within a reasonable time. Every
alternate shall be entitled to attend and vote at meetings at which the person
who appointed him is not present or deemed to be present, and, if he is a
Director, to have a separate vote on behalf of the Director he is representing
in addition to his own vote. A Director may at any time by written notice to the
Company revoke the appointment of an alternate appointed by him. The
remuneration payable to such an alternate shall be payable out of the
remuneration of the Director appointing him.
9.6 The Directors may remove from office a Director who is convicted of
an indictable offence.
9.7 The remuneration of the Directors as such may from time to time be
determined by the Directors. Such remuneration may be in addition to any salary
or other remuneration paid to any officer or employee of the Company who is a
Director. The Directors shall be repaid such reasonable travelling, hotel and
other expenses as they incur in and about the business of the Company and if any
Director shall perform any professional or other services for the Company that
in the opinion of the Directors are outside the ordinary duties of a Director or
shall otherwise be specially occupied in or about the Company's business, he may
be paid a remuneration to be fixed by the Board, or, at the option of such
Director, by resolution of the members and such remuneration may be either in
addition to, or in substitution for, any other remuneration that he may be
entitled to receive. The Directors may pay a gratuity or pension or allowance on
retirement to any Director who has held any salaried office or place of profit
with the Company or to his spouse or dependents and may make contributions to
any fund and pay premiums for the purchase or provision of any such gratuity,
pension or allowance.
9.8 A casual vacancy occurring in the Board of Directors may be filled
by the remaining Directors or Director.
<PAGE> 13
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PART 10
POWERS AND DUTIES OF DIRECTORS
10.1 The powers of the Company shall be exercised only by the
directors, except those which, by the Company Act or these Articles, are
required to be exercised by a resolution of the members and those referred to
the members by the Directors.
10.2 The Directors may from time to time on behalf of the Company:
(i) borrow money in such manner and amount, on such security, from
such sources and upon such terms and conditions as they think
fit,
(ii) issue bonds, debentures, and other debt obligations either
outright or as security for any liability or obligation of the
Company or any other person, and
(iii) mortgage, charge, whether by way of specific or floating
charge, or give other security on the undertaking, or on the
whole or any part of the property and assets, of the Company,
both present and future.
10.3 The Directors may from time to time by power of attorney or other
instrument appoint any person to be the attorney of the Company for such
purposes, and with such powers, authorities and discretions (not exceeding those
vested in or exercisable by the Directors under these Articles and excepting the
powers of the Directors relating to the constitution of the Board and of any of
its committees and the appointment or removal of officers and the power to
declare dividends) and for such period, with such remuneration and subject to
such conditions as the Directors may think fit and any such power of attorney
may contain such provisions for the protection or convenience of persons dealing
with such attorney as the Directors think fit. Any such attorney may be
authorized by the Directors to sub-delegate all or any of the powers,
authorities and discretions for the time being vested in him.
PART 11
DISCLOSURE OF INTEREST OF DIRECTORS
11.1 A Director shall disclose his interest in and not vote in respect
of any proposed contract or transaction with the Company in which he is,
<PAGE> 14
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in any way, directly or indirectly interested but such Director shall be counted
in the quorum at the meeting of the Directors at which the proposed contract or
transaction is approved. A directors resolution consented to in writing, or
otherwise as herein provided, by all the directors, shall not be deemed to be a
vote in respect thereof for the purposes of this paragraph. Where a contract is
made between the Company and a Director, a reference to the Director's name in
such resolution shall be deemed to be adequate disclosure of his interest
therein.
11.2 A Director may hold any office or place of profit with the Company
in addition to his office of Director for such period and on such terms (as to
remuneration or otherwise) as the Directors may determine and no Director or
intended Director shall be disqualified by his office from contracting with the
Company either with regard to his tenure of any such other office or place of
profit or as vendor, purchaser or otherwise, and no contract or transaction
entered into by or on behalf of the Company in which a Director is in any way
interested shall be liable to be voided by reason thereof.
11.3 A Director or his firm may act in a professional capacity for the
Company and he or his firm shall be entitled to remuneration for professional
services as if he were not a Director.
11.4 A Director may be or become a director, officer or employee of, or
otherwise interested in, any corporation or firm in which the Company may be
interested as a shareholder or otherwise, and such Director shall not, except as
provided by the Company Act or these Articles, be accountable to the Company for
any remuneration or other benefit received by him as director, officer or
employee of, or from his interest in, such other corporation or firm, unless the
Directors otherwise direct.
PART 12
PROCEEDINGS OF DIRECTORS
12.1 A Director may, and the Secretary shall on the request of a
Director, call a meeting of the Directors.
12.2 The Chairman of the Board, or in his absence, the President, shall
preside as chairman at every meeting of the Directors, or, if there is no
Chairman of the Board or neither the Chairman of the Board nor the President is
present within fifteen minutes of the time appointed for holding the meeting or
is willing to act as chairman, or, if the Chairman of the Board, if any, and the
President have advised the Secretary that they will not be present at the
meeting, the Directors present shall choose one of their number to be chairman
of the meeting.
12.3 The Directors may meet together for the dispatch of business,
adjourn and otherwise regulate their meetings as they think fit.
<PAGE> 15
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Questions arising at any meeting shall be decided by a majority of votes. In
case of an equality of votes the chairman shall not have a second or casting
vote.
12.4 A Director may participate in a meeting of the Board or of any
committee of the Directors by means of conference telephones or other
communications facilities if all Directors participating in the meeting can hear
each other and provided that all such Directors agree to such participation. A
Director participating in a meeting in accordance with this Article shall be
deemed to be present at the meeting and to have so agreed and shall be counted
in the quorum therefor and be entitled to speak and vote thereat.
12.5 The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and if not so fixed shall be two
Directors or, if the number of Directors is fixed at one, shall be one Director.
12.6 The Directors may, if there is a quorum, act notwithstanding any
vacancy.
12.7 Every act of a Director is valid notwithstanding any defect that
may afterwards be discovered in his election or appointment.
12.8 Any resolutuion of the Directors or of a committee thereof may be
passed with the consent in writing to the resolution of all the Directors or the
members of that committee. The consent may be in counterparts.
PART 13
EXECUTIVE AND OTHER COMMITTEES
13.1 The Directors may appoint an Executive Committee to consist of
such member or members of the Board as they think fit, which Committee shall
have and may exercise, subject to such restrictions as the Directors may decide
from time to time, all the powers vested in the Board except the power to fill
vacancies in the Board, the power to change the membership of, or fill vacancies
in, said Committee or any other committee of the Board.
13.2 The Directors may appoint one or more committees consisting of
such member or members of the Board as they think fit and may delegate to any
such committee such powers of the Board (except the power to fill vacancies in
the Board and the power to change the membership of or fill vacancies in any
committee of the Board) as may be prescribed.
13.3 All Committees may meet and adjourn as they think fit. Questions
arising at any meeting shall be determined by a majority of votes of the members
of the committee present, and in case of an equality of votes, the chairman
shall not have a second or casting vote.
<PAGE> 16
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13.4 All Committees shall keep regular minutes of their actions and
shall cause them to be recorded in books kept for that purpose and shall report
the same to the Board of Directors at such times as the Board of Directors may
from time to time require. The Directors shall also have power at any time to
revoke or override any authority given to or acts to be done by any such
committees except as to acts done before such revocation or overriding and to
terminate the appointment or change the membership of a committee and to fill
vacancies in it. Committees may make rules for the conduct of their business and
may appoint such assistants as they may deem necessary. A majority of the
members of a committee, if more than one, shall constitute a quorum thereof.
PART 14
OFFICERS
14.1 The Directors may decide what functions and duties each officer
shall perform and may entrust to and confer upon him any of the powers
exercisable by them upon such terms and conditions and with such restrictions as
they think fit and may from time to time revoke, withdraw, alter or vary all or
any of such functions, duties and powers.
PART 15
INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
15.1 Subject to the provisions of the Company Act, the Directors shall
cause the Company to indemnify a Director or former Director of the Company, and
the Directors may cause the Company to indemnify a director or former director
of a corporation of which the Company is or was a shareholder, and the heirs and
personal representatives of any such person, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them, including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party, by reason of his
being or having been a Director of the Company or a director of such
corporation, including any action brought by the Company or any such
corporation. Each Director of the Company on being elected or appointed
shall be deemed to have contracted with the Company on the terms of the
foregoing indemnity.
15.2 Subject to the provisions of the Company Act, the Directors may
cause the Company to indemnify any officer, employee or agent of the Company, or
of a corporation of which the Company is or was a shareholder (notwithstanding
that he is also a Director), and his heirs and personal rep-
<PAGE> 17
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resentatives, against all costs, charges and expenses whatsoever incurred by him
or them and resulting from his acting as an officer, employee or agent of the
Company or such corporation. In addition, the Company shall indemnify the
Secretary or an Assistant Secretary of the Company (if he shall not be a
full-time employee of the Company and notwithstanding that he is also a
Director), and his respective heirs and legal representatives, against all
costs, charges and expenses whatsoever incurred by him or them and arising out
of the functions assigned to the Secretary by the Company Act or these Articles
and each such Secretary and Assistant Secretary shall, on being appointed, be
deemed to have contracted with the Company on the terms of the foregoing
indemnity.
15.3 The failure of a Director or officer of the Company to comply with
the provisions of the Company Act or of the Memorandum or these Articles shall
not invalidate any indemnity to which he is entitled under this Part.
15.4 The Directors may cause the Company to purchase and maintain
insurance for the benefit of any person who is or was serving as a Director,
officer, employee or agent of the Company or as a director, officer, employee or
agent of any corporation of which the Company is or was a shareholder and his
heirs or personal representatives against any liability incurred by him as such
Director, director, officer, employee or agent.
PART 16
DIVIDENDS AND RESERVE
16.1 The Directors from time to time declare and authorize payment of
such dividends, if any, as they may deem advisable and need not give notice of
such declaration to any member. No dividend shall be paid otherwise than out of
funds or assets properly available for the payment of dividends and a
declaration by the Directors as to the amount of such funds or assets available
for dividends shall be conclusive. Any dividend may be paid wholly or in part by
the distribution of specific assets and in particular, by paid up shares, bonds,
debentures or other securities of the Company or any other corporation or in any
one or more such ways as may be authorized by the Directors and where any
difficulty arises with regard to such a distribution the Directors may settle
the same as they think expedient, and and in particular, may fix the value for
distribution of such specific assets or any part thereof, and may determine that
cash payment in substitution for all or any part of the specific assets to which
any members are entitled shall be made to any members on the basis of the value
so fixed in order to adjust the rights of all parties and may vest any specific
assets in trustees for the persons entitled to the dividend.
16.2 Any dividend declared on shares of any class by the Directors may
be made payable on such date as is fixed by the Directors.
<PAGE> 18
- 14 -
16.3 If persons are registered as joint holders of any share, any one
of them may give an effective receipt for any dividend, bonuses or other moneys
payable in respect of the share.
16.4 Unless otherwise determined by the Directors, no dividend shall be
paid on any share which has been purchased or redeemed by the Company while the
share is held by the Company.
16.5 Any dividend, bonuses or other moneys payable in cash in respect
of shares may be paid by cheque. Every such cheque shall be made payable to the
order of the person to whom it is sent. The mailing of such cheque shall, to the
extent of the sum represented thereby (plus the amount of any tax required by
law to be deducted) discharge all liability for the dividend, unless such cheque
shall not be paid on presentation or the amount of tax so deducted shall not be
paid to the appropriate taxing authority.
16.6 Notwithstanding anything contained in these Articles, the
Directors may from time to time capitalize any undistributed surplus on hand of
the Company and may from time to time issue shares, bonds, debentures or debt
obligations of the Company as a dividend representing such undistributed surplus
on hand or any part thereof.
PART 17
DOCUMENTS, RECORDS AND REPORTS
17.1 No member of the Company shall be entitled to inspect the
accounting records of the Company unless the Directors determine otherwise.
PART 18
NOTICES
18.1 Any notice required to be given by these Articles or the Company
Act, unless the form is otherwise specified, may be given verbally or in
writing.
18.2 A notice in writing, a statement, report or other document shall
have been effectively sent or given if posted, delivered, telexed, telegraphed
or cabled to the person entitled thereto at his address recorded on a register
maintained by the Company and a certificate signed by the Secretary or other
officer of the Company, or of any other corporation acting on behalf of the
<PAGE> 19
- 15 -
Company, that the notice, statement, report or other document was so sent or
given, shall be conclusive evidence thereof.
18.3 A notice, statement, report or other document may be given by the
Company to the joint holders of a share by giving it to any of them.
18.4 A notice, statement, report or other document may be given by the
Company to the persons entitled to a share in consequence of the death,
bankruptcy or incapacity of a member in the same manner as the same might have
been given if the death, bankruptcy or incapacity had not occurred.
18.5 Notice of each directors' meeting, except a directors' meeting
held immediately following an annual general meeting of which no notice shall be
required, shall be given to every director and alternate director except a
director or alterate director who has waived notice or is absent from the
Province of British Columbia.
18.6 The accidental omission to give notice of a meeting to, or the
non-receipt thereof by, any person entitled to receive notice shall not
invalidate the proceedings at that meeting.
18.7 A notice of a meeting shall specify the place, day and time of the
meeting and if for a general meeting the general nature of all special business
intended to be conducted thereat, unless specified in an information circular
relating thereto.
18.8 An entry in the minute book of the waiver or reduction of the
period of notice of a general meeting shall be sufficient evidence of the due
convening of the meeting.
18.9 A Director may waive his entitlement to receive a notice of any
past, present or future meeting or meetings and may at any time withdraw such
waiver. After the waiver is received by the Company and until it is withdrawn no
notice need be given to such Director or, unless the Director otherwise requires
in writing to the Company, to his alternate director. All meetings held without
such notice being given shall not have been improperly called by reason thereof.
18.10 Not less than two (2) hours' notice of a directors' meeting
requiring notice shall be given.
18.11 Where in these Articles any period of time dating from a given
day, act or event is prescribed, the time shall be reckoned exclusive of such
day, act or event.
<PAGE> 20
- 16 -
PART 19
SEAL
19.1 If the seal of the Company is affixed and accompanied by the
signature of the Chairman of the Board, President, Secretary or any other
director or as directed by resolution of the directors in respect of such
existing documents as are therein specified, that shall constitute effective
execution.
19.2 The Company may have an official seal for use in any other
province, state, territory or country.
19.3 The seal of the Company, may if directed by the directors, be
reproduced on any document by any means and in any form other than an impression
thereof.
NAME, ADDRESS AND OCCUPATION
OF
SUBSCRIBER
/s/ Sandra Kansky
- -------------------------------
Sandra Kansky
2176 West 15th Avenue
Vancouver, B.C.
V6K 2Y5
Secretary
Dated: November 3, 1982
<PAGE> 21
[SEAL] [SEAL]
MEMORANDUM
OF
CAPROCK ENERGY LTD.
I wish to be formed into a company with limited liability under the
"Company Act" in pursuance of this Memorandum.
1. The full name of the Company is CAPROCK ENERGY LTD.
2. The authorized capital of the Company consists of TWENTY MILLION (20,000,000)
common shares without par value.
3. I agree to take the number (and kind) (and class) of shares in the Company
set opposite my name.
Name, Resident Address & Number (and kind) (and class)
Occupation of Subscriber of share taken by Subscriber
/s/ Sandra Kansky
- --------------------------- ONE (1) COMMON SHARE
Sandra Kansky
2176 West 15th Avenue
Vancouver, B.C.
V6K 2Y5
Secretary
TOTAL SHARES TAKEN: ONE (1) COMMON SHARE
DATED: November 3, 1982
<PAGE> 22
[SEAL]
PROVINCE of British Columbia
(Section 40)
Certificate of
Incorporation No. 256465
COMPANY ACT
DIRECTORS' RESOLUTION
The following Directors' resolution was passed by the undermentioned Company on
the date stated:
Name of Company: CAPROCK ENERGY LTD.
Date resolution passed: May 26, 1986
Resolution:
CANCELLATION OF ESCROW SHARES
WHEREAS pursuant to an agreement dated November 10, 1982 between the
Company and Fargo Oil Corporation (now known as Fargo Resources Limited), the
Company was to issue up to 2,000,000 escrow shares;
AND WHEREAS 1,988,265 shares have been qualified pursuant to the terms
of the agreement;
AND WHEREAS the balance of 11,735 shares are required to be cancelled;
THEREFORE BE IT RESOLVED that:
(a) 11,735 shares held in escrow pursuant to an Escrow Agreement required
by the Vancouver Stock Exchange and the Superintendent of Brokers be
cancelled and surrendered to the Company pursuant to the terms of the
Escrow Agreement;
(b) the Memorandum of the Company be altered by decreasing the authorized
capital of the Company from 20,000,000 common shares without par value,
of which 3,992,000 shares are issued, to 19,988,265 common shares
without par value, of which 3,992,000 shares are issued;
(c) paragraph 2 of the Memorandum be altered to read:
"2. The authorized capital of the Company consists of NINETEEN
MILLION NINE HUNDRED AND EIGHTY-EIGHT THOUSAND TWO HUNDRED AND
SIXTY-FIVE (19,988,265) common shares without par value."
.../2
(1673F)
<PAGE> 23
- 2 -
(d) The Memorandum be in the form attached hereto and marked
Schedule "A".
Certified a true copy the 9th day of July, 1986.
RAND & EDGAR
per: /s/ William A. Rand
------------------------
William A. Rand
Solicitor
(1673F)
<PAGE> 24
SCHEDULE "A"
ALTERED MEMORANDUM
OF
CAPROCK ENERGY LTD.
(as altered by Resolution Passed: May 26, 1986
I wish to be formed into a company with limited liability under the
"Company Act" in pursuance of this Memorandum.
1. The full name of the Company is CAPROCK ENERGY LTD.
2. The authorized capital of the Company consists of NINETEEN MILLION NINE
HUNDRED AND EIGHTY-EIGHT THOUSAND TWO HUNDRED AND SIXTY-FIVE
(19,988,265) common shares without par value.
3. I agree to take the number (and kind) (and class) of shares in the
Company set opposite my name.
Name, Resident Address & Number (and kind) (and class)
Occupation of Subscriber of share taken by Subscriber
(1654R)
<PAGE> 25
PROVINCE OF BRITISH COLUMBIA [SEAL]
Form 21 Certificate of
(Section 371) Incorporation No. 256465
COMPANY ACT
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned Company on the
date stated:
Name of Company: CAPROCK ENERGY LTD.
Date resolution passed: June 25, 1987
Resolution:
UPON MOTION duly made and seconded IT WAS UNANIMOUSLY RESOLVED that:
(a) The Memorandum be altered by increasing the authorized share
capital of the Company from 19,988,265 common shares without
par value of which 3,980,265 shares are issued and
outstanding, to 20,000,000 common shares without par value of
which 3,980,265 shares are issued and outstanding;
(b) Paragraph 2 of the Memorandum be altered to read:
"2. The authorized capital of the Company consists of
Twenty Million (20,000,000) common shares without par
value."
(c) The Memorandum of the Company be in the form attached hereto
marked Schedule "A".
Certified a true copy the 20th day of July, 1987.
RAND & EDGAR
per: /s/ William A. Rand
-----------------------
William A. Rand,
Solicitor
(0020F)
<PAGE> 26
SCHEDULE "A"
ALTERED MEMORANDUM
OF
CAPROCK ENERGY LTD.
(AS ALTERED BY RESOLUTION PASSED: JUNE 25, 1987)
I wish to be formed into a company with limited liability under the
"Company Act" in pursuance of this Memorandum.
1. The full name of the Company is CAPROCK ENERGY LTD.
2. The authorized capital of the Company consists of Twenty Million
(20,000,000) common shares without par value.
3. I agree to take the number (and kind) (and class) of shares in the
Company set opposite my name.
Name, Resident Address & Number (and kind) (and class)
Occupation of Subscriber of share taken by Subscriber
<PAGE> 27
[SEAL]
FORM 21
(Section 371)
Certificate of
Incorporation No. 256465
COMPANY ACT
SPECIAL RESOLUTION
The following Special Resolutions were passed by the undermentioned
Company on the date stated:
Name of Company: CAPROCK ENERGY LTD.
Date Resolution Passed: September 19, 1988
Resolutions:
"ON MOTION DULY MADE, SECONDED AND CARRIED, IT WAS RESOLVED as a Special
Resolution that:
1. the authorized capital be altered by consolidating all of the Company's
common shares, being 20,000,000 common shares without par value of
which 9,516,398 shares are issued, to 4,000,000 common shares without
par value of which 1,903,279 3/5 are issued and outstanding, every five
(5) of such shares before consolidation being consolidated into one (1)
share, and that the Memorandum of the Company be altered accordingly;
2. the authorized capital be increased from 4,000,000 common shares
without par value of which 1,903,279 3/5 common shares are issued and
outstanding, to 20,000,000 common shares without par value of which
1,903,279 3/5 common shares are issued and outstanding, and that the
Memorandum of the Company be altered accordingly;
3. the name of the Company be changed to Consolidated Caprock Resources
Ltd. and that the Memorandum of the Company be altered to reflect such
change of name."
The altered memorandum of the Company is attached hereto as Schedule "A".
CERTIFIED a true copy this 1st day of September, 1989.
/s/ ILLEGIBLE
------------------------------
SIGNATURE
Director
------------------------------
Relationship to Company
118/6/40
<PAGE> 28
Schedule
FORM 1
(Section 5)
COMPANY ACT
ALTERED MEMORANDUM
of
CONSOLIDATED CAPROCK RESOURCES LTD.
(as altered by special resolution passed September 19, 1988)
1. The name of the Company is "CONSOLIDATED CAPROCK RESOURCES LTD.".
2. The authorized capital of the Company consists of 20,000,000 common
shares without par value.
118/6/4C
<PAGE> 29
[SEAL]
FORM 21
(Section 371)
Certificate of
Incorporation
No. 256465
COMPANY ACT
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned company on the
date stated:
Name of Company: CONSOLIDATED CAPROCK RESOURCES LTD.
Date Resolution passed: June 3, 1992
Resolution:
"BE IT RESOLVED, each as a Special Resolution, THAT:
1. The 20,000,000 common shares without par value in the capital of the
Company, of which 3,649,284 shares are issued, be consolidated into
6,666,666.66 common shares without par value of which 1,216,428 shares
are issued, every 3 common shares before consolidation being
consolidated into one share and that the Memorandum of the Company be
altered accordingly.
2. The authorized capital of the Company be increased from 6,666,666.66
common shares without par value, of which 1,216,428 are issued, to
20,000,000 common shares without par value of which 1,216,428 shares
are issued and that the Memorandum of the Company be altered
accordingly.
3. The name of the Company be changed from "Consolidated Caprock Resources
Ltd." to "Minco Mining & Metals Corporation" and that the Memorandum of
the Company be altered accordingly."
The Altered Memorandum of the Company is attached hereto as Schedule "A".
Certified a true copy this 5th day of February, 1993.
/s/ Mark A. Kurschner
------------------------------
Mark A. Kurschner
Solicitor
------------------------------
(Relationship to Company)
<PAGE> 30
SCHEDULE "A"
"COMPANY ACT"
(As Altered by Special Resolution Passed June 3rd, 1992)
ALTERED MEMORANDUM
MINCO MINING & METALS CORPORATION
"1. The name of the Company is "MINCO MINING & METALS CORPORATION"
2. The authorized capital of the Company consists of 20,000,000 common
shares without par value."
<PAGE> 1
EXHIBIT 1b
ARTICLES
OF
MINCO MINING & METALS CORPORATION
====================
TABLE OF CONTENTS
PART 1 INTERPRETATION
1.1 Definitions, Construction of Words
1.2 Definitions Same as Company Act
1.3 Interpretation Act Rules of Construction Apply
PART 2 SHARES
2.1 Member Entitled to Certificate
2.2 Replacement of Lost or Defaced Certificate
2.3 Execution of Certificates
2.4 Recognition of Trusts
PART 3 ISSUE OF SHARES
3.1 Directors Authorized
3.2 Conditions of Allotment
3.3 Commissions and Brokerage
3.4 Conditions of Issue
PART 4 SHARE REGISTERS
4.1 Register of Members, Transfers and Allotments
4.2 Branch Registers of Members
<PAGE> 2
- ii -
PART 5 TRANSFER AND TRANSMISSION OF SHARES
5.1 Transfer of Shares
5.2 Execution of Instrument of Transfer
5.3 Enquiry as to Title not Required
5.4 Submission of Instruments of Transfer
5.5 Transfer Fee
5.6 Personal Representative Recognized on Death
5.7 Death or Bankruptcy
5.8 Persons in Representative Capacity
PART 6 ALTERATION OF CAPITAL
6.1 Increase of Authorized Capital
6.2 Other Capital Alterations
6.3 Creation, Variation and Abrogation of
Special Rights and Restrictions
6.4 Consent of Class Required
6.5 Special Rights of Conversion
6.6 Class Meetings of Members
PART 7 PURCHASE AND REDEMPTION OF SHARES
7.1 Company Authorized to Purchase or Redeem its Shares
7.2 Selection of Shares to be Redeemed
7.3 Purchased or Redeemed Shares Not Voted
PART 8 BORROWING POWERS
8.1 Powers of Directors
8.2 Special Rights Attached to and Negotiability of Debt
Obligations
8.3 Register of Debentureholders
8.4 Execution of Debt Obligations
8.5 Register of Indebtedness
<PAGE> 3
- iii -
PART 9 GENERAL MEETINGS
9.1 Annual General Meetings
9.2 Waiver of Annual General Meeting
9.3 Classification of General Meetings
9.4 Calling of Meetings
9.5 Advance Notice for Election of Directors
9.6 Notice of General Meeting
9.7 Waiver or Reduction of Notice
9.8 Notice of Special Business at General Meeting
PART 10 PROCEEDINGS AT GENERAL MEETINGS
10.1 Special Business
10.2 Requirement of Quorum
10.3 Quorum
10.4 Lack of Quorum
10.5 Chairman
10.6 Alternate Chairman
10.7 Adjournments
10.8 Resolutions Need Not be Seconded
10.9 Decisions by Show of Hands or Poll
10.10 Casting Vote
10.11 Manner of Taking Poll
10.12 Retention of Ballots Cast on a Poll
10.13 Casting of Votes
10.14 Ordinary Resolution Sufficient
PART 11 VOTES OF MEMBERS
11.1 Number of Votes per Share or Member
11.2 Votes of Persons in Representative Capacity
11.3 Representative of a Corporate Member
11.4 Votes by Joint Holders
11.5 Votes by Committee for a Member
11.6 Appointment of Proxyholders
11.7 Execution of Form of Proxy
11.8 Deposit of Proxy
<PAGE> 4
- iv -
11.9 Validity of Proxy Note
11.10 Acceptance of Proxy in Substituted Form
11.11 Directors May Make Regulations for Deposit of Proxy
11.12 Death or Incapacity of Member Giving Proxy
11.13 Revocation of Proxy
PART 12 DIRECTORS
12.1 Number of Directors
12.2 Remuneration and Expenses of Directors
12.3 Qualification of Directors
PART 13 ELECTION AND REMOVAL OF DIRECTORS
13.1 Election at Annual General Meetings
13.2 Eligibility of Retiring Director
13.3 Continuance of Directors
13.4 Election of Less Than Required Number of Directors
13.5 Filling a Casual Vacancy
13.6 Additional Directors
13.7 Alternate Directors
13.8 Termination of Directorship
13.9 Removal of Directors
PART 14 POWERS AND DUTIES OF DIRECTORS
14.1 Management of Affairs and Business
14.2 Appointment of Attorney
PART 15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1 Disclosure of Conflicting Interest
15.2 Voting and Quorum re Proposed Contract
15.3 Alternate Director Conflict
15.4 Director May Hold Office or Place of Profit with Company
15.5 Director Acting in Professional Capacity
<PAGE> 5
- v -
15.6 Director Receiving Remuneration from Other Interests
PART 16 PROCEEDINGS OF DIRECTORS
16.1 Chairman and Alternate
16.2 Meetings - Procedure
16.3 Meetings by Conference Telephone
16.4 Notice of Meeting
16.5 Waiver of Notice of Meetings
16.6 Quorum
16.7 Continuing Directors May Act During Vacancy
16.8 Validity of Acts of Directors
16.9 Resolution in Writing Effective
PART 17 EXECUTIVE AND OTHER COMMITTEES
17.1 Appointment of Executive Committee
17.2 Appointment of Committees
17.3 Procedure at Meetings
PART 18 OFFICERS
18.1 President and Secretary Required
18.2 Persons Holding More Than One Office and Remuneration
18.3 Disclosure of Conflicting Interest
PART 19 INDEMNITY AND PROTECTION OF DIRECTORS,
OFFICERS AND EMPLOYEES
19.1 Indemnification of Directors
19.2 Indemnification of Officers, Employees, Agents
19.3 Indemnification Not Invalidated by Non-compliance
19.4 Company May Purchase Insurance
<PAGE> 6
- vi -
PART 20 DIVIDENDS AND RESERVES
20.1 Declaration of Dividends
20.2 Declaration of Dividend Rate
20.3 Proportionate to Number of Shares Held
20.4 Reserves
20.5 Receipts from Joint Holders
20.6 No Interest on Dividends
20.7 Payment of Dividends
20.8 Capitalization of Undistributed Surplus
PART 21 DOCUMENTS, RECORDS AND REPORTS
21.1 Documents to be Kept
21.2 Accounts to be Kept
21.3 Inspection of Accounts
21.4 Financial Statements and Reports for General Meeting
21.5 Financial Statements and Reports for Members
PART 22 NOTICES
22.1 Method of Giving Notice
22.2 Notice to Joint Holder
22.3 Notice to Personal Representative
22.4 Persons to Receive Notice
PART 23 RECORD DATES
23.1 Record Date
23.2 No Closure of Register of Members
PART 24 SEAL
24.1 Affixation of Seal to Documents
24.2 Reproduction of Seal
24.3 Official Seal for Other Jurisdictions
<PAGE> 7
- vii -
PART 25 MECHANICAL REPRODUCTION OF SIGNATURES
25.1 Instruments may be Mechanically Signed
25.2 Definition of Instruments
PART 26 PROHIBITIONS
26.1 Number of Members and No Securities to be Offered to the
Public
26.2 Restriction on Transfer of Shares
<PAGE> 8
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
OF
MINCO MINING & METALS CORPORATION
PART 1
INTERPRETATION
1.1 In these Articles, unless there is something in the subject or context
inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the directors or
sole director and includes alternate directors, if any, of the Company
for the time being.
"Company Act" means the Company Act of the Province of British Columbia
as from time to time enacted and all amendments thereto and statutory
modifications thereof and includes the regulations made pursuant
thereto.
"Seal" means the common seal of the Company.
"Month" means a calendar month.
"Registered owner" or registered holder", when used with respect to a
share in the authorized capital of the Company means the person
registered in the register of members in respect of such share.
"Personal representative" shall include executors, administrators,
trustees-in-bankruptcy and duly constituted representatives in lunacy.
Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography,
photocopy, telecopying, telexing, telegraphing and other modes of
representing, reproducing or transmitting words in a visible form.
<PAGE> 9
- 2 -
Words importing the singular include the plural and vice versa; and
words importing male persons include female persons and words
importing persons shall include corporations.
1.2 The meaning of any words or phrases defined in the Company Act shall,
if not inconsistent with the subject or context, bear the same meaning
in these Articles.
1.3 The Rules of Construction contained in the Interpretation Act shall
apply, mutatis mutandis, to the interpretation of these Articles.
PART 2
SHARES AND SHARE CERTIFICATES
2.1 Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him; provided
that, in respect of a share or shares held jointly by several persons,
the Company shall not be bound to issue more than one certificate, and
delivery of a certificate for a share to the first named of several
joint registered holders or to his duly authorized agent shall be
sufficient delivery to all; and provided further that the Company
shall not be bound to issue certificates representing redeemable
shares, if such shares are to be redeemed within one month of the date
on which they were allotted. Any share certificate may be sent through
the mail by registered prepaid mail to the member entitled thereto,
and neither the Company nor any transfer agent shall be liable for any
loss occasioned to the member owing to any such share certificate so
sent being lost in the mail or stolen.
2.2 If a share certificate
(a) is worn out or defaced, the directors shall, upon production to
them of the said certificate and upon such other terms, if any,
as they may think fit, order the said certificate to be
cancelled and shall issue a new certificate in lieu thereof;
(b) is lost, stolen or destroyed, then upon proof thereof to the
satisfaction of the directors and upon such indemnity, if any,
as the directors deem adequate being given, a new share
certificate in lieu thereof shall be issued to the person
entitled to such lost, stolen or destroyed certificate; or
<PAGE> 10
- 3 -
(c) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the
Company issue in his name two or more certificates, each
representing a specified number of shares and, in the
aggregate, representing the same number of shares as the
certificate so surrendered and, upon payment of an amount
determined from time to time by the directors, the Company
shall cancel the certificate so surrendered and issue in lieu
thereof certificates in accordance with such request.
2.3 Every share certificate shall be signed manually by at least one
officer or director of the Company, or by or on behalf of a registrar,
branch registrar, transfer agent or branch transfer agent of the
Company and any additional signatures may be printed, lithographed,
engraved or otherwise mechanically reproduced in accordance with these
Articles.
2.4 Except as required by law, statute or these Articles, no person shall
be recognized by the Company as holding any share upon any trust, and
the Company shall not be bound by or compelled in any way to recognize
(even when having notice thereof) any equitable, contingent, future or
partial interest in any share or in any fractional part of a share or
(except only as by law, statute or these Articles provided or as
ordered by a court of competent jurisdiction) any other rights in
respect of any share except an absolute right to the entirety thereof
in its registered holder.
PART 3
ISSUE OF SHARES
3.1 Subject to Article 3.2 and to any direction to the contrary contained
in a resolution passed at a general meeting authorizing any increase
or alteration of capital, the shares shall be under the control of the
directors who may, subject to the rights of the registered holders of
the shares of the Company for the time being issued, issue, allot,
sell or otherwise dispose of, and/or grant options on or otherwise
deal in, shares authorized but not outstanding at such times, to such
persons (including directors), in such manner, upon such terms and
conditions, and at such price or for such consideration, as they, in
their absolute discretion, may determine.
3.2 If the Company is, or becomes, a company which is not a reporting
company and the directors are required by the Company Act before
allotting any shares to offer them pro
<PAGE> 11
- 4 -
rata to the members, the directors shall, before allotting any shares,
comply with the applicable provisions of the Company Act.
3.3 Subject to the provisions of the Company Act, the Company or the
directors on behalf of the Company, may pay a commission or allow a
discount to any person in consideration of his subscribing or agreeing
to subscribe, whether absolutely or conditionally, for any shares,
debentures, share rights, warrants or debenture stock in the Company,
or procuring or agreeing to procure subscriptions, whether absolutely
or conditionally, for any such shares, debentures, share rights,
warrants or debenture stock, provided that, if the Company is not a
specially limited company, the rate of the commission and discount
shall not in the aggregate exceed 25 percent of the amount of the
subscription price of such shares, and if the Company is a specially
limited company, the rate of the commission and discount shall not in
the aggregate exceed 98 percent of the amount of the subscription price
of such shares, debentures, share rights, warrants or debenture stock.
The Company may also pay such brokerage as may be lawful.
3.4 No share may be issued until it is fully paid and the Company shall
have received the full consideration therefor in cash, property or past
services actually performed for the Company. The value of the property
or services for the purposes of this Article shall be the value
determined by the directors by resolution to be, in all circumstances
of the transaction, the fair market value thereof.
PART 4
SHARE REGISTERS
4.1 The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British
Columbia, all as required by the Company Act, and may combine one or
more of such registers. If the Company's capital shall consist of more
than one class of shares, a separate register of members, register of
transfers and register of allotments may be kept in respect of each
class of shares. The directors, on behalf of the Company, may appoint a
trust company to keep the register of members, register of transfers
and register of allotments or, if there is more than one class of
shares, the directors may appoint a trust company, which need not be
the same trust company, to keep the register of members, the register
of transfers and the register of allotments for each class of shares.
The directors, on behalf of the Company, may also appoint one or more
trust companies, including the trust company
<PAGE> 12
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which keeps the said registers of its shares or of a class thereof, as
transfer agent for its shares or such class thereof, as the case may
be, and the same or another trust company or companies as registrar
for its shares or such class thereof, as the case may be. The
directors may terminate the appointment of any such trust company at
any time and may appoint another trust company in its place.
4.2 Unless prohibited by the Company Act, the Company may keep or cause to
be kept one or more branch registers of members at such place or
places as the directors may from time to time determine.
PART 5
TRANSFER AND TRANSMISSION OF SHARES
5.1 Subject to the provisions of the Memorandum and of these Articles that
may be applicable, any member may transfer any of his shares by
instrument in writing executed by or on behalf of such member and
delivered to the Company or its transfer agent, the instrument of
transfer of any share of the Company shall be in the form, if any, on
the back of the Company's share certificates or in such other form as
the directors may from time to time approve. Except to the extent that
the Company Act may otherwise provide, the transferor shall be deemed
to remain the holder of the shares until the name of the transferee is
entered in the register of members or a branch register of members
thereof.
5.2 The signature of the registered holder of any shares, or of his duly
authorized attorney, upon an authorized instrument of transfer shall
constitute a complete and sufficient authority to the Company, its
directors, officers and agents to register, in the name of the
transferee as named in the instrument of transfer, the number of
shares specified therein or, if no number is specified. all the shares
of the registered holder represented by share certificates deposited
with the instrument of transfer. If no transferee is named in the
instrument of transfer, the instrument of transfer shall constitute a
complete and sufficient authority to the Company, its directors,
officers and agents to register, in the name of the person in whose
behalf any certificate for the shares to be transferred is deposited
with the Company for the purpose of having the transfer registered,
the number of shares specified in the instrument of transfer, or if no
number is specified, all the shares represented by all share
certificates deposited with the instrument of transfer.
<PAGE> 13
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5.3 Neither the Company nor any director, officer or agent thereof shall
be bound to inquire into the title of the person named in the form of
transfer as transferee, or if no person is named therein as
transferee, of the person on whose behalf the certificate is deposited
with the Company for the purpose of having the transfer registered or
be liable to any claim by such registered holder or by any
intermediate holder of the certificate or of any of the shares
represented thereby or any interest therein for registering the
transfer, and the transfer, when registered, shall confer upon the
person in whose name the shares have been registered, a valid title to
such shares.
5.4 Every instrument of transfer shall be executed by the transferor and
left at the registered office of the Company or at the office of its
transfer agent or registrar for registration together with the share
certificate for the shares to be transferred and such other evidence,
if any, as the directors or the transfer agent or registrar may
require to prove the title of the transferor or his right to transfer
the shares and the right of the transferee to have the transfer
registered. All instruments of transfer where the transfer is
registered shall be retained by the Company or its transfer agent or
registrar and any instrument of transfer where the transfer is not
registered, shall be returned to the person depositing the same
together with the share certificate which accompanied the same when
tendered for registration.
5.5 There shall be paid to the Company in respect of the registration of
any transfer, such sum, if any, as the directors may from time to time
determine.
5.6 In the case of the death of a member, the survivor, or survivors where
the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be
the only persons recognized by the Company as having any title to his
interest in the shares. Before recognizing any legal personal
representative, the directors may require him to obtain a grant of
probate or letters of administration in British Columbia.
5.7 Upon the death or bankruptcy of a member, his personal representative
or trustee in bankruptcy, although not a member, shall have the same
rights, privileges and obligations that attach to the shares formerly
held by the deceased or bankrupt member if the documents required by
the Company Act shall have been deposited at the Company's registered
office.
5.8 Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon such documents and evidence being
produced to the Company as the Company Act requires or who becomes
entitled to a share as a result of an order of
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a court of competent jurisdiction or a statute, has the right either
to be registered as a member in his representative capacity in respect
of such share or, if he is a personal representative, instead of being
registered himself, to make such transfer of the share as the deceased
or bankrupt person could have made; but the directors shall, as
regards a transfer by a personal representative or trustee in
bankruptcy, have the same right, if any, to decline or suspend
registration of a transferee as they would have in the case of a
transfer of a share by the deceased or bankrupt person before the
death or bankruptcy.
PART 6
ALTERATION OF CAPITAL
6.1 The Company may, by ordinary resolution filed with the Registrar,
amend its Memorandum to increase the authorized capital of the Company
by
(a) creating shares with par value or without par value, or both;
(b) increasing the number of shares with par value or shares
without par value, or both; or
(c) increasing the par value of a class of shares with par value,
if no shares of that class are issued.
All new shares shall be subject to the same provisions with reference
to transfers, transmissions and otherwise as the existing shares of
the Company.
6.2 The Company may, by special resolution, alter its Memorandum to
subdivide, consolidate, change from shares with par value to shares
without par value, or from shares without par value to shares with par
value, or change the designation of all or any of its shares but only
to such extent, in such manner and with such consents of members
holding a class of shares which is the subject of or affected by such
alteration as the Company Act provides.
6.3 The Company may alter its Memorandum or these Articles
(a) by special resolution, to create, define and attach special
rights or restrictions to any shares, and
<PAGE> 15
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(b) by special resolution, and by otherwise complying with any
applicable provision of its Memorandum or these Articles, to
vary or abrogate any special rights and restrictions attached
to any shares
and in each case by filing a copy of such resolution with the Registrar
but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of each
class whose right or special right is so prejudiced or interfered with
consent thereto in writing, or unless a resolution consenting thereto
is passed at a separate meeting of the holders of the shares of each
such class by a majority of three-fourths, or such greater majority as
may be specified by the special rights attached to the class of shares,
of the issued shares of such class.
6.4 Notwithstanding such consent in writing or such resolution, no such
alteration shall be valid as to any part of the issued shares of any
class unless the holders of the remainder of the issued shares of such
class, either all consent thereto in writing or consent thereto by a
resolution passed by the votes of members holding three-fourths of the
rest of such remaining shares.
6.5 If the Company is or becomes a reporting company, no resolution to
create, vary or abrogate any special right of conversion attaching to
any class of shares shall be submitted to any meeting of members
unless, if so required by the Company Act, the Superintendent of
Brokers shall have consented to the resolution.
6.6 Unless these Articles otherwise provide, the provisions of these
Articles relating to general meetings shall apply with the necessary
changes, and so far as they are applicable, to a class meeting of
members holding a particular class of shares but the quorum at a class
meeting shall be one person holding or representing by proxy one-third
of the shares affected.
PART 7
PURCHASE AND REDEMPTION OF SHARES
7.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the directors and in
compliance with the Company Act, purchase any of its shares at the
price and upon the terms specified in such resolution or redeem any
class of its shares in accordance with the special rights and
restrictions attaching
<PAGE> 16
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thereto. No such purchase or redemption shall be made if the Company is
insolvent at the time of the proposed purchase or redemption, or if the
proposed purchase or redemption would render the Company insolvent.
7.2 If the Company proposes, at its option to redeem some but not all of the
shares of any class, the directors may, subject to the special rights
and restrictions attached to such class of shares, decide the manner in
which the shares to be redeemed shall be selected.
7.3 Subject to the provisions of the Company Act, any shares purchased or
redeemed by the Company may be sold or issued by it, but while such
shares are held by the Company, it shall not exercise any vote in
respect of such shares.
PART 8
BORROWING POWERS
8.1 The directors may from time to time on behalf of the Company
(a) borrow money in such manner and amount, on such security, from
such sources and upon such terms and conditions as they think
fit;
(b) issue bonds, debentures and other debt obligations, either
outright or as security for any liability or obligation of the
Company, or any other person; and
(c) mortgage, charge, whether by way of specific or floating charge,
or give other security on the undertaking, or on the whole or any
part of the property and assets of the Company (both present and
future).
8.2 Any bonds, debentures or other debt obligations of the Company may be
issued at a discount, premium or otherwise, and with any special
privileges as to redemption, surrender, drawings, allotment of or
conversion into or exchange for shares or other securities, attending
and voting at general meetings of the Company, appointment of directors
and otherwise, and may, by their terms, be assignable free from any
equities between the Company and the person to whom they were issued or
any subsequent holder thereof, all as the directors may determine.
<PAGE> 17
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8.3 The Company shall keep or cause to be kept within the Province of
British Columbia, in accordance with the Company Act, a register of its
debentures and a register of debentureholders, which registers may be
combined, and subject to the provisions of the Company Act, may keep or
cause to be kept, one or more branch registers of its debentureholders
at such place or places as the directors may from time to time
determine and the directors may, by resolution, regulation or
otherwise, make such provisions as they think fit respecting the
keeping of such branch registers.
8.4 Every bond, debenture or other debt obligation of the Company shall be
signed manually by at least one director or officer of the Company or
by or on behalf of a trustee, registrar, branch registrar, transfer
agent or branch transfer agent for the bond, debenture or other debt
obligation appointed by the Company or under any instrument under which
the bond, debenture or other debt obligation is issued and any
additional signatures may be printed or otherwise mechanically
reproduced thereon and, in such event, a bond, debenture or other debt
obligation so signed is as valid as if signed manually notwithstanding
that any person whose signature is so printed or mechanically
reproduced shall have ceased to hold the office that is stated on such
bond, debenture or other debt obligation to be held at the date of the
issue thereof.
8.5 The Company shall keep or cause to be kept a register of its
indebtedness of every director or officer of the Company or any
associate of any of them in accordance with the provisions of the
Company Act.
PART 9
GENERAL MEETINGS
9.1 Subject to any extensions of time permitted pursuant to the Company
Act, the first annual general meeting of the Company shall be held
within fifteen months from the date of incorporation and thereafter, an
annual general meeting shall be held once in every calendar year at
such time (being not more than thirteen months after the holding of the
last annual general meeting) and place as may be determined by the
directors.
9.2 If the Company is, or becomes a company which is not a reporting
company, and all the members entitled to attend and vote at an annual
general meeting consent in writing to all the business which is
required or desired to be transacted at the meeting, the meeting need
not be held.
<PAGE> 18
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9.3 All general meetings, other than annual general meetings, are herein
referred to as and may be called extraordinary general meetings.
9.4 The directors may, whenever they think fit, convene an extraordinary
general meeting. An extraordinary general meeting, if requisitioned in
accordance with the Company Act, shall be convened by the directors or,
if not convened by the directors, may be convened by the
requisitionists as provided in the Company Act.
9.5 If the Company is or becomes a reporting company, advance notice of any
general meeting at which directors are to be elected shall be published
in the manner required by the Company Act.
9.6 A notice convening a general meeting specifying the place, the day and
the hour of the meeting, and in the case of special business, the
general nature of that business, shall be given as provided in the
Company Act and in the manner hereinafter in these Articles mentioned,
or in such other manner (if any) as may be prescribed by ordinary
resolution, whether previous notice thereof has been given or not, to
such persons as are entitled by law or under these Articles to receive
such notice from the Company. Accidental omission to give notice of a
meeting to, or the non-receipt of notice of a meeting by any member
shall not invalidate the proceedings at that meeting.
9.7 All the members of the Company entitled to attend and vote at a general
meeting may, by unanimous consent in writing given before, during or
after the meeting, or if they are present at the meeting, by a
unanimous vote, waive or reduce the period of notice of such meeting
and an entry in the minute book of such waiver or reduction shall be
sufficient evidence of the due convening of the meeting.
9.8 Except as otherwise provided by the Company Act, where any special
business at a general meeting includes considering, approving,
ratifying, adopting or authorizing any document or the execution
thereof or the giving of effect thereto, the notice convening the
meeting shall, with respect to such document, be sufficient if it
states that a copy of the document or proposed document is or will be
available for inspection by members at the registered office or records
office of the Company or at some other place in British Columbia
designated in the notice during usual business hours up to the date of
such general meeting.
<PAGE> 19
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PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1 All business shall be deemed special business which is transacted at
(a) an extraordinary general meeting, other than the conduct of and
voting at such meeting; and
(b) an annual general meeting, with the exception of the conduct of
and voting at such meeting, the consideration of the financial
statements and the respective reports of the directors and
auditors, fixing or changing the number of directors, approving
a motion to elect two or more directors by a single resolution,
the election of directors, the appointment of the auditor, the
fixing of the remuneration of the auditor, and such other
business as by these Articles or the Company Act may be
transacted at a general meeting without prior notice thereof
being given to the members or any business which is brought
under consideration by the report of the directors.
10.2 No business, other than election of the chairman or the adjournment of
the meeting shall be transacted at any general meeting unless a quorum
of members entitled to attend and vote is present at the commencement of
the meeting, but the quorum need not be present throughout the meeting.
10.3 Save as herein otherwise provided, a quorum shall be two members or one
or more proxyholder representing two members, or one member and a
proxyholder representing another member. The directors, the Secretary,
or in his absence, an Assistant-Secretary, and the solicitor for the
Company, shall be entitled to attend at any general meeting but no such
person shall be counted in the quorum or be entitled to vote at any
general meeting unless he shall be a member or proxyholder entitled to
vote thereat.
10.4 If within half an hour from the time appointed for a general meeting, a
quorum is not present, the meeting, if convened upon requisition by the
members shall be dissolved. In any other case, it shall stand adjourned
to the same day in the next week, at the same time and place, and if at
the adjourned meeting a quorum is not present within half an hour from
the time appointed for the meeting, the member or members present or
being represented by proxy shall be a quorum.
<PAGE> 20
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10.5 The Chairman of the Board, if any, or in his absence, the President of
the Company, or in his absence, a Vice-President of the Company, if
any, shall be entitled to preside as chairman at every general meeting
of the Company.
10.6 If at any general meeting neither the Chairman of the Board nor the
President or a Vice- President is present within fifteen minutes after
the time appointed for holding the meeting or is unwilling to act as
chairman, the directors present shall choose one of their number to be
chairman, or if all the directors present decline to take the chair or
shall fail to do so, or if no director be present, the members present
shall choose some other person in attendance, who need not be a member,
to be chairman.
10.7 The chairman may and shall, if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting other than the business
left unfinished at the meeting from which the adjournment took place.
When a meeting is adjourned for thirty days or more, notice, but not
advance notice of the adjourned meeting shall be given as in the case
of an original meeting. Save as aforesaid, it shall not be necessary to
give any notice of an adjourned meeting or of the business to be
transacted at an adjourned meeting.
10.8 No motion proposed at a general meeting need be seconded and the
chairman may propose or second a motion.
10.9 Subject to the provisions of the Company Act, at any general meeting a
resolution put to the vote of the meeting shall be decided by a show of
hands, unless (before or on the declaration of the result of the show
of hands) a poll is directed by the chairman or demanded by at least
one member entitled to vote who is present in person or by proxy. The
chairman shall declare to the meeting, the decision on every question
in accordance with the result of the show of hands or the poll, and
such decision shall be entered in the book of proceedings of the
Company. A declaration by the chairman that a resolution has been
carried, or carried unanimously, or by a particular majority, or lost
or not carried by a particular majority and an entry to that effect in
the book of the proceedings of the Company shall be conclusive evidence
of the fact, without proof of the number or proportion of the votes
recorded in favour of or against that resolution.
10.10 In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes
place or at which the poll is demanded shall be entitled to a casting
vote in addition to the vote or votes to which he may be entitled as a
member or proxyholder and this provision shall apply notwithstanding
the chairman is interested in the subject matter of the resolution.
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10.11 No poll may be demanded on the election of the chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll
demanded on any other question shall be taken as soon as, in the
opinion of the chairman, is reasonably convenient, but in no event
later than seven days after the meeting and at such time and place and
in such manner as the chairman of the meeting directs. The result of
the poll shall be deemed to be the resolution of and passed at the
meeting upon which the poll was demanded. Any business other than that
upon which the poll has been demanded may be proceeded with pending the
taking of the poll. A demand for a poll may be withdrawn. In any
dispute as to the admission or rejection of a vote, the decision of the
chairman made in good faith shall be final and conclusive.
10.12 Every ballot cast upon a poll and every proxy appointing a proxyholder
who casts a ballot upon a poll shall be retained by the Secretary for
such period and subject to such inspection as the Company Act may
provide.
10.13 On a poll a person entitled to cast more than one vote need not, if he
votes, use all his votes or cast all the votes he uses in the same way.
10.14 Unless the Company Act, the Memorandum or these Articles otherwise
provide, any action to be taken by a resolution of the members may be
taken by an ordinary resolution.
PART 11
VOTES OF MEMBERS
11.1 Subject to any special voting rights or restrictions attaching to any
class of shares and the restrictions on joint registered holders of
shares
(a) on a show of hands
(1) every member who is present in person and entitled to
vote shall have one vote, and
(2) a proxyholder duly appointed by a holder of a share who
would have been entitled to vote shall have one vote,
<PAGE> 22
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(b) on a poll, every member shall have one vote for each share of
which he is the registered holder and may exercise such vote
either in person or by proxyholder.
11.2 Any person who is not registered as a member but is entitled to vote at
any general meeting in respect of a share, may vote the share in the
same manner as if he were a member; but unless the Directors have
previously admitted his right to vote at that meeting in respect of the
share, he shall satisfy the Directors of his right to vote the share
before the time for holding the meeting or adjourned meeting, as the
case may be, at which he proposes to vote.
11.3 Any corporation not being a subsidiary which is a member of the Company
may, by a document signed by two directors, or two officers, or any one
director and one officer, or any one member of an Executive or other
committee, or by resolution of its directors or other governing body,
authorize such person as it thinks fit to act as its representative at
any general meeting or class meeting. The person so authorized shall be
entitled to exercise in respect of and at such meeting, the same powers
on behalf of the corporation which he represents as that corporation
could exercise if it were an individual member of the Company
personally present, including without limitation, the right, unless
restricted by such resolution, to appoint a proxyholder to represent
such corporation, and shall be counted for the purpose of forming a
quorum if present at the meeting. Evidence of the appointment of any
such representative may be sent to the Company by written instrument.
Notwithstanding the foregoing, a corporation being a member may appoint
a proxyholder.
11.4 In the case of joint registered holders of a share, the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall
be accepted to the exclusion of the votes of the other joint registered
holders; and for this purpose, seniority shall be determined by the
order in which the names stand in the register of members. Several
legal personal representatives of a deceased member whose shares are
registered in his sole name shall, for the purpose of this Article, be
deemed joint registered holders.
11.5 A member of unsound mind entitled to attend and vote in respect of whom
an order has been made by any court having jurisdiction, may vote,
whether on a show of hands or on a poll, by his committee, curator
bonis or other person in the nature of a committee or curator bonis
appointed by that court, and any such committee, curator bonis or other
person may appoint a proxyholder.
11.6 A member holding more than one share in respect of which he is entitled
to vote shall be entitled to appoint one or more (but not more than
five) proxyholders to attend, act
<PAGE> 23
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and vote for him on the same occasion. If such member should appoint
more than one proxyholder for the same occasion, he shall specify the
number of shares each proxyholder shall be entitled to vote. A member
may also appoint one or more alternate proxyholders to act in the place
and stead of an absent proxyholder.
11.7 A form of proxy shall be in writing executed by the appointor or his
attorney authorized in writing, or if the appointor is a corporation,
by a duly authorized officer or attorney of such corporation.
11.8 A proxy shall be deposited in the manner hereinafter specified. A
proxyholder need not be a member of the Company.
11.9 Subject as herein provided, a proxy shall be deposited at the
registered office of the Company or at such other place as is specified
for that purpose in the notice convening the meeting not less than 48
hours (excluding Saturdays, Sundays and holidays) before the time for
holding the meeting or such other time and place as is specified in the
notice calling the meeting.
11.10 The chairman, in his absolute and unfettered discretion may, but is not
bound to accept a proxy in substituted form and in his absolute and
unfettered discretion may, but is not bound to accept in substituted
form, evidence of authority by a corporation to vote or a power of
attorney or evidence of other authority under which a proxy is
executed. The chairman may, in his unfettered discretion waive the
requirement to deposit evidence of the authority under which a proxy or
authority by a corporation to vote is executed. In this Article 11.10,
"substituted form" shall mean a document produced by means of
photocopy, telegraph, telex, telecopy or any other means of
transmission or production which creates a legibly recorded message or
copy of a document.
11.11 In addition to any other method of depositing proxies provided for in
these Articles, the directors may, from time to time, by resolution
make regulations relating to the depositing of proxies at any place or
places and fixing the time or times for depositing the proxies not
exceeding 48 hours (excluding Saturdays, Sundays and holidays)
preceding the meeting or adjourned meeting specified in the notice
calling a meeting of members and providing for particulars of such
proxies to be sent to the Company or any agent of the Company in
writing so as to arrive before the commencement of the meeting or
adjourned meeting at the office of the Company or any agent of the
Company appointed for the purpose of receiving such particulars and
providing that proxies so deposited as required by this Part 11 and
votes given in accordance with such regulations shall be valid and
counted.
<PAGE> 24
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11.12 A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving
the proxy or the authority under which the form of proxy was executed or
the transfer of the share in respect of which the proxy is given,
provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered office
of the Company or by the chairman of the meeting or adjourned meeting
for which the proxy was given before the vote is taken.
11.13 Every proxy may be revoked by instrument in writing
(a) executed by the member giving the same or by his attorney
authorized in writing or, where the member is a corporation, by
a duly authorized officer or attorney of the corporation; and
(b) delivered either to the registered office of the Company at any
time up to and including the last business day preceding the day
of the meeting or any adjournment thereof at which the proxy is
to be used, or to the chairman of the meeting on the day of the
meeting or any adjournment thereof before any vote in respect of
which the proxy is to be used shall have been taken
or in any other manner provided by law.
PART 12
DIRECTORS
12.1 The subscribers to the Memorandum of the Company are the first
directors. The directors to succeed the first directors may be
appointed in writing by a majority of the subscribers to the Memorandum
or at a meeting of the subscribers, or if not so appointed, they shall
be elected by the members entitled to vote on the election of directors
and the number of directors shall be the same as the number of
directors so appointed or elected. The number of directors, excluding
additional directors, may be fixed or changed from time to time by
ordinary resolution, whether previous notice thereof has been given or
not, but notwithstanding anything contained in these Articles, the
number of directors shall never be less than one or, if the Company is
or becomes a reporting company, less than three.
<PAGE> 25
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12.2 The remuneration of the directors, as such, may from time to time be
determined by the directors or, if the directors shall so decide, by the
members. Such remuneration may be in addition to any salary or other
remuneration paid to any officer or employee of the Company as such who
is also a director. The directors shall be paid such reasonable
travelling, hotel and other expenses as they incur in and about the
business of the Company and if any director shall perform any
professional or other services for the Company that in the opinion of
the directors are outside the ordinary duties of a director or shall
otherwise be specially occupied in or about the Company's business, he
may be paid a remuneration to be fixed by the Board or, at the option of
such director, by the Company in general meeting, and such remuneration
may be either in addition to or in substitution for any other
remuneration that he may be entitled to receive. The directors, on
behalf of the Company, unless otherwise determined by ordinary
resolution, may pay a gratuity, a pension or an allowance on retirement
to any director who has held any salaried office or place of profit with
the Company or to his spouse or dependents and may make contributions to
any fund and pay premiums for the purchase or provision of any such
gratuity, pension or allowance.
12.3 A director shall not be required to hold a share in the capital of the
Company as qualification for his office, but shall be qualified as
required by the Company Act to become or act as a director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1 At each annual general meeting of the Company, all of the directors
shall retire and the members shall elect a Board of Directors consisting
of the number of directors for the time being fixed pursuant to these
Articles. If the Company is or becomes a company that is not a reporting
company and the business to be transacted at any annual general meeting
is consented to in writing by all of the members who are entitled to
attend and vote thereat, such annual general meeting shall be deemed,
for the purpose of this Part 13, to have been held on such written
consent becoming effective.
13.2 A retiring director shall be eligible for re-election.
13.3 When the Company fails to hold an annual general meeting in accordance
with the Company Act, the directors then in office shall be deemed to
have been elected or
<PAGE> 26
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appointed as directors on the last day on which the annual general
meeting could have been held pursuant to these Articles and they may
hold office until other directors are appointed or elected or until
the day on which the next annual general meeting is held.
13.4 If at any general meeting at which there should be an election of
directors, the places of the retiring directors are not filled by such
election, such retiring directors who are not re-elected as may be
requested by the newly-elected directors shall, if willing to do so,
continue in office to complete the number of directors for the time
being fixed pursuant to these Articles until further new directors are
elected at a general meeting convened for the purpose. If any such
election or continuance of directors does not result in the election
or continuance of the number of directors for the time being fixed
pursuant to the Articles, such number shall be fixed at the number of
directors actually elected or continued in office.
13.5 Any casual vacancy occurring in the Board of Directors may be filled
by the remaining directors or director.
13.6 Between successive annual general meetings, the directors shall have
power to appoint one or more additional directors but not more than
one-third of the number of directors fixed pursuant to these Articles
and in effect at the last general meeting at which directors were
elected. Any director so appointed shall hold office only until the
next following annual general meeting of the Company, but shall be
eligible for election at such meeting and so long as he is an
additional director, the number of directors shall be increased
accordingly.
13.7 Any director may, by instrument in writing delivered to the Company,
appoint any person to be his alternate to act in his place at meetings
of the directors at which he is not present unless the directors shall
have reasonably disapproved the appointment of such person as an
alternate director and shall have given notice to that effect to the
director appointing the alternate director within a reasonable time
after delivery of such instrument to the Company. Every such alternate
shall be entitled to notice of the meetings of the directors and to
attend and vote as a director at a meeting at which the person
appointing him is not personally present, and if he is a director, to
have a separate vote on behalf of the director he is representing in
addition to his own vote. A person may be appointed as an alternate
for more than one director and shall have a separate vote for each
director so represented. A director may, at any time, by instrument in
writing delivered to the Company, revoke the appointment of an
alternate appointed by him. The remuneration payable to such alternate
shall be payable out of the remuneration of the director appointing
him.
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13.8 The office of director shall be vacated if the director:
(a) resigns his office by notice in writing delivered to the
registered office of the Company; or
(b) is convicted of an indictable offence and the other directors
shall have resolved to remove him; or
(c) ceases to be qualified as a director pursuant to the Company
Act.
13.9 The Company may, by special resolution, remove any director before the
expiration of his period of office, and may, by an ordinary resolution,
appoint another person in his stead.
PART 14
POWERS AND DUTIES OF DIRECTORS
14.1 The directors shall manage or supervise the management of the affairs
and business of the Company and shall have authority to exercise all
such powers of the Company as are not, by the Company Act or by the
Memorandum or these Articles required to be exercised by the Company in
general meeting.
14.2 The directors may, from time to time, by power of attorney or other
instrument under seal, appoint any person to be the attorney of the
Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the
directors under these Articles and excepting the powers of the directors
relating to the constitution of the Board and of any of its committees
and the appointment or removal of officers and the power to declare
dividends) and for such period, with such remuneration, and subject to
such conditions as the directors may think fit, and any such appointment
may be made in favour of any of the directors or any of the members of
the Company, or in favour of any corporation, or of any of the members,
directors, nominees or managers of any corporation, firm or joint
venture and any such power of attorney may contain such provisions for
the protection or convenience of persons dealing with such attorney as
the directors think fit. Any such attorney may be authorized by the
directors to sub-delegate all or any of the powers, authorities and
discretions for the time being vested in him.
<PAGE> 28
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PART 15
DISCLOSURE OF INTEREST OF DIRECTORS
15.1 A director who is, in any way, directly or indirectly interested in an
existing or proposed contract or transaction with the Company, or who
holds any office or possesses any property whereby, directly or
indirectly, a duty or interest might be created to conflict with his
duty or interest as a director, shall declare the nature and extent of
his interest in such contract or transaction or the conflict or
potential conflict with his duty and interest as a director, as the
case may be, in accordance with the provisions of the Company Act.
15.2 A director shall not vote in respect of any such contract or
transaction with the Company in which he is interested and if he shall
do so, his vote shall not be counted, but he shall be counted in the
quorum present at the meeting at which such vote is taken. Subject to
the provisions of the Company Act, the foregoing prohibitions shall not
apply to:
(i) any such contract or transaction relating to a loan to the
Company, which a director or a specified corporation or a
specific firm in which he has an interest has guaranteed or
joined in guaranteeing the repayment of the loan or any part of
the loan;
(ii) any contract or transaction made or to be made with, or for the
benefit of a holding corporation or a subsidiary corporation of
which a director is a director;
(iii) any contract by a director to subscribe for or underwrite
shares or debentures to be issued by the Company or a
subsidiary of the Company, or any contract, arrangement or
transaction in which a director is, directly or indirectly
interested if all the other directors are also, directly or
indirectly interested in the contract, arrangement or
transaction;
(iv) determining the remuneration of the directors;
(v) purchasing and maintaining insurance to cover directors against
liability incurred by them as directors; or
(vi) the indemnification of any director by the Company.
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These exceptions may from time to time be suspended or amended to any
extent approved by the Company at a general meeting and as permitted by
the Company Act, either generally or in respect of any particular
contract or transaction for any particular period.
15.3 The interest of a director in any matter in Articles 15.1, 15.2 or
otherwise shall not affect such director's alternate director and such
alternate director may be counted in a quorum and may vote upon such
matter notwithstanding disqualification of the director, nor shall a
disqualification of an alternate director affect the ability of a
director to be counted in a quorum or to vote on a matter in which such
director's alternate director shall be disqualified.
15.4 A director may hold any office or place of profit with the Company
(other than the office of auditor of the Company) in conjunction with
his office of director for such period and on such terms (as to
remuneration or otherwise) as the directors may determine and no
director or intended director shall be disqualified by his office from
contracting with the Company, either with regard to his tenure of any
such other office or place of profit, or as vendor, purchaser or
otherwise, and, subject to compliance with the provisions of the
Company Act, no contract or transaction entered into by or on behalf of
the Company in which a director is in any way interested shall be
liable to be voided by reason thereof.
15.5 Subject to compliance with the provisions of the Company Act, a
Director or his firm may act in a professional capacity for the Company
(except as auditor for the Company) and he or his firm shall be
entitled to remuneration for professional services as if he were not a
director.
15.6 A director may be or become a director or other officer or employee of,
or otherwise interested in any corporation or firm in which the Company
may be interested as a shareholder or otherwise, and, subject to
compliance with the provisions of the Company Act, such director shall
not be accountable to the Company for any remuneration or other
benefits received by him as a director, officer or employee of, or from
his interest in such other corporation or firm prior to the Company in
general meeting directing otherwise.
<PAGE> 30
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PART 16
PROCEEDINGS OF DIRECTORS
16.1 The Chairman of the Board, if any, or in his absence, the President,
shall preside as chairman at every meeting of the directors, or if there
is no Chairman of the Board or neither the Chairman of the Board nor the
President is present within fifteen minutes of the time appointed for
holding the meeting or is unwilling to act as chairman, or if the
Chairman of the Board, if any, and the President have advised the
Secretary that they will not be present at the meeting, the directors
present shall choose one of their number to be chairman of the meeting.
16.2 The directors may meet together for the dispatch of business, adjourn
and otherwise regulate their meetings as they think fit. Questions
arising at any meeting shall be decided by a majority of votes. In the
case of an equality of votes, the chairman shall not have a second or
casting vote. Meetings of the Board held at regular intervals may be
held at such place, at such time and upon such notice (if any) as the
Board may by resolution from time to time determine.
16.3 One or more directors, or all directors, may participate in a meeting of
the Board or of any committee of the directors by means of conference
telephones or other communication facilities by means of which the
directors participating in the meeting can hear each other provided that
a majority of such directors agree to such participation. A director
participating in a meeting in accordance with this Article shall be
deemed to be present at the meeting and to have so agreed and shall be
counted in the quorum therefor and be entitled to speak and vote
thereat.
16.4 A director may, and the Secretary or an Assistant Secretary, upon
request of a director, shall call a meeting of the Board at any time.
Reasonable notice of such meeting specifying the place, day and hour of
such meeting shall be given by mail, postage prepaid, addressed to each
of the directors and alternate directors at his address as it appears on
the books of the Company or by leaving it at his usual business or
residential address, or by telephone, telegram, telex or any method of
transmitting legibly recorded message. It shall not be necessary to give
notice of a meeting of directors to any director or alternate director
if such meeting is to be held immediately following a general meeting at
which such director shall have been elected or is the meeting of
directors at which such director is appointed.
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16.5 Any director of the Company may file with the Secretary, a document
executed by him, waiving notice of any past, present or future meetings
of the directors being or required to have been sent to him and may, at
any time, withdraw such waiver with respect to meetings held
thereafter. After filing such waiver with respect to future meetings,
until such notice is withdrawn, no notice need be given to such
director, and unless the director otherwise requires in writing to the
Secretary, to his alternate director, of any meeting of directors and
all meetings of the directors so held shall be deemed not to be
improperly called or constituted by reason of notice not having been
given to such director or alternate director.
16.6 The quorum necessary for the transaction of the business of the
directors may be fixed by the directors and if not so fixed shall be a
majority of the directors or, if the number of directors is fixed at
one, shall be one director.
16.7 The continuing directors may, notwithstanding any vacancy in their
body, but if and so long as their number is reduced below the number
fixed pursuant to these Articles as the necessary quorum of directors,
act only for the purpose of increasing the number of directors to that
number, or of summoning a general meeting of the Company, but for no
other purpose.
16.8 Subject to the provisions of the Company Act, all acts done by any
meeting of the directors or of a committee of directors, or by any
person acting as a director, shall, notwithstanding that it be
afterwards discovered that there was some defect in the qualification,
election or appointment of any of such directors or the members of such
committee or persons acting aforesaid, or that they or any of them were
disqualified, be as valid as if every such person had been duly elected
or appointed and was qualified to be a director.
16.9 A resolution consented to in writing by all of the directors or
alternate directors shall be as valid and effectual as if it had been
passed at a meeting of the directors duly called and held. Such
resolution may be in two or more counterparts which together shall be
deemed to constitute one resolution in writing. Such resolution shall
be filed with the minutes of the proceedings of the directors and shall
be effective on the date stated thereon or on the latest day stated on
any counterpart. A resolution may be consented to by a director or
alternate director who has an interest in the subject matter of the
resolution provided that he has otherwise complied with the provisions
of these Articles and the Company Act.
<PAGE> 32
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PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1 The directors may, by resolution, create and appoint an Executive
Committee to consist of such member or members of their body as they
think fit, which Committee shall have, and may exercise during the
intervals between the meetings of the Board, all the powers vested in
the Board except the power to fill vacancies on the Board, the power to
change the membership of or fill vacancies in said Committee or any
other committee of the Board, and such other powers, if any, as may be
specified in the resolution. The said Committee shall keep regular
minutes of its transactions and shall cause them to be recorded in the
books for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time
require. The Board shall have the power at any time to revoke or
override the authority given to or acts done by the Executive Committee
except as to the acts done before such revocation or overriding and to
terminate the appointment or change the membership of such Committee and
to fill vacancies on it. The Executive Committee may make rules for the
conduct of its business and may appoint such assistants as it may deem
necessary. A majority of the members of the said Committee shall
constitute a quorum thereof.
17.2 The directors may, by resolution, create and appoint one or more
committees consisting of such member or members of their body as they
think fit and may delegate to any such committee, such powers of the
Board as the Board may designate or prescribe (except the power to fill
vacancies in any committee of the Board and the power to appoint or
remove officers appointed by the Board) subject to such conditions as
may be prescribed in such resolution, and all committees so appointed
shall keep regular minutes of their transactions and shall cause them to
be recorded in books kept for that purpose, and shall report same to the
Board of Directors at such times as the Board of Directors may from time
to time require. The directors shall also have power at any time to
revoke or override any authority given to or acts to be done by any such
committees except as to acts done before such revocation or overriding
and to terminate the appointment or change the membership of a committee
and to fill vacancies in it. Committees may make rules for the conduct
of their business and may appoint such assistants as they may deem
necessary. A majority of the members of a committee shall constitute a
quorum thereof.
17.3 The Executive Committee and any other committee may meet and adjourn as
it thinks proper. Questions arising at any meeting shall be determined
by a majority of votes of the members of the committee present, and in
case of an equality of votes, the chairman
<PAGE> 33
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shall not have a second or casting vote. A resolution approved in
writing by all the members of the Executive Committee or any other
committee shall be as valid and effective as it if had been passed at a
meeting of such committee duly called and constituted. Such resolution
may be in two or more counterparts which together shall be deemed to
constitute one resolution in writing. Such resolution shall be filed
with the minutes of the proceedings of the committee and shall be
effective on the date stated thereon or on the latest date stated in
any counterpart.
PART 18
OFFICERS
18.1 The directors shall, from time to time, appoint a President and a
Secretary and such other officers, if any, as the directors shall
determine and the directors may, at any time, terminate any such
appointment. No officer shall be appointed unless he is qualified in
accordance with the provisions of the Company Act.
18.2 One person may hold more than one of such offices except that the
offices of President and Secretary must be held by different persons
unless the Company has only one member. Any person appointed as the
Chairman of the Board, the President or the Managing Director shall be
a director. The other officers need not be directors. The remuneration
of the officers of the Company as such and the terms and conditions of
their tenure of office or employment shall, from time to time, be
determined by the directors; such remuneration may be by way of salary,
fees, wages, commission or participation in profits or any other means
or all of these modes and an officer may, in addition to such
remuneration, be entitled to receive, after he ceases to hold such
office or leaves the employment of the Company, a pension or gratuity.
The directors may decide what functions and duties each officer shall
perform and may entrust to and confer upon him any of the powers
exercisable by them upon such terms and conditions and with such
restrictions as they think fit and may, from time to time, revoke,
withdraw, alter or vary all or any of such functions, duties and
powers. The Secretary shall, inter alia, perform the functions of the
Secretary specified in the Company Act.
18.3 Every officer of the Company who holds any office or possesses any
property whereby, whether directly or indirectly, duties or interests
might be created in conflict with his duties or interests as an officer
of the Company shall, in writing, disclose to the President the fact
and the nature, character and extent of the conflict.
<PAGE> 34
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PART 19
INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Subject to the provisions of the Company Act, the directors shall cause
the Company to indemnify a director or former director of the Company and
the directors may cause the Company to indemnify a director or former
director of a corporation of which the Company is or was a shareholder
and the heirs and personal representatives of any such person against all
costs, charges and expenses, including any amount paid to settle an
action or satisfy a judgment, actually and reasonably incurred by him or
them including an amount paid to settle an action or satisfy a judgment
in a civil, criminal or administrative action or proceeding to which he
is or they are made a party by reason of his being or having been a
director of the Company or a director of such corporation, including any
action brought by the Company or any such corporation. Each director of
the Company, on being elected or appointed, shall be deemed to have
contracted with the Company on the terms of the foregoing indemnity.
19.2 Subject to the provisions of the Company Act, the directors may cause the
Company to indemnify any officer, employee or agent of the Company or of
a corporation of which the Company is or was a shareholder
(notwithstanding that he is also a director) and his heirs and personal
representatives against all costs, charges and expenses whatsoever
incurred by him or them and resulting from his acting as an officer,
employee or agent of the Company or such corporation. In addition, the
Company shall indemnify the Secretary or an Assistant Secretary of the
Company (if he shall not be a full time employee of the Company and
notwithstanding that he is also a director) and his respective heirs and
legal representatives against all costs, charges and expenses whatsoever
incurred by him or them and arising out of the functions assigned to the
Secretary by the Company Act or these Articles and each such Secretary
and Assistant Secretary shall, on being appointed, be deemed to have
contracted with the Company on the terms of the foregoing indemnity.
19.3 The failure of a director or officer of the Company to comply with the
provisions of the Company Act or of the Memorandum or these Articles
shall not invalidate any indemnity to which he is entitled under this
Part.
19.4 The directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was serving as a director,
officer, employee or agent of the
<PAGE> 35
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Company, or as a director, officer, employee or agent of any
corporation of which the Company is or was a shareholder and his heirs
or personal representatives against any liability incurred by him as
such director, officer, employee or agent.
PART 20
DIVIDENDS AND RESERVE
20.1 The directors may from time to time declare and authorize payment of
such dividends, if any, as they may deem advisable and need not give
notice of such declaration to any member. No dividend shall be paid
otherwise than out of funds and/or assets properly available for the
payment of dividends and a declaration by the directors as to the
amount of such funds or assets available for dividends shall be
conclusive. The Company may pay any such dividend wholly or in part by
the distribution of specific assets and in particular, by paid-up
shares, bonds, debentures or other securities of the Company or any
other corporation or in any one or more such ways as may be authorized
by the Company or the Directors and where any difficulty arises with
regard to such a distribution, the directors may settle the same as
they think expedient, and in particular, may fix the value for
distribution of such specific assets or any part thereof, and may
determine that cash payments in substitution for all or any part of the
specific assets to which any members are entitled shall be made to any
members on the basis of the value so fixed in order to adjust the
rights of all parties and may vest any such specific assets in trustees
for the persons entitled to the dividend as may seem expedient to the
directors.
20.2 Any dividend declared on shares of any class by the directors may be
made payable on such date as is fixed by the directors.
20.3 Subject to the rights of members (if any) holding shares with special
rights as to dividends, all dividends on shares of any class shall be
declared and paid according to the number of shares held.
20.4 The directors may, before declaring any dividend, set aside out of the
funds properly available for the payment of dividends, such sums as
they think proper as a reserve or reserves, which shall, at the
discretion of the directors, be applicable for meeting contingencies,
or for equalizing dividends, or for any other purpose to which such
funds of the Company may be properly applied, and sending such
application may, at the like discretion, either be employed in the
business of the Company or be invested in such
<PAGE> 36
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investments as the directors may from time to time think fit. The
directors may also, without placing the same in reserve, carry forward
such funds which they think prudent not to divide.
20.5 If several persons are registered as joint holders of any share, any
one of them may give an effective receipt for any dividend, bonuses or
other monies payable in respect of the share.
20.6 No dividend shall bear interest against the Company. Where the dividend
to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such
payment shall be deemed to be payment in full.
20.7 Any dividend, bonuses or other monies payable in cash in respect of
shares may be paid by cheque or warrant sent through the post, directed
to the registered address of the holder, or in the case of joint
holders, to the registered address of that one of the joint holders who
is first named on the register, or to such person and to such address
as the holder or joint holders may direct in writing. Every such cheque
or warrant shall be made payable to the order of the person to whom it
is sent. The mailing of such cheque or warrant shall, to the extent the
sum represented thereby (plus the amount of any tax required by law to
be deducted) discharge all liability for the dividend, unless such
cheque or warrant shall not be paid on presentation or the amount of
tax so deducted shall not be paid to the appropriate taxing authority.
20.8 Notwithstanding anything contained in these Articles, the directors
may, from time to time, capitalize any undistributed surplus of the
Company on hand and may, from time to time, issue as fully paid and non
assessable, any unissued shares, or any bonds, debentures or debt
obligations of the Company as a dividend representing such
undistributed surplus on hand or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1 The Company shall keep at its records office or at such other place as
the Company Act may permit, the documents, copies, registers, minutes
and records which the Company is required by the Company Act to keep at
its records office or such other place, as the case may be.
<PAGE> 37
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21.2 The Company shall cause to be kept proper books of account and
accounting records in respect of all financial and other transactions
of the Company in order to properly record the affairs and condition of
the Company and to comply with the Company Act.
21.3 Unless the directors determine otherwise, or unless otherwise
determined by an ordinary resolution, no member of the Company shall be
entitled to inspect the accounting records of the Company.
21.4 The directors shall, from time to time, at the expense of the Company,
cause to be prepared and laid before the Company in general meeting
such financial statements and reports as are required by the Company
Act.
21.5 Every member shall be entitled to be provided once gratis, on demand,
with a copy of the latest annual financial statement of the Company
and, if so required by the Company Act, a copy of each such annual
financial statement and interim financial statement shall be mailed to
each member.
PART 22
NOTICES
22.1 A notice, statement or report may be given or delivered by the Company
to any member either by delivery to him personally or by sending it by
mail to him at his address as recorded in the register of members.
Where a notice, statement or report is sent by mail, service or
delivery of the notice, statement or report shall be deemed to be
effected by properly addressing, prepaying and mailing the notice,
statement or report and shall be deemed to have been given on the day,
(Saturdays, Sundays and holidays excepted), following the date of
mailing. A certificate signed by the Secretary or other officer of the
Company or of any other corporation acting in that behalf for the
Company that the letter, envelope or wrapper containing the notice,
statement or report was so addressed, prepaid and mailed shall be
conclusive evidence thereof.
22.2 A notice, statement or report may be given or delivered by the Company
to the joint holders of a share by giving notice to the joint holder
first named in the register of members in respect of the share.
22.3 A notice, statement or report may be given or delivered by the Company
to the persons
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entitled to a share in consequence of the death, bankruptcy or
incapacity of a member by sending it through the mail, prepaid,
addressed to them by name or by the title of representative of the
deceased or incapacitated person or trustee of the bankrupt, or by any
like description, at the address (if any) supplied to the Company for
the purpose by the persons claiming to be so entitled, or (until such
address has been so supplied) by giving notice in the manner in which
same might have been given if the death, bankruptcy or incapacity had
not occurred.
22.4 Notice of every general meeting or meeting of members holding a class
of shares shall be given in the manner herein before authorized to
every member holding at the time of the issue of the notice or the date
fixed for determining the members entitled to such notice, whichever is
the earlier, shares which confer the right to notice of and to attend
and vote at any such meeting. No other person except the auditor of the
Company and the directors of the Company shall be entitled to receive
notices of any such meeting.
PART 23
RECORD DATES
23.1 The directors may fix in advance a date, which shall not be more than
the maximum number of days permitted by the Company Act, preceding the
date of any meeting of members of any class of shares, or of the
payment of any dividend, or of the proposed taking of any other proper
action requiring the determination of members as the record date for
the determination of the members entitled to notice of, or to attend
and vote at, any such meeting and any adjournment thereof, or entitled
to receive payment of any such dividend or for any other proper purpose
and, in such case, notwithstanding anything elsewhere contained in
these Articles, only members of record on the date so fixed shall be
deemed to be members for the purposes aforesaid.
23.2 Where no record date is so fixed for the determination of members as
provided in the preceding Article, the date on which the notice is
mailed or on which the resolution declaring the dividend is adopted, as
the case may be, shall be the record date for such determination.
<PAGE> 39
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PART 24
SEAL
24.1 The directors may provide a seal for the Company and, if they do so,
shall provide for the safe custody of the seal which shall not be
affixed to any instrument except in the presence of the following
persons, namely:
(i) any two directors, or
(ii) one of the Chairman of the Board, the President, the Managing
Director, a Director and a Vice-President together with one of
the Secretary, the Treasurer, the Secretary-Treasurer, an
Assistant Secretary, an Assistant Treasurer and an Assistant
Secretary-Treasurer, or
(iii) if the Company shall have only one member, the President or the
Secretary, or
(iv) such person or persons as the directors may from time to time
by resolution appoint
and the said directors, officers, person or persons in whose presence
the seal is so affixed to an instrument shall sign such instrument.
For the purpose of certifying under seal true copies of any document
or resolution, the seal may be affixed in the presence of any one of
the foregoing persons.
24.2 To enable the seal of the Company to be affixed to any bonds,
debentures, share certificates or other securities of the Company,
whether in definitive or interim form, on which facsimiles of any of
the signatures of the directors or officers of the Company are, in
accordance with the Company Act and/or these Articles printed or
otherwise mechanically reproduced, there may be delivered to the firm
or company employed to engrave, lithograph or print such definitive or
interim bonds, debentures, share certificates or other securities one
or more unmounted dies reproducing the Company's seal and the Chairman
of the Board, the President, the Managing Director or a Vice-President
and the Secretary, Treasurer, Secretary-Treasurer, Assistant
Secretary, Assistant Treasurer or Assistant Secretary-Treasurer may by
a document authorize such firm or company to cause the Company's seal
to be affixed to such definitive or interim bonds, debentures, share
certificates or other securities by the use of such dies. Bonds,
debentures, share certificates and other securities to which the
Company's seal has been so affixed shall,
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for all purposes, be deemed to be under and to bear the Company's seal
lawfully affixed thereto.
24.3 The Company may have for use in any other province, state, territory
or country an official seal which shall have on its face, the name of
the province, state, territory or country where it is to be used and
all of the powers conferred by the Company Act with respect thereto
may be exercised by the directors or by a duly authorized agent of the
Company.
PART 25
MECHANICAL REPRODUCTION OF SIGNATURES
25.1 The signature of any officer, director, registrar, branch registrar,
transfer agent or branch transfer agent of the Company, unless
otherwise required by the Company Act or by these Articles may, if
authorized by the directors, be printed, lithographed, engraved or
otherwise mechanically reproduced upon all instruments executed or
issued by the Company or any officer thereof; and any instrument on
which the signature of any such person is so reproduced shall be
deemed to have been manually signed by such person whose signature is
so reproduced and shall be as valid to all intents and purposes as if
such instrument had been signed manually, and notwithstanding that the
person whose signature is so reproduced may have ceased to hold the
office that he is stated on such instrument to hold at the date of the
delivery or issue of such instrument.
25.2 The term "instrument" as used in Article 25.1 shall include deeds,
mortgages, hypothecs, charges, conveyances, transfers and assignments
of property, real or personal, agreements, releases, receipts and
discharges for the payment of money or other obligations, shares and
share warrants of the Company, bonds, debentures and other debt
obligations of the Company, and all paper writings.
<PAGE> 41
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PART 26
PROHIBITIONS
26.1 If the Company is, or becomes a company which is not a reporting company
(i) the number of members for the time being of the Company,
(counting any two or more joint registered members as one member)
exclusive of persons who are in the employment of the Company, or
an affiliate of the Company, or continue to be members after the
termination of such employment, shall not exceed fifty (50); and
(ii) no shares or debt obligations issued by the Company shall be
offered for sale to the public.
26.2 If the Company is, or becomes a company which is not a reporting
company, or a reporting company but does not have any of its securities
listed for trading on any stock exchange wheresoever situate, or a
reporting company and has not with respect to any of its securities,
filed a prospectus with the Superintendent of Brokers or any similar
securities' regulatory body and obtained a receipt therefor, then no
shares shall be transferred without the previous consent of the
directors expressed by a resolution of the Board and the directors shall
not be required to give any reason for refusing any such proposed
transfer.
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<PAGE> 1
EXHIBIT 3A
ASSIGNMENT OF CONTRACTS AND SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 19th day of February, 1996.
BETWEEN:
MINCO MINING AND METALS CORPORATION, a company validly subsisting under
the laws of British Columbia with an office at Suite 1870, 401 West
Georgia Street, Vancouver, British Columbia, V6B 5A1
("Minco")
AND:
PACIFIC CANADA RESOURCES INC., a company validly subsisting under the
laws of Ontario with an office at 350 Bay Street, 7th Floor, Toronto,
Ontario, M5H 2S6
("PCR")
W H E R E A S:
A. PCR has entered into a letter of intent with Teck Exploration Ltd.
("Teck") and Baiyin Non-Ferrous Metals Company ("Baiyin") dated June 6, 1995
regarding the exploration and development of the Lijiagou lead-zinc deposit and
possible acquisition of the Changba open pit mine (the "CB-LG Property") located
in Chenxian, Gansu Province, Peoples Republic of China (the "CB-LG Agreement") a
copy of which is attached hereto as Schedule "A".
B. PCR is also party to a cooperation agreement between PCR, Patrician
Gold Mines Ltd. and the First Geoexploration Bureau of Ministry of Metallurgical
Industry dated October 4, 1994 regarding the formation of an equity joint
venture to explore, develop and produce certain mineral properties known as the
"Stone Lake", "Crystal Valley" and "Emperor's Delight" properties located,
respectively, in Lingshou County, Zhangjiakou District and Chende District all
in the Province of Hebei, Peoples Republic of China (the "FGEB Co-Operation
Agreement") a copy of which is attached hereto as Schedule "B".
C. Patrician Gold Mines Ltd. assigned its interests in the FGEB
Co-Operation Agreement to Orient Gold Mines Ltd. ("Orient") pursuant to an
assignment agreement dated September 8, 1994.
D. Pursuant to the terms of the FGEB Co-Operation Agreement, PCR entered
into a joint venture contract dated December 25, 1995 with FGEB in respect to
the exploration and development of the Emperor's Delight property, through PCR's
British Virgin Islands subsidiary Triple Eight Mineral Corporation ("Temco"),
(the "Emperor's Delight Joint Venture Contract") a copy of which is attached
hereto as Schedule "C".
E. Pursuant to an option agreement made between PCR and Orient dated
March 3, 1995, (the "Temco Option Agreement"), a copy of which is attached
hereto as Schedule "D", PCR granted to Orient the right to earn a forty (40%)
percent share interest in Temco.
<PAGE> 2
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F. PCR has entered into an agreement (the "T-C Investment and
Participation Agreement") dated February 19, 1996 with Teck Corporation ("Teck")
and with Cominco Ltd. ("Cominco"), a copy of which is attached hereto as
Schedule "E". Under this T-C Investment and Participation Agreement, PCR has
granted certain rights to Teck and Cominco in exchange for them making a private
placement in a specified company which the parties have agreed will be Minco,
subject to the Closing of this Agreement.
G. For greater certainty, the CB-LG Agreement and the FGEB Co-Operation
Agreement do not contemplate that PCR will ever hold a direct interest in a
Chinese mineral property but rather will hold a right to acquire an interest in
a Chinese corporation which will hold all right, title and interest in and to
the relevant Chinese mineral properties.
H. Pursuant to a Cooperative Agreement made between Minco and the Sichuan
Bureau of Geology and Minerals Resources dated July 7, 1995 as amended by an
undated Supplementary Agreement (the "Chapuzi Agreement"), a copy of which is
attached hereto as Schedule "F", Minco holds the right to acquire an interest in
certain mineral properties known as the "Chapuzi Property" located in Sichuan
Province, Peoples Republic of China.
I. PCR has agreed to assign to Minco all its right, title and interest in
and to the CB-LG Agreement, FGEB Co-Operation Agreement, Emperor's Delight Joint
Venture Contract, Temco Option Agreement and Minco has agreed to assume all
liabilities under such agreements and PCR has also agreed to sell to Minco all
of the issued common shares of Temco owned by PCR, all on the terms and
conditions hereinafter set forth.
J. PCR and Minco have entered into a confidentiality agreement dated
January 2, 1996 (the "Confidentiality Agreement") relating to the
confidentiality obligations as between each other regarding the exchange of
information in contemplation of entering into this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the mutual promises, and agreements herein contained, the parties
hereto agree as follows:
1. INTERPRETATION
1.1 In this Agreement and in the recitals and Schedules hereto, unless the
context otherwise requires, the following expressions will have the following
meanings:
(a) "Act" means the Securities Act (British Columbia) and the
Regulations and Rules passed thereunder, as amended from time
to time;
(b) "Chapuzi Agreement" means the agreement pursuant to which
Minco holds an NCI (hereinafter defined) in the Chapuzi
property;
(c) "Closing Date" means the fifth business day following the date
upon which Minco receives written notification from the
Exchange that this Agreement has been accepted for filing.
<PAGE> 3
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(d) "Exchange" means the Vancouver Stock Exchange;
(e) "PCR Agreements" means, collectively, the FGEB Co-operation
Agreement, the Temco Option Agreement and the Emperor's
Delight Joint Venture Contract;
(f) "PCR Properties" means all of PCR's rights and interests in
and to the Properties held pursuant to the PCR Agreements;
(g) "Property" or "Properties" means a mineral property or
properties in China by whatever instrument it may be held by
any interest, contractual right, or other right to acquire an
interest therein;
(h) "NCI", with respect to a Property, means a direct or indirect
interest in a Chinese mineral property which is available to
be held by foreigners or non-Chinese entities under Chinese
law including, without limitation, a share interest in a
Chinese company which holds title to a Chinese mineral
property, or a contractual right to acquire such share
interest;
(i) "Teck-Cominco Private Placement" means the agreement to be
negotiated between Minco, Teck and Cominco whereby each of
Teck and Cominco agree to subscribe for 1,250,000 treasury
shares of Minco at a price of $0.80 per share; and
(j) "Temco Shares" means 600 of the 1,000 fully paid and
non-assessable issued common shares of Temco in the capital
stock of Temco beneficially owned by PCR.
1.2 The following schedules are incorporated by reference into this
Agreement:
SCHEDULE DESCRIPTION
- -------- -----------
A the CB-LG Agreement
B the FGEB Co-operation Agreement
C the Emperor's Delight Joint Venture Contract
D the Temco Option Agreement
E the T-C Investment and Participation Agreement
F the Chapuzi Agreement
G Minco's Unaudited December 31, 1995 Financial Statements
H Minco's Material Liabilities
I Rights to acquire Securities in Minco
J Temco's Unaudited December 31, 1995 Financial Statement
<PAGE> 4
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SCHEDULE DESCRIPTION
- -------- -----------
K Temco's Material Liabilities
L Rights to acquire Securities in Temco
M Escrow Agreement
N Shareholders Agreement
O the Confidentiality Agreement
P PCR's third-party liabilities
2. REPRESENTATIONS AND WARRANTIES
2.1 COMMON REPRESENTATIONS AND WARRANTIES
Each of Minco and PCR represents and warrants to the other, as
representations and warranties upon which each party has relied in entering into
this Agreement, which will be true at the Closing Date, and which will survive
the execution hereof, that:
(a) it is a body corporate duly formed, organized and validly
subsisting under the laws of its incorporating jurisdiction;
(b) it has full power and authority to carry on its business and
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
(c) neither the execution and delivery of this Agreement, nor any
of the agreements referred to herein or contemplated hereby,
nor the consummation of the transactions hereby contemplated
will be in violation of its constating documents, or conflict
with, or will result the breach of, or accelerate the
performance required by, any agreement to which it is a party
and will not result in the creation or imposition of any lien,
encumbrance or restrictions of any nature whatsoever in favour
of a third party upon or against its assets;
(d) it is resident in Canada within the meaning of the Income Tax
Act (Canada); and
(e) no proceedings are pending for, and neither party is aware of
any basis for the institutions or any proceedings leading to
is dissolution or its winding-up, or the placing or it into
bankruptcy, or becoming subject to any other laws governing
the affairs of insolvent persons.
2.2 MINCO'S REPRESENTATIONS AND WARRANTIES
Minco represents and warrants to PCR, as representations and warranties
upon which PCR has relied in entering into this agreement, which will be true
at the Closing Date, and which will survive the execution hereof, that:
<PAGE> 5
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(a) the authorized capital of Minco consists of 20,000,000 common
shares of which 3,223,373 common shares are validly issued,
fully-paid and non-assessable;
(b) no finder's fees, commissions or financial service fees of any
type whatsoever are payable by Minco in connection with
transactions contemplated by this Agreement other than a
finder's fee of up to 100,000 shares of Minco which may be
paid to a third party;
(c) the financial statements of Minco for the fiscal period ended
December 31, 1995 attached hereto as Schedule "G" delivered
to PCR present fairly, in all material respects, the financial
position of Minco as at December 31, 1995 and the results of
operations and the changes in financial position for the year
then ended in accordance with Canadian generally accepted
accounting principles applied on a consistent basis and do not
omit to state any material fact that is required by generally
accepted accounting principles, or by applicable law, to be
stated or reflected therein, or which is necessary to make the
statements contained therein not misleading;
(d) since December 31, 1995, Minco has carried on its business in
the ordinary and normal course of the routine daily affairs of
such business. Since such date, there has been no material
change in the business, operations, affairs or conditions of
Minco, financial or otherwise, including, without limitation.
any change arising as a result of any legislative or
regulatory change, modification, revocation, or suspension or
any material license or right to do business, fire, explosion,
accident, casualty, labour trouble, flood, drought, riot,
storm, expropriation, condemnation, act of God, or otherwise,
except changes occurring in the ordinary course of the routine
daily affairs of business, which changes have not materially
adversely affected the organization, business, properties,
prospects, or financial condition of Minco;
(e) no order prohibiting the issue and sale of securities by Minco
has been issued and no proceedings for this purpose have been
instituted, are pending, or, to the knowledge or Minco,
contemplated;
(f) this Agreement and any statement furnished to PCR by, or on
behalf of Minco, do not contain and will not contain an untrue
statement of material fact or omit or will omit to state a
material fact or circumstance necessary to make the statements
contained herein or therein not misleading, or which may be
material in PCR's decision to enter into this Agreement;
(G) Minco owns, as of the date hereof, the NCI or has rights to
acquire an NCI, in the Property as set out in the Chapuzi
Agreement;
(h) the Chapuzi Agreement is a valid and subsisting contract
enforceable in accordance with its terms and Minco has not
assigned, encumbered or otherwise disposed or any interest in
such agreement to any third parties;
<PAGE> 6
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(i) to the best of its knowledge, there are no adverse claims,
challenges, actions, suits, disputes or proceedings regarding
the Chapuzi Agreement, and there are no such claims pending,
nor is there any basis therefor;
(j) there are no material liabilities, contingent or otherwise, of
Minco which are not disclosed in Schedule "H" attached hereto
and Minco has not guaranteed, or agreed to guarantee, any
debt, liability or other obligation of any person, firm or
corporation other than as described in Schedule "H";
(k) no person, other than PCR, or as set out in Schedule "I", has
any right, agreement, or option, present or future, contingent
or absolute, or any right capable of becoming a right,
agreement or option:
(i) to require Minco to issue any further or other shares
in its capital or any security or other instrument
convertible or exchangeable in to shares in its
capital, or to convert or exchange any security or
other instrument into, with or for shares in its
capital;
(ii) for the issue or allotment of any of the authorized
but unissued shares in its capital;
(iii) to require Minco to create any additional shares in
its capital;
(iv) to require Minco to purchase, redeem, or otherwise
acquire any of the issued and outstanding shares in
its capital;
(v) to require Minco to distribute any or all of its
assets, or to declare any dividends;
(vi) for the purchase of any assets or the acquisition or
any interest in a Property, or an NCI; or
(vii) to purchase or otherwise acquire any securities or
Minco;
(l) the Purchased Shares (as hereinafter defined) to be issued to
PCR pursuant to the provisions of paragraph 3, when issued,
will be validly issued as fully paid and non-assessable and
will be free of all resale restrictions other than any control
block restrictions which may apply and the one-year hold
period imposed by the Act;
(m) Minco has the corporate power to own the assets owned by it
and to carry out the business carried on by it and is duly
registered and qualified to carry on business in British
Columbia;
(n) Minco is not indebted to any affiliate or director or officer
of Minco other than is set out in the financial statements
attached hereto as Schedule "G";
<PAGE> 7
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(o) no dividends or other distribution of any shares in the
capital of the Minco have been made, declared or authorized;
(p) Minco has not entered into any material contracts, agreements,
undertakings, or arrangements with third parties other as
referred to herein;
(q) there is no basis for and there are no actions, suits,
judgments, investigations or proceedings outstanding or
pending or to the knowledge of Minco threatened against or
affecting Minco at law or in equity or before or by any
governmental agency or authority having jurisdiction;
(r) Minco is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject
or which apply to it;
(s) all taxes, assessments, levies and other amounts which Minco
is required by law to pay, withhold or collect, will have been
duly paid, withheld or collected before the Closing Date;
provided, however, that none of the foregoing need be paid
while the same is being contested in good faith by appropriate
proceedings diligently conducted;
(t) no director of Minco is indebted or under obligation to Minco
on any account whatsoever;
(u) all material transactions of Minco have been promptly and
properly recorded or filed in or with its respective books and
records. The minute books of Minco contain all records of the
meetings and proceedings of shareholders and directors
thereof; and
(v) the performance of this Agreement will not be in violation of
the constating documents of Minco or of any agreement to which
Minco is a party and will not give any person or company any
right to terminate or cancel any agreement or any right
enjoyed by Minco and will not result in the creation or
imposition of any lien, encumbrance or restriction of any
nature whatsoever in favour of a third party upon or against
the assets of Minco.
2.3 PCR'S REPRESENTATIONS AND WARRANTIES
PCR represents and warrants to Minco, as representations and warranties
upon which Minco has relied in entering into this Agreement, which will be true
at the Closing Date, and which will survive the execution hereof, that:
(a) each of the PCR Agreements is a valid and subsisting contract
enforceable in accordance with its terms and PCR has not
assigned, encumbered or otherwise disposed of any interests in
any of the PCR Agreements to any third parties;
<PAGE> 8
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(b) Temco has the corporate power to own the assets owned by it
and to carry out the business carried on by it and is duly
registered and qualified to carry on business in the British
Virgin Islands;
(c) Temco is not indebted to PCR or any affiliate or director or
officer of Temco other than is set out in the financial
statements attached hereto as Schedule "J" ;
(d) no dividends or other distribution of any shares in the
capital of the Temco have been made, declared or authorized;
(e) Temco has not discharged or satisfied or paid any lien or
encumbrance or obligation or liability other than current
liabilities in the ordinary course of business;
(f) the business of Temco has been carried on in the ordinary
course and the Company has not incurred new liabilities or
entered into any transactions outside of the ordinary course
of business of Temco since December 31, 1995;
(g) the constating documents of Temco have not been altered since
the incorporation of Temco;
(h) Temco has not entered into any contracts, agreements,
undertakings, or arrangements with third parties other than
(i) the Emperor's Delight Joint Venture Contract and a
preliminary version of such agreement which was entered into
as part of the process required to obtain approvals under
Chinese Law (ii) extension agreement relating to the extension
of the term of the FGEB Co-operation Agreement; and (iii) a
directorship of a company incorporated under the laws of the
British Virgin Islands;
(i) there is no basis for and there are no actions, suits,
judgments, investigations or proceedings outstanding or
pending or to the knowledge of PCR threatened against or
affecting Temco at law or in equity or before or by any
governmental agency or authority having jurisdiction;
(j) Temco is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject
or which apply to it;
(k) neither PCR nor any director of Temco are indebted or under
obligation to Temco on any account whatsoever except as
provided in the Temco Option Agreement;
(1) all material transactions of Temco have been promptly and
properly recorded or filed in or with its respective books and
records. The minute books of Temco contain all records of the
meetings and proceedings of shareholders and directors
thereof;
<PAGE> 9
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(m) the performance of this Agreement will not be in violation of
the constating documents of Temco or of any agreement to which
Temco is a party and will not give any person or company any
right to terminate or cancel any agreement or any right
enjoyed by PCR or Temco and will not result in the creation or
imposition of any lien, encumbrance or restriction of any
nature whatsoever in favour of a third party upon or against
the assets of Temco;
(n) the authorized capital of Temco consists of 50,000 shares
having a par value of US$1.00 each of which the Temco Shares
and the 400 shares issued to Orient are the only shares that
are issued and outstanding;
(o) the Temco Shares are validly issued, fully-paid and
non-assessable common shares not subject to any trading
restrictions other than as set out in the constating documents
of Temco, and the Shares represent the total issued and
outstanding share capital of Temco;
(p) no finder's fees, commissions or financial service fees of any
type whatsoever are payable by Temco in connection with
transactions contemplated by this Agreement;
(q) the financial statements of Temco for the fiscal period ended
December 31, 1995 attached hereto as Schedule "J" delivered to
Minco present fairly, in all material respects, the financial
position of Temco as at December 31, 1995 and the results of
operations and the changes in financial position for the year
then ended in accordance with Canadian generally accepted
accounting principles applied on a consistent basis and do not
omit to state any material fact that is required by generally
accepted accounting principles, or by applicable law, to be
stated or reflected therein, or which is necessary to make the
statements contained therein not misleading;
(r) since December 31, 1995, Temco has carried on its business in
the ordinary and normal course of the routine daily affairs
of such business. Since such date, there has been no material
change in the business, operations, affairs or conditions of
Temco, financial or otherwise, including, without limitation,
any change arising as a result of any legislative or
regulatory change, modification, revocation, or suspension or
any material license or right to do business, fire, explosion,
accident, casualty, labour trouble, flood, drought, riot,
storm, expropriation, condemnation, act of God, or otherwise,
except changes occurring in the ordinary course of the
routine daily affairs of business, which changes have not
materially adversely affected the organization, business,
properties, prospects, or financial condition of Temco;
(s) there are no material liabilities, contingent or otherwise, of
Temco which are not disclosed in Schedule "K" attached hereto,
and Temco has not guaranteed, or agreed to guarantee, any
debt, liability or other obligation
<PAGE> 10
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of any person, firm or corporation other than or described in
Schedule "K";
(t) no person, other than Minco, or as set out in Schedule "L",
has any right, agreement, or option, present or future,
contingent or absolute, or any right capable of becoming a
right, agreement or option:
(i) to require Temco to issue any further or other shares
in its capital or any security or other instrument
convertible or exchangeable in to shares in its
capital, or to convert or exchange any security or
other instrument into, with or for shares in its
capital;
(ii) for the issue or allotment of any of the authorized
but unissued shares in its capital;
(iii) to require Temco to create any additional shares in
its capital;
(iv) to require Temco to purchase, redeem, or otherwise
acquire any of the issued and outstanding shares in
its capital;
(v) to require Temco to distribute any or all of its
assets, or to declare any dividends;
(vi) for the purchase of any assets or the acquisition or
any interest in a Property, or an NCI; or
(vii) to purchase or otherwise acquire any securities of
Temco;
(u) no order prohibiting the issue and sale of securities by Temco
has been issued and no proceedings for this purpose have been
instituted, are pending, or, to the knowledge of PCR,
contemplated;
(v) this Agreement and any statement furnished to Minco by, or on
behalf of PCR and Temco, do not contain and will not contain
an untrue statement of material fact or omit or will omit to
state a material fact or circumstance necessary to make the
statements contained herein or therein not misleading, or
which may be material in Minco's decision to enter into this
Agreement;
(w) PCR or Temco owns, as of the date hereof, the NCI, or has
rights to acquire an NCI, in Property as set out in the PCR
Agreements;
(x) to the best of its knowledge, there are no adverse claims,
challenges, actions, suits, disputes or proceedings regarding
the PCR Agreements, and there are no such claims pending, nor
is there any basis therefor.
2.4 The representations, warranties, covenants and agreements by each of the
parties contained in this Agreement or any certificates or documents delivered
pursuant to the provisions
<PAGE> 11
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hereof or in connection with the transaction contemplated hereby shall be true
at and as of the date of Closing of this Agreement as though such
representations and warranties were made at and as of such time.
Notwithstanding any investigations or inquiries made by a party prior to the
execution of this Agreement or the waiver of any condition by such party, the
representations, warranties, covenants and agreements of the other party shall
survive the execution and Closing of this Agreement and notwithstanding the
purchase and sale herein provided for, shall continue in full force and effect.
2.5 The representations and warranties hereinbefore set out are conditions
on which the parties have relied in entering into this Agreement and will
survive the acquisition of the PCR Agreements and the Temco Shares by Minco,
and each of Minco and PCR will indemnify and save the other harmless from all
loss, damage, costs, actions and suits arising out of or in connection with any
breach of any representation, warranty, covenant, agreement or condition made
by Minco or PCR, as the case may be, and contained in this Agreement.
3. ASSIGNMENT OF PCR AGREEMENTS
AND TRANSFER OF TEMCO SHARES
3.1 Upon and subject to the terms and conditions of the Agreement, PCR
hereby agrees to sell, transfer and assign to Minco and Minco agrees to
purchase from PCR the PCR Properties and the Temco Shares. Without limiting the
generality of the foregoing, as part of such sale, transfer and assignment, PCR
agrees to assign to Minco all its rights and interests in and to each of the
PCR Agreements and Minco Agrees to assume all liabilities under the PCR
Agreements.
3.2 The purchase price to be paid by Minco for the PCR Properties and the
Temco Shares (the "Purchase Price") will be:
(a) the allotment and issuance to PCR of Seven Million Two Hundred
and Eighty Thousand (7,280,000) common shares of Minco (the
"Purchased Shares"). The parties acknowledge and agree that the
total number of such shares to be issued is to be equal to
approximately two-thirds (2/3) of the total number of shares of
Minco outstanding on a fully-diluted basis as at the date of
this Agreement and before giving effect to the Teck-Cominco
Private Placement. Such Purchased Shares shall comprise:
(i) Two Million Four Hundred Thousand (2,400,000) free-
trading shares (the "Free Trading Shares") having a
deemed value of $0.97 per share. These Free Trading
Shares will be subject to the restrictions set out in
section 8.1(f) herein. The parties acknowledge and
agree that the number of Free Trading Shares to be
issued to PCR hereunder is to be based upon the value of
the interest in the Emperor's Delight Property which may
be earned by PCR pursuant to the Emperor's Delight Joint
Venture Contract; and
(ii) Four Million Eight Hundred and Eighty Thousand
(4,880,000) escrow shares (the "Escrow Shares"). These
Escrow Shares will
<PAGE> 12
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be subject both to the restrictions set out in section
8.1(f) herein and to the terms and conditions of an
escrow agreement in the form attached hereto as Schedule
"M" (the "Escrow Agreement") and such Escrow Shares may
be released from escrow only in accordance with the
provisions of the Escrow Agreement and of this
Agreement; and
(b) the assumption by Minco of PCR's liabilities to third parties as
are set out in Schedule "P" attached hereto.
3.3 PCR acknowledges that it may be required to execute and deliver such
other documents as may reasonably be requested by Minco in order to obtain
necessary regulatory approval of the transactions herein contemplated and PCR
hereby agrees to execute and deliver any and all such documents forthwith at
such request of Minco.
3.4 Subject to section 5.1 herein, following the execution of this
Agreement by both parties, Minco will submit this Agreement to the Exchange and
request the acceptance for filing hereof and the purchase of the PCR Properties
and Temco Shares. Thereafter, both parties will diligently pursue obtaining
such acceptance for filing and regulatory approval and comply with all
reasonable requests of the Exchange in connection therewith, but neither party
will, in any event, be liable for failure to obtain such acceptance or
approval. Each party will cooperate with the other as reasonably necessary to
secure such acceptance for filing and other required approvals.
3.5 PCR acknowledges that the Purchased Shares to be allotted and issued to
it hereunder pursuant to exemptions from the registration and prospectus
requirements of the Act, and acknowledges, confirms to and covenants with Minco
that:
(a) it will comply with all requirements of applicable securities
legislation in connection with the issuance to it of the Shares
and the resale of the Shares including, without limitation,
entering into the Escrow Agreement if required; and
(b) it is not entering into this Agreement as result of any material
information about the affairs of Minco that, to its knowledge,
has not been publicly disclosed.
4. RELEASE OF ESCROW SHARES
4.1 The Escrow Shares issued to PCR hereunder shall be released to PCR on
the following basis:
(a) one escrow share for each $0.97 in the value of the interests to
be acquired by Minco from PCR hereunder in any of the PCR
Properties, based on a valuation report to be prepared by a
qualified independent consultant, less any expenditures
required to be made by Minco, pursuant to the PCR Agreements or
otherwise, in order to earn its interests in such Properties;
provided that all required Chinese governmental approvals in
order to perfect the interests to be acquired by Minco
<PAGE> 13
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hereunder have been obtained for each of the Properties that are
the subject of the valuation report;
(b) one escrow share for each $0.97 in the value of the interest in
any New Projects (as defined in paragraph 6 herein) acquired by
Minco pursuant to this Agreement or the T-C Investment
Participation Agreement, such value to be determined on the same
basis and subject to the same provisions as described in sub-
paragraph 4.1(a) above, mutatis mutandis;
(c) one Escrow Share for every $1.81 expended by Minco, PCR, Teck,
Cominco, Temco or any other third party expending monies
(including PCR's joint venture partner in Temco, Orient) or on
exploration and development of the PCR Properties or of any New
Projects acquired by Minco pursuant to this Agreement or the T-C
Investment and Participation Agreement, exclusive of general and
administrative expenses, determined in accordance with the
provisions applicable to natural resources issuers under Local
Policy Statement #3-07 of the British Columbia Securities
Commission; and
(d) one Escrow Share for every $0.97 in cumulative Cash Flow, as
hereinafter defined, from the operations of Minco on the PCR
Properties and any New Projects as defined in paragraph 6 herein
and as determined in accordance with generally accepted
accounting principals and by reference to Minco's annual audited
financial statements, provided that each PCR Property and each
New Project will be considered separately without taking into
account any negative cash flow that may exist in any other PCR
Property or New Project.
4.2 For the purposes of subparagraph 4.1(d) herein, Cash Flow means net
profit for a fiscal year of Minco adjusted for the following add backs:
depreciation, amortization of goodwill, deferred income taxes, and amortization
of research and development costs, plus any other capitalization charges as may
be permitted by the Exchange. Cumulative Cash Flow, less any amounts used in
prior Escrow Share releases pursuant to subparagraph 4.1(d), divided by $0.97
per share, equals the total number of Escrow Shares which may be released in
any twelve-month period. During the currency of the Escrow Agreement, Minco
shall determine (i) the cumulative Cash Flow commencing after the Closing Date
(as defined in paragraph 1.1 herein), (ii) the total exploration and
development expenditures on the Properties pursuant to subparagraph 4.1(c), and
(iii) the number of Escrow Shares available for release to PCR, within One
Hundred Twenty (120) days from each fiscal year end of Minco.
4.3 Minco shall file its annual audited financial statements, prepared in
accordance with generally accepted accounting principles, with the Exchange and
the number of Escrow Shares to be released from escrow to PCR at any time shall
be subject to the prior written consent of the Exchange. Notwithstanding the
foregoing, in the event that not all of the Escrow Shares are released to PCR
within Ten (10) years of the Closing Date, as hereinafter defined, any Escrow
Shares not released shall be forfeited by PCR and cancelled and Minco shall
have no further obligation or liability to PCR with respect to such Escrow
Shares. For greater certainty the Escrow Shares shall not be forfeited for any
reason other than the expiration of the aforementioned Ten (10) year period.
<PAGE> 14
- 14 -
5. CONDITIONS PRECEDENTS
5.1 This Agreement and the obligations of each party are in each case
subject to each of the following occurring on or before ten (10) days next
following the date on Which this Agreement is executed:
(a) the acceptance for filing of this Agreement by the Exchange;
(b) the execution of an investment and participation agreement
between Minco, Teck and Cominco under which Minco will have
rights and obligations substantially the same as those of PCR
under the T-C Investment and Participation Agreement;
(c) the execution of a subscription agreement between Minco, Teck
and Cominco relating to the Teck-Cominco Private Placement,
unless already included in the investment and participation
agreement referred to in section 5.1(b) above;
(d) all representations and warranties of each party made to the
other in this Agreement, or in any written statement delivered
by each party to the other under this Agreement, are true at
the Closing Date;
(e) each of the covenants and agreements of, conditions imposed
upon, and the deliveries set out herein, to be made,
satisfied, or compiled with by each party in favour of the
other on or before the Closing Date has been fully performed,
satisfied and complied with in all respects on or before the
Closing Date; and
(f) the execution by PCR of the T-C Investment and Participation
Agreement.
5.2 If the conditions set out in section 5.1 herein are not satisfied on
or before the date which is ten (10) days next following the date on which this
Agreement is executed, either party may, in its sole discretion, terminate this
Agreement at any time thereafter whereupon neither party shall have any further
obligation to the other party under this Agreement.
5.3 This Agreement shall also be subject to PCR making available to Minco
of the following on or before the Closing Date:
(a) all non-public data, agreements, evaluations, professional
reports and other information in the possession or control of
PCR with respect to the PCR Properties;
(b) written consent of Baiyin to the assignment of the CB-LG
Agreement hereunder.
5.4 PCR agrees to diligently pursue obtaining the written consent required
pursuant to section 5.3(b) hereunder, but PCR will in no event be liable for
failure to obtain such written consent.
<PAGE> 15
- 15 -
6. EXCLUSIVE RIGHT OF ACQUISITION
6.1 For a period of time commencing on the date of this Agreement and
expiring on March 1, 2000, Minco shall have the exclusive right to acquire from
PCR, at cost and in the manner hereinafter described (the "Right of
Acquisition") all right, title and interest in and to any new base or precious
metal Property which PCR identifies and in respect to which PCR has acquired an
NCI (a "New Property") or in respect to which PCR has a reasonable expectation
of acquiring an NCI. The Right of Acquisition may be extended beyond March 1,
2000 upon agreement of the parties hereto.
6.2 Upon identification of a New Property, PCR shall deliver a notice to
Minco providing reasonable details regarding the New Property, including a
description of the NCI acquired or to be acquired by PCR therein, which notice
shall be accompanied by copies of all documentation in the possession of PCR
regarding the New Property, including but not limited to all underlying
agreements and geological reports regarding the New Property (the "New Property
Notice") Minco and PCR shall thereupon enter into a separate confidentiality
agreement relating to such New Property.
6.3 Upon receipt of the New Property Notice and in the event Teck and
Cominco have not yet exercised their "Earn-in Rights" in respect to two NCI's,
as defined in the T-C Investment and Participation Agreement, Minco shall
forthwith provide a complete copy of the New Property Notice to Teck and
Cominco in accordance with the provisions of Part 6 of the T-C Investment and
Participation Agreement, with a request that Teck and Cominco determine whether
the New Property is one that should be governed by the T-C Investment and
Participation Agreement.
6.4 In the event that after receiving a complete copy of the New Property
Notice Teck and Cominco determine that the New Property is one that should be
governed by the T-C Investment and Participation Agreement, then Minco shall be
deemed to have exercised the Right of Acquisition and PCR shall be deemed to
have assigned all its right, title and interest in the New Property to Minco.
6.5 In the event that Teck and Cominco determine that the New Property is
not one that should be governed by the T-C Investment and Participation
Agreement or in the event that Teck and Cominco have exercised their "Earn-in
Rights" in respect to two NCI's, as defined in the T-C Investment and
Participation Agreement, then Minco shall, as soon as practicable following the
determination of Teck and Cominco, if applicable, but in any event not later
than 30 days following receipt of the New Property Notice by Minco notify PCR
in writing of its decision to either exercise or decline to exercise its Right
of Acquisition.
6.6 If Minco elects not to exercise its Right of Acquisition, PCR will be
free to deal with the New Property as it sees fit, and the Property shall
thereafter not be subject to this Agreement. Failure by Minco to notify PCR of
its election within the time limit in section 6.5 will be deemed to be an
election that Minco has declined to exercise the Right of Acquisition.
6.7 If Minco elects or is deemed to have elected to exercise its Right of
Acquisition in respect to a New Property, PCR shall assign all its right, title
and interest in the New Property to Minco. PCR shall thereafter provide Minco
with copies of all documentation
<PAGE> 16
- 16 -
reasonably necessary to substantiate PCR's out-of-pocket costs in respect to
the acquisition of its interests in such New Property and Minco shall forthwith
upon receipt of such documentation reimburse PCR for all such out-of-pocket
costs and in addition, Minco shall be responsible for payment of any finder
fees, commissions or other payments due to third parties in connection with the
acquisition of the New Property, the payment of which are in accordance with
regulatory requirements and have been approved by Minco's board of directors.
PCR furthermore agrees to execute and deliver to Minco any and all
documentation reasonably necessary to perfect such the assignment of its
interests in the New Property to Minco and to provide to Minco all such
reasonable assistance that Minco may require to secure the Property and the NCI
therein.
6.8 The rights of acquisition held by Minco under section 6 herein shall be
subject to any prior rights that Teck and Cominco may have under the T-C
Investment and Participation Agreement.
7. MINCO BOARD APPOINTMENTS
7.1 The parties agree that forthwith upon execution of this Agreement,
Minco shall take such steps as are necessary to change the constitution of the
board of directors of Minco in accordance with the Shareholders Agreement
attached hereto as Schedule "N".
8. CLOSING
8.1 On the Closing Date, the following events shall occur:
(a) Minco shall deliver to PCR a copy of the Exchange letter of
acceptance in respect to this Agreement;
(b) PCR shall deliver to Minco a deed of assignment in respect to each
of the PCR Agreements;
(c) PCR shall deliver to Minco the Temco Shares duly endorsed for
transfer, and make adequate provision for transfer of control of
all corporate records, registers and documents of Temco, including
the minute book and corporate seal of Temco;
(d) PCR shall cause to be delivered to Minco a legal opinion from a
qualified British Virgin Islands lawyer that the Temco Shares were
legally created, and are fully paid and non-assessable; and that
Temco has taken all necessary corporate actions to authorize and
approve the transfer of the Temco Shares to Minco, and that the
transfer will not breach or cause a breach of any terms of the
constating documents of Temco;
(e) Each of Minco and PCR shall execute and deliver to one another the
Escrow Agreement;
<PAGE> 17
- 17 -
(f) Minco shall issue to PCR certificates representing the Free
Trading Shares and Escrow Shares, which certificates will be
endorsed with a legend indicating that they are held subject
to the one year hold period imposed by the Act and, in the
case of the Escrow Shares, that such shares may only be traded
in accordance with the terms of the Escrow Agreement;
(g) Minco and PCR shall cause the Shareholders Agreement (as
defined by paragraph 7.1 herein), fully executed, to be
delivered to one another;
(h) Minco shall cause to be delivered to PCR a legal opinion from
a qualified British Columbia lawyer that the Free Trading and
Escrow Shares were legally created, and are fully paid and
non-assessable; and that Minco has taken all necessary
corporate actions to authorize the issuance of the Free
Trading Escrow Shares to PCR, and that the transfer will not
breach or cause a breach of any terms of the constating
documents of Minco;
(i) The Teck-Cominco Private Placement shall be completed: and
(j) The payment by Minco to PCR of PCR's third party liability as
set out in Schedule "P".
9. NOTICE
9.1 Any notice, direction or other instrument required or permitted to be
given under this Agreement will be in writing and may be given by the delivery
of the same or by mailing the same by prepaid registered or certified mail or by
sending the same by telegram, telex. telecommunication or other similar form of
communication, in each case addressed as follows:
(a) if to Minco at:
Minco Mining and Metals Corporation
Suite 1870, 401 W. Georgia Street
Vancouver, B.C.
V6B 5A1
Fax No.: 1-604-688-8030
Attention: Mr. Peter Tsaparas, Chairman & C.E.O.
(b) if to PCR at:
Pacific Canada Resources Inc.
Suite 7000, 350 Bay Street
Toronto, Ontario
M5H 2S6
Fax No.: 1-416-368-2579
Attention: Mr. Ken Z. Cai, Managing Director
<PAGE> 18
-18-
9.2 Any notice, direction or other instrument aforesaid will, if delivered,
be deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
services in which event notice will be deemed to be received only when actually
received and, if sent by fax, be deemed to have been given or received on the
next business day of the recipient party following the date on which it was so
sent.
9.3 Any party may at any time give to the other, notice in writing of any
change of address of the party giving such notice and from and after the giving
of such notice, the address or addresses therein specified will be deemed to be
the address of such party for the purposes of giving notice hereunder.
10. GENERAL
-------
10.1 This Agreement, other than the Confidentiality Agreement, constitutes
the entire agreement between the parties and replaces and supersedes all prior
agreements, memoranda, correspondence, communications, negotiations and
representations, whether verbal or written, express or implied, statutory or
otherwise between the parties with respect to the subject matter herein. For
greater certainty, the parties agree that, if this Agreement is terminated for
any reason, the Confidentiality Agreement will not be terminated and the rights
and obligations set out therein will continue to be in effect.
10.2 The parties hereto agree that they and each of them will execute all
documents and do all acts and things within their respective powers to carry
out and implement the provisions or intent of this Agreement.
10.3 The headings to the respective sections herein will not be deemed part
of this Agreement but will be regarded as having been used for convenience
only.
10.4 All references to monies hereunder will be in Canadian funds. All
payments to be made to any party hereunder will be made by cash, certified
cheque or bank draft mailed or delivered to such party at its address for
notice purposes as provided herein, or for the account of such part at such
bank or banks in Canada as such party may designate from time to time by
written notice. Said bank or banks will be deemed the agent of the designating
party for the purpose of receiving, collecting and receipting such payment.
10.5 This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
10.6 This Agreement may be signed by facsimile and in one or more
counterparts and signed counterpart copies, when read together, shall be
irrevocably deemed to constitute a single binding Agreement signed by both
parties.
10.7 This Agreement will be governed and interpreted in accordance with the
laws of British Columbia (except for its conflict of laws provisions) and the
laws of Canada applicable therein. All actions arising from this Agreement will
be commenced and prosecuted in the courts of British Columbia, and the parties
hereby attorn to the jurisdiction thereof.
<PAGE> 19
- 19 -
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
THE CORPORATE SEAL OF MINCO )
MINING AND METALS CORPORATION )
was hereunto affixed in the presence of: )
)
)
/s/ )
_______________________________________ ) C/S
Authorized Signatory )
)
)
/s/ )
_______________________________________ )
Authorized Signatory )
THE CORPORATE SEAL OF PACIFIC )
CANADA RESOURCES INC. was hereunto )
affixed in the presence of: )
)
)
/s/ )
_______________________________________ ) C/S
Authorized Signatory )
)
)
/s/ )
_______________________________________ )
Authorized Signatory )
<PAGE> 20
THIS IS SCHEDULE "A" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
The CB-LG Agreement
(LETTER OF INTENT
REGARDING THE DEVELOPMENT OF THE LIJIAGOU LARGE Pb-Zn DEPOSIT)
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 21
THIS IS SCHEDULE "B" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
The FGEB Co-Operation Agreement
(COOPERATION AGREEMENT REGARDING
CERTAIN MINERAL DEPOSIT PROPERTIES)
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 22
THIS IS SCHEDULE "C" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION, AND
PACIFIC CANADA RESOURCES INC.
The Emperor's Delight Joint Venture Contract
(GEOEXPLORATION CORPORATION OF THE FIRST GEOEXPLORATION BUREAU
and TRIPLE EIGHT MINERAL CORPORATION - JOINT VENTURE AGREEMENT)
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 23
THIS IS SCHEDULE "D" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION, AND
PACIFIC CANADA RESOURCES INC.
The Temco Option Agreement
(ORIENT GOLD MINES LTD. and PACIFIC CANADA RESOURCES INC. -
HEADS OF AGREEMENT)
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 24
THIS IS SCBEDULE "E" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION, AND
PACIFIC CANADA RESOURCES INC.
The T-C Investment and Participation Agreement
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 25
THIS IS SCHEDULE "F" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION, AND
PACIFIC CANADA RESOURCES INC.
The Chapuzi Agreement
(SUPPLEMENTARY AGREEMENT BETWEEN
MINCO MINING AND METALS CORPORATION
and
SICHUAN BUREAU OF GEOLOGY AND MINERAL RESOURCES)
The parties acknowledge having received a copy of the above-referenced
agreement.
<PAGE> 26
THIS IS SCHEDULE "G" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
MINCO MINING AND METALS CORPORATION
Financial Statements
December 31, 1995
Index
Auditors' Report
Balance Sheet
Statement of Loss and Deficit
Statement of Changes in Financial Position
Notes to Financial Statements
<PAGE> 27
AUDITOR'S REPORT
To the Shareholders of
MINCO MINING AND METALS CORPORATION
We have audited the balance sheets of Minco Mining and Metals Corporation as at
December 31, 1995 and 1994 and the statements of loss and deficit and changes
in financial position for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1995 and
1994 and the results of its operations and changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles.
Vancouver, Canada
February 12, 1996 Chartered Accountants
DRAFTED ON FEB. 16/96
<PAGE> 28
MINCO MINING AND METALS CORPORATION
Balance Sheet
December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash $ 229,304 $ 137,437
Marketable securities -- 600
Refundable tax credits 2,680 1,989
- --------------------------------------------------------------------------------
231,984 140,026
Resource interests (Note 2) 100 --
Capital assets (Note 3) 25,102 --
- --------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 27,908 $ 10,550
Management fees payable 12,000 48,000
Due to a director 60,000 --
- --------------------------------------------------------------------------------
99,908 58,550
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 3,026,474 2,526,474
Deficit (2,869,196) (2,444,998)
- --------------------------------------------------------------------------------
157,278 81,476
- --------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
</TABLE>
Approved by the Directors:
-------------------------- ----------------------
Director Director
DRAFTED ON FEB. 16/96
<PAGE> 29
MINCO MINING AND METALS CORPORATION
Statement of Loss and Deficit
Year Ended December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue
Interest income $ 8,754 $ 2,795
Gain on sale of marketable securities 535 --
- --------------------------------------------------------------------------------
9,289 2,795
- --------------------------------------------------------------------------------
Expenses
Accounting and audit 21,830 11,958
Amortization 3,587 --
Bank charges 852 230
Filing fees 7,840 4,171
Investor relations 19,863 3,683
Legal 18,409 4,746
Management and consulting fees 45,684 24,000
Office 19,625 1,075
Property investigation 146,081 51,287
Rent 38,443 --
Salaries and benefits 57,621 --
Telephone 15,678 --
Transportation 11,200 --
Transfer agent 4,392 4,119
Travel and conference 22,382 --
- --------------------------------------------------------------------------------
433,487 105,269
- --------------------------------------------------------------------------------
Net loss for the year (424,198) (102,474)
Deficit, beginning of year (2,444,998) (2,342,524)
- --------------------------------------------------------------------------------
Deficit, end of year $(2,869,196) $(2,444,998)
================================================================================
Loss per share $(0.17) $(0.04)
================================================================================
</TABLE>
DRAFTED ON FEB. 16/96
<PAGE> 30
MINCO MINING AND METALS CORPORATION
Statement of Changes in Financial Position
Year Ended December 31, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used for) operating activities
Net loss for the year $(424,198) $(102,474)
Item not involving cash:
-amortization 3,587 --
- ----------------------------------------------------------------------------------
(420,611) (102,474)
Net change in non-cash working capital 41,267 91,705
- ----------------------------------------------------------------------------------
(379,344) ( 10,769)
- ----------------------------------------------------------------------------------
Cash provided by financing activities
Proceeds from issuance of shares 500,000 110,000
- ----------------------------------------------------------------------------------
Cash provided by investing activities
Acquisition of capital assets (28,689) --
Acquisition of resource interests (100) --
- ----------------------------------------------------------------------------------
(28,789) --
- ----------------------------------------------------------------------------------
Increase in cash position 91,867 99,231
Cash position, beginning of year 137,437 38,206
- ----------------------------------------------------------------------------------
Cash position, end of year $ 229,304 $ 137,437
==================================================================================
</TABLE>
DRAFTED ON FEB. 16/96
<PAGE> 31
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
a) Capital Assets
--------------
Amortization is provided on a declining-balance basis as
follows:
Computer equipment 30% per annum
Office equipment and furniture 20% per annum
b) Resource Interests
------------------
The Company follows the policy of deferring all acquisition,
exploration and development costs relating to the resource
interests. These costs will be amortized against revenue from
future production or written off if the interest is abandoned or
sold. At the present time, management has determined each
project to be a cost centre.
Depletion of cost capitalized on projects put into commercial
production will be recorded using the unit-of-production method
when estimated proven reserves are determined.
The amounts shown for resource interests represent acquisition
and exploration costs incurred to date less recoveries, and do
not necessarily reflect present or future values.
The Company does not resource the estimated costs of maintaining
its resource interest in good standing.
c) Option Agreements
-----------------
From time to time, the Company may acquire or dispose of
properties pursuant to the terms of option agreements. Due to
the fact that options are exercisable entirely at the discretion
of the optionee, the amounts payable or receivable are not
recorded. Option payments are recorded as resource property
costs or recoveries when the payments are made or received.
<PAGE> 32
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
2. Resource Interest
The Company has entered into a joint venture agreement with the Sichuan
Bureau of Geology and Mineral Resources ("SBGMR"). SBGMR is the holder
of exploration rights to the Chapuzi Gold Deposit in Sichuan Province,
China.
Pursuant to the agreement, the Company shall have the right to earn a
51% interest by spending CDN$5 million on exploration and development.
To date the Company has incurred $138,304 in connection with the
investigation and signing of the joint venture agreement. These costs
have been expensed together with other property investigation.
The resource interest is carried at a minimal amount of $100.
3. Capital Assets
<TABLE>
<CAPTION>
1995 1994
--------------------------------------- --------
Accumulated Net book Net book
Cost amortization value value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $14,358 $2,154 $12,204 $
Office equipment and
furniture 14,331 1,433 12,898
- --------------------------------------------------------------------------------
$28,689 $3,587 $25,102 $
================================================================================
</TABLE>
4. Share Capital
a) Authorized: 20,000,000 common shares without par value.
b) Issued:
<TABLE>
<CAPTION>
Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1993 1,785,873 $2,416,474
Issued pursuant to exercise of
warrants at $0.22 per share 500,000 110,000
- --------------------------------------------------------------------------------
Balance, December 31, 1994 2,285,873 2,526,474
Issued pursuant to a private placement 500,000 500,000
- --------------------------------------------------------------------------------
Balance, December 31, 1995 2,785,873 $3,026,474
================================================================================
</TABLE>
<PAGE> 33
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
4. Share Capital (continued)
c) 125,000 of the shares are held in escrow, the release of which
is subject to the direction of the regulatory authorities.
d) The Company has granted incentive stock options to directors and
employees for 156,750 shares exercisable at $1.00 per share,
expiring June 2, 2000.
e) The Company has agreed to issue 437,000 additional escrow shares
to its directors at $0.01 per share. These shares were issued
subsequent to the year-end.
f) The Company has agreed to issue, subject to regulatory approval,
200,000 shares as finder's fees in connection with the
joint-venture as described in Note 2.
5. Remuneration of Directors and Senior Officers
During the year, the Company paid or accrued the following expenses to
its directors:
Accounting - $10,400
Management and consulting fees - $45,684
Salaries - $33,000
<PAGE> 34
THIS IS SCHEDULE "H" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
Minco's Material Liabilities
None other than as disclosed in Minco's financial statements for the year ended
December 31, 1995 which are attached to this Agreement as Schedule "G".
<PAGE> 35
THIS IS SCHEDULE "I" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
RIGHTS TO ACQUIRE SECURITIES IN MINCO
1. incentive stock options for an aggregate of 156,750 common shares,
still subject to the approval of the Exchange, and exercisable until
June 2, 2000 at a price of $1.00 per share;
2. an aggregate 60,241 additional performance escrow shares to be issued
to certain principals of Minco pursuant to the policies of the
Exchange, the issuance of which remains subject to the approval of the
Exchange; and
3. 200,000 finders fee shares to be issued to December Inc. pursuant to a
Finders Fee Agreement dated as of December 11, 1995 made between
December Inc. and Minco, the issuance of which remains subject to the
approval of the Exchange;
<PAGE> 36
THIS IS SCHEDULE "J" OF THE ASSIGNMENT OF CONTRACTS AND SHARE PURCHASE
AGREEMENT DATED FEBRUARY 19, 1996 BETWEEN MINCO MINING AND METALS CORPORATION
AND PACIFIC CANADA RESOURCES INC.
TEMCO'S UNAUDITED FINANCIAL STATEMENTS
DATED DECEMBER 31, 1995
<PAGE> 37
TRIPLE EIGHT MINERAL CORPORATION
BALANCE SHEET (U.S.$)
As At December 31, 1995
<TABLE>
<CAPTION>
ASSET
<S> <C>
PREPAID EXPENSE $ 28,635
---------
<CAPTION>
LIABILITY
<S> <C>
DUE TO PACIFIC CANADA RESOURCES INC. $ 61,751
---------
<CAPTION>
SHAREHOLDER'S EQUITY
<S> <C>
CAPITAL STOCK 1,000
CONTRIBUTED SURPLUS 377,025
DEFICIT (411,141)
--------
(33,116)
--------
$ 28,635
========
</TABLE>
<PAGE> 38
TRIPLE EIGHT MINERAL CORPORATION
STATEMENT OF LOSS AND DEFICIT (U.S.$)
FOR THE PERIOD FROM
SEPTEMBER 13, 1995 TO DECEMBER 31, 1995
<TABLE>
<S> <C>
EXPENSES
China negotiations $303,698
Geological 61,797
General and administrative 37,037
Incorporation cost 850
Professional fees 7,759
--------
NET LOSS, being DEFICIT, end of period $411,141
========
</TABLE>
<PAGE> 39
THIS IS SCHEDULE "K" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT (THE "AGREEMENT") DATED FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION
AND PACIFIC CANADA RESOURCES INC.
TEMCO'S MATERIAL LIABILITIES
NOTES:
The only material liabilities of Temco are:
1. those liabilities imposed upon all corporations incorporated in the
British Virgin Islands under the relevant governing legislation;
2. those as are set out in its financial statements dated December 31,
1995 which are attached to this Agreement as Schedule "J"; and
3. those as are set out in the Emperor's Delight Joint Venture Contract.
<PAGE> 40
THIS IS SCHEDULE "L" OF THE ASSIGNMENT OF CONTRACTS AND SHARE PURCHASE
AGREEMENT DATED FEBRUARY 19, 1996 BETWEEN MINCO MINING AND METALS CORPORATION
AND PACIFIC CANADA RESOURCES INC.
RIGHTS TO ACQUIRE SECURITIES IN TEMCO
NOTES:
1. No third party has any rights to acquire securities in Temco.
<PAGE> 41
THIS IS SCHEDULE "M" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
ESCROW AGREEMENT
----------------
THIS AGREEMENT is dated for reference the ___ day of February, 1996 and
made AMONG:
MONTREAL TRUST COMPANY OF CANADA, of 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9
(the "Escrow Agent")
AND:
MINCO MINING AND METALS CORPORATION, a company validly subsisting under
the laws of British Columbia with an office at Suite 1870, 401 West
Georgia Street, Vancouver, British Columbia, V6B 5A1
(the "Issuer")
AND:
PACIFIC CANADA RESOURCES INC., a company validly subsisting under the
laws of Ontario with an office at 350 Bay Street, 7th Floor, Toronto,
Ontario, M5H 2S6
("PCR")
WHEREAS PCR has acquired or is about to acquire 4,880,000 escrow shares
of the Issuer pursuant to an Assignment of Contracts and Share Purchase
Agreement between the Issuer and PCR dated February ___, 1996 (the "Assignment
Agreement") as more particularly described in Schedule "A" attached hereto:
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in
respect of the shares upon the acquisition of the shares by PCR;
NOW THEREFORE in consideration of the covenants contained in this
Escrow Agreement and other good and valuable consideration (the receipt and
sufficiency of which is acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this Escrow Agreement:
<PAGE> 42
-2-
(a) "EXCHANGE" means the Vancouver Stock Exchange;
(b) "EXECUTIVE DIRECTOR" means the Executive Director of the
British Columbia Securities Commission appointed under the
Act; and
(c) "EXECUTIVE DIRECTOR OR THE EXCHANGE" means the Executive
Director, if the shares of the Issuer are not listed on the
Exchange, or the Exchange, if the shares of the Issuer are
listed on the Exchange.
(d) "SHARES" means the shares to be issued under escrow pursuant
to the Assignment Agreement and described in Schedule "A"
attached hereto;
2. PLACEMENT OF SHARES IN ESCROW
PCR shall place the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon as
practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), PCR may exercise all voting rights
attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
PCR waives the rights attached to the Shares:
(a) to vote the Shares on a resolution to cancel any of the Shares
in accordance with section 7 of this Agreement,
(b) to receive dividends, and
(c) to participate in the assets and property of the Issuer on a
winding up or dissolution of the Issuer.
<PAGE> 43
-3-
5. TRANSFER WITHIN ESCROW
(a) PCR shall not transfer any of the Shares except with the
consent of the Executive Director or the Exchange.
(b) The Escrow Agent shall not effect a transfer of the Shares
within escrow unless the Escrow Agent has received;
(i) a copy of an acknowledgment agreeing to be bound by
the terms of this Escrow Agreement executed by the
person to whom the Shares are to be transferred, and
(ii) a letter from the Executive Director or the Exchange
consenting to the transfer.
(c) Upon the insolvency or bankruptcy of PCR, the Escrow Agent
shall hold the Shares subject to this Escrow Agreement for the
person that is legally entitled to become the registered owner
of the Shares.
6. RELEASE FROM ESCROW
(a) PCR irrevocably directs the Escrow Agent to retain the Shares
until the Shares are released from escrow pursuant to
subsection (b), or surrendered for cancellation pursuant to
section 7, of this Agreement.
(b) The Escrow Agent shall not release the Shares from escrow
unless PCR and the Issuer have complied with the provisions of
section 4 of the Assignment Agreement and the Escrow Agent has
received a letter from the Executive Director or the Exchange
consenting to the release.
(c) The approval of the Executive Director or the Exchange to a
release from escrow of any of the Shares shall terminate this
Escrow Agreement only in respect of the Shares so released.
<PAGE> 44
-4-
7. SURRENDER FOR CANCELLATION
In the event of the cancellation of the Shares pursuant to the terms
of section 4.3 of the Assignment Agreement, PCR shall surrender the Shares and
the Escrow Agent shall deliver the certificates representing the Shares to the
Issuer for cancellation.
8. AMENDMENT OF AGREEMENT
This Escrow Agreement may be amended only by a written agreement among
the Parties and with the written consent of the Executive Director or the
Exchange.
9. INDEMNIFICATION OF ESCROW AGENT
The issuer and PCR, jointly and severally, release, indemnify
and save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agents compliance in good
faith with this Escrow Agreement.
10. RESIGNATION OF ESCROW AGENT
(a) If the Escrow Agent wishes to resign as escrow agent in
respect of the Shares, the Escrow Agent shall give notice to
the Issuer.
(b) If the Issuer wishes the Escrow Agent to resign as escrow
agent in respect of the Shares, the Issuer shall give notice
to the Escrow Agent.
(c) A notice referred to in subsection (a) or (b) shall be in
writing and delivered to
(i) the Issuer at 1870 - 401 West Georgia Street,
Vancouver, British Columbia, V6B 5A1: or
(ii) the Escrow Agent at 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9
and the notice shall be deemed to have been received on the
date of delivery. The Issuer or the Escrow Agent may change
its address for notice by giving notice to the other party in
accordance with this subsection.
<PAGE> 45
-5-
(d) A copy of a notice referred to in subsection (a) or (b) shall
concurrently be delivered to the Executive Director or the Exchange.
(e) The resignation of the Escrow Agent shall be effective and the
Escrow Agent shall cease to be bound by this Escrow Agreement on
the date that is 180 days after the date of receipt of the notice
referred to in subsection (a) or (b) or on such other date as the
Escrow Agent and the Issuer may agree upon (the "resignation date").
(f) The Issuer shall, before the resignation date and with the written
consent of the Executive Director or the Exchange, appoint another
escrow agent and that appointment shall be binding on the Issuer and
PCR.
11. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any
acts necessary to carry out the intent of this Escrow Agreement.
12. TIME
Time is of the essence of this Escrow Agreement.
13. GOVERNING LAWS
This Escrow Agreement shall be construed in accordance with and
governed by the laws of British Columbia and the laws of Canada applicable in
British Columbia.
14. COUNTERPARTS
This Escrow Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one agreement.
<PAGE> 46
-6-
15. LANGUAGE
Wherever a singular expression is used in this Escrow Agreement,
that expression is deemed to include the plural or the body corporate where
required by the context.
16. ENUREMENT
This Escrow Agreement enures to the benefit of and is binding on
the Parties and their heirs, executors, administrators, successors and
permitted assigns.
The Parties have executed and delivered this Escrow Agreement as of
the date of reference of this Escrow Agreement.
THE COMMON SEAL of MONTREAL )
TRUST COMPANY OF CANADA was )
hereto affixed in the presence of: )
)
- ----------------------------------- ) C/S
Authorized Signatory )
)
)
- ----------------------------------- )
Authorized Signatory )
)
)
THE CORPORATE SEAL OF MINCO )
MINING AND METALS CORPORATION was )
hereunto affixed in the presence of: )
)
- ----------------------------------- ) C/S
Authorized Signatory )
)
)
- ----------------------------------- )
Authorized Signatory )
<PAGE> 47
-7-
THE CORPORATE SEAL OF PACIFIC )
CANADA RESOURCES INC. was hereunto )
affixed in the presence of: )
)
)
___________________________________ ) C/S
Authorized Signatory )
)
)
___________________________________ )
Authorized Signatory )
<PAGE> 48
THIS IS SCHEDULE "A" OF THE ESCROW AGREEMENT
DATED FOR REFERENCE *, 1996
BETWEEN MONTREAL TRUST COMPANY OF CANADA,
MINCO MINING AND METALS CORPORATION
AND PACIFIC CANADA RESOURCES INC.
NAME OF ESCROW SHAREHOLDER NO. OF SHARES HELD IN ESCROW SHARE CERTIFICATE NO.
- -------------------------- ---------------------------- ---------------------
Pacific Canada Resources Inc. 4,880,000 *
<PAGE> 49
THIS IS SCHEDULE "N" OF THE ASSIGNMENT OF CONTRACTS AND
SHARE PURCHASE AGREEMENT DATED FOR REFERENCE FEBRUARY 19, 1996
BETWEEN MINCO MINING AND METALS CORPORATION AND
PACIFIC CANADA RESOURCES INC.
SHAREHOLDERS AGREEMENT
THIS AGREEMENT made as of the_______day of February, 1996.
BETWEEN:
PACIFIC CANADA RESOURCES INC., a company validly subsisting
under the laws of Ontario with an office at 350 Bay Street,
7th Floor, Toronto, Ontario, M5H 2S6
("PCR")
OF THE FIRST PART
AND:
PETER TSAPARAS, Businessman, of Suite 1870, 401 West Georgia
Street, Vancouver, British Columbia, V6B 5A1
("Tsaparas")
OF THE SECOND PART
AND:
COLIN McALEENAN, Businessman, of Suite 1870, 401 West Georgia
Street, Vancouver, British Columbia, V6B 5A1
("McAleenan")
OF THE THIRD PART
(collectively, PCR, Tsaparas and McAleenan hereinafter called the
"Shareholders")
AND:
KEN CAI, Businessman, of 350 Bay Street, 7th Floor, Toronto,
Ontario, M5H 2S6
("Cai")
OF THE FOURTH PART
<PAGE> 50
AND:
DONALD HICKS, Businessman, of 350 Bay Street, 7th Floor,
Toronto, Ontario, M5H 2S6
("Hicks")
OF THE FIFTH PART
AND:
WAYNE SPILSBURY, Geologist, of 268 Orchard Road, #16-01 Yen
San Building, 0923 Singapore
("Spilsbury")
OF THE SIXTH PART
AND:
MINCO MINING AND METALS CORPORATION, a company validly
subsisting under the laws of British Columbia with an office
at Suite 1870, 401 West Georgia Street, Vancouver, British
Columbia, V6B 5Al
(the "Corporation")
OF THE SEVENTH PART
WHEREAS:
A. PCR and the Corporation have entered into an Assignment of Contracts and
Share Purchase Agreement dated February *, 1996 (the "Assignment Agreement")
pursuant to which certain interests in Chinese mineral properties were
transferred to the Corporation;
B. Pursuant to the Assignment Agreement a total of 7,280,000 common shares of
the Corporation were issued to PCR comprised of 2,400,000 free-trading shares
and 4,880,000 escrowed shares (the "PCR Escrow Shares"). The release of the
PCR Escrow Shares is governed by the terms of an Escrow Agreement dated
February *, 1996 entered into between PCR, the Corporation and the Montreal
Trust Company of Canada;
C. Pursuant to the terms of the Assignment Agreement, Teck Corporation ("Teck")
and Cominco Ltd. ("Cominco") have agreed to participate with PCR and the
Corporation in the exploration and development of Chinese mineral properties;
D. Each of PCR and Tsaparas represents that after giving effect to the
transactions contemplated by the Assignment Agreement, each of PCR and
Tsaparas is the beneficial owner, directly or indirectly, of or otherwise has
the right to vote or deal with fully paid and nonassessable common shares
without par value in the capital of the Corporation (the "Common Shares"), as
follows:
<PAGE> 51
- 3 -
PCR - 7,280,000
Tsaparas - 279,167
McAleenan - 90,000
Hicks - None
Cai - None
Spilsbury - None
E. Each of the Shareholders represents that as of the date hereof they do
not beneficially own, directly or indirectly, or otherwise have direction and
control over or the right to deal with any other common shares of the
Corporation.
F. The parties desire to enter into this Agreement in order to record
their respective rights and obligations with respect to the certain corporate
matters pertaining to the Corporation.
NOW THEREFORE in consideration of the premises, the payment of the sum of One
($1.00) Dollar by each of the parties hereto to the other, and in further
consideration of the mutual covenants and the agreements herein contained and
of other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto covenant and agree with each other
as follows:
1. COMMON SHARES
1.1 "Common Shares" includes the Common Shares as set forth in the recitals
hereto and any common shares of the Corporation acquired by any Shareholders
(including any acquisitions of common shares of the Corporation by any
corporation, partnership, trust or other entity, in which any Shareholder or
all of the Shareholders together, owns beneficially, directly or indirectly 50%
or more of the voting rights attaching to the outstanding securities of such
entity (referred to herein as an "affiliate")) at any time after the date of
this Agreement.
1.2 Each of Hicks, Cai and Spilsbury acknowledges and agrees that,
notwithstanding that they do not beneficially own common shares of the
Corporation as of the date hereof, they will be considered Shareholders for the
purposes of this Agreement in the same manner as if they had beneficially owned
shares of the Corporation as at the date of this Agreement.
2. VOTING OF COMMON SHARES
2.1 Immediately following the closing of the Assignment Agreement, the
Shareholders shall vote their Common Shares so that the Board of Directors of
the Corporation (the "Board") shall be comprised of five (5) directors and so
that two nominees of Tsaparas and McAleenan, collectively, two nominees of PCR
and one nominee of Teck and Cominco, collectively, are appointed directors of
the Corporation as follows:
<PAGE> 52
- 4 -
SHAREHOLDER NOMINEE
Tsaparas/McAleenan Peter Tsaparas
Tsaparas/McAleenan Colin McAleenan
PCR Donald Hicks
PCR Ken Cai
Spilsbury (Teck/Cominco) Wayne Spilsbury
The Shareholders further agree to vote their Common Shares to appoint each of
Tsaparas and Cai to the Board of Directors of the Corporation for a three year
term and each of McAleenan, Hicks and Spilsbury for a one year term.
Thereafter, the nominees of the respective Shareholders shall be as determined
from time to time by such Shareholders.
In the event that a person on the Board shall be open for any reason
whatsoever, the Shareholder whose nominee shall have formerly occupied such
position shall be entitled to nominate a new director to fill such vacancy.
2.2 If a nominee to the Board of one of the Shareholders should resign or
be removed, then the Shareholders agree to exercise their rights as
shareholders of the Corporation and in accordance with this Agreement and the
Articles of the Corporation to elect such individuals as is nominated by such
Shareholder or Shareholders whose original nominee it is that has resigned or
been removed
2.3 The Shareholders further agree that at the Corporation's next annual
general meeting following the date of this Agreement they shall vote their
Common Shares in such a manner as to:
(a) increase the size of the Corporation's Board of Directors to
seven (7) members, to appoint the five (5) individuals
specified in section 2.1 in the manner therein described (the
"Original Directors") and to appoint two (2) new directors, one
of whom shall be a nominee of PCR and the second of whom shall
be a nominee of the Original Directors, acting as a Board:
(b) approve the issuance of 60,241 additional performance escrow
shares as described in section 3.1(b) and
(c) cause the Corporation to change its corporate name to such new
name as may be approved by the Original Directors and the
regulatory authorities having jurisdiction.
2.4 During the term of this Agreement each of Shareholders shall, after
receipt of any notice of meeting of shareholders of the Corporation, either
attend such shareholder meeting to vote their Common Shares or shall complete
and deliver to the Corporation a proxy, duly completed and executed in such a
manner as to ensure that the votes of the Shareholders are
<PAGE> 53
- 5 -
recognized and included in the voting at such shareholders meeting, all in
accordance with the provisions of this Agreement.
3. VOTING OF BOARD OF DIRECTORS
3.1 Each of the Original Directors agrees that, while a director of the
Corporation and during the term of this Agreement, they shall cast their
Director's votes in favour of the following:
(a) the appointment on an annual basis of the following officers
of the Corporation while such individuals are directors of
the Corporation and for the terms indicated:
<TABLE>
<CAPTION>
OFFICE DIRECTOR TERM
<S> <C> <C>
Chairman Tsaparas 3 years
President and CEO Cai 3 years
Vice-President Hicks 1 year
Vice-President McAleenan 1 year
</TABLE>
(b) the completion of all steps necessary to cause the issuance of
the balance of 60,241 additional performance escrow shares
pursuant to an application made to the Vancouver Stock Exchange
on January 17, 1996, upon approval by the shareholders of the
Corporation as described in section 2.3;
(c) the completion of all steps necessary to cause the issuance of
200,000 finder's fee shares to December Inc. pursuant to a
finder's fee agreement made between the Corporation and December
Inc. dated December 11, 1995;
(d) the grant of an aggregate 1,100,000 incentive stock options to
the Original Directors in accordance with the policies of the
Vancouver Stock Exchange and at the lowest exercise price
permitted under such policies, as follows:
<TABLE>
<S> <C> <C>
Ken Cai - 350,000
Peter Tsaparas - 200,000
Donald Hicks - 200,000
Wayne Spilsbury - 200,000
Colin McAleenan - 150,000
</TABLE>
(e) the grant of an aggregate 200,000 incentive stock options to the
two new directors to be appointed pursuant to section 2 herein,
in accordance with the policies of the Vancouver Stock Exchange
and at the lowest exercise price permitted under such policies,
such grant to be made on or forthwith following the later of the
date of appointment of the new Director and the
<PAGE> 54
- 6 -
completion of the Corporation's proposed initial round of
public financing offering of a minimum 2,000,000 shares
of the Corporation; and
(f) the change of the Corporation's name in accordance with
the regulatory authorities having jurisdiction.
3.2 Notwithstanding the provisions of this Agreement, the Shareholders
acknowledge and agree that, while acting in their capacity as directors of the
Board, they have a fiduciary obligation to act in the best interests of the
Corporation.
4. SHAREHOLDERS MEETINGS
4.1 The Corporation confirms that it is entering into this Agreement to
acknowledge notice of the provisions of this Agreement and that it will cause
the chairman of any meeting of shareholders of the Corporation to acknowledge
to the parties hereto the provisions of this Agreement and such chairman shall
not accept or recognize any ballot, proxy or vote by or on behalf of any of the
Shareholders, or any nominee thereof, which is not cast or exercised so as to
carry out the provisions of this Agreement.
5. SALE OF ESCROW SHARES
5.1 PCR agrees that it shall not sell, transfer or convey any of its Escrow
Shares to a third party until it first provides all parties to this Agreement
with a written acknowledgement of such third party under which it agrees to be
bound by the terms and conditions of this Agreement in the same manner as if
such third party was an original signatory hereto.
6. PLEDGED OR MARGINED COMMON SHARES
6.1 If any of the Common Shares are mortgaged, pledged, charged,
hypothecated, margined or held by any nominee at any time during the currency
of this Agreement, the holder thereof shall advise the other parties hereto
and, if requested by any of such parties, shall deliver to such other parties
prior to such mortgage, pledge, charge, hypothecation or margin, an
acknowledgment in substantially the form set out as Schedule "A" hereto,
whereby such mortgagee, pledgee, chargee, hypothecary, broker or nominee, as the
case may be, agrees to subject such Common Shares to the provisions of this
Agreement.
7. REORGANIZATION
7.1 In the event of the subdivision, consolidation, change, classification
or reclassification at any time of any Common Shares into a greater or lesser
number of common shares of the Corporation or in the event of the conversion of
such Common Shares or upon the amalgamation of the Corporation with any other
corporation or corporations any shares resulting from such subdivision,
consolidation, change, classification, reclassification, conversion or
amalgamation shall be subject to this Agreement.
<PAGE> 55
<PAGE> 56
- 7 -
8. REQUESTS
8.1 Each of the parties hereto shall have the right to request in writing that
any of the other parties disclose to them in writing the number of Common Shares
beneficially owned, directly or indirectly, by them and any of their affiliates
and such other parties shall provide such information in writing, within a
reasonable period of time.
9. FURTHER DOCUMENTS
9.1 The parties hereto agree to execute such further documents as may be
required to give effect to the foregoing
10. TERM
10.1 The term of this Agreement shall be for one (1) year commencing on the
date of execution hereof
11. SUCCESSORS
11.1 This Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties hereto. Subject as aforesaid, this
Agreement shall be binding upon and enure to the benefit of the parties hereto
and their respective heirs, executors, administrators, successors and permitted
assigns, as the case may be.
12. GOVERNING LAW
12.1 This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia.
13. COUNTERPARTS
13.1 This Agreement may be signed by facsimile and in one or more counterparts
14 SEVERABILITY
14.1 Any provision or provisions of this Agreement which contravene any
applicable law or which are found to be unenforceable shall, to the extent of
such contravention or unenforceability, be deemed severable and shall not cause
this Agreement to be held invalid or unenforceable or affect any other provision
or provisions of this Agreement.
15. NOTICES
15.1 Any notice, consent, direction or other instrument required or permitted to
be given under the provisions of this Agreement shall be in writing and may
be given by delivering same or mailing same by prepaid registered mail or
sending same by telegram, telex, telecommunication or other similar form of
communication in each case addressed as follows:
<PAGE> 57
- 8 -
(a) if to PCR, at:
Pacific Canada Resources Inc.
Suite 7000, 350 Bay Street
Toronto, Ontario
M5H 2S6
Fax No.: 416-368-2579
Attention: Mr. Ken Z. Cai, Managing Director
(b) if to Tsaparas, at:
c/o Minco Mining and Metals Corporation
Suite 1870, 401 W. Georgia Street
Vancouver, B.C.
V6B 5A1
Fax No.: 604-688-8030
Attention: Mr. Peter Tsaparas
(c) if to McAleenan, at:
c/o Minco Mining and Metals Corporation
Suite 401 W. Georgia Street
Vancouver, B.C.
V6B 5A1
Fax No.: 604-688-8030
Attention: Mr. Colin McAleenan
(d) if to Cai, at:
c/o Pacific Canada Resources Inc.
Suite 7000, 350 Bay Street
Toronto, Ontario
M5H 2S6
Fax No.: 416-368-2579
Attention: Mr. Ken Z. Cai
(e) if to Hicks, at:
c/o Pacific Canada Resources Inc
Suite 7000, 350 Bay Street
Toronto, Ontario
M5H 2S6
Fax No.: 416-368-2579
Attention: Mr. Donald Hicks
<PAGE> 58
- 9 -
(f) if to Spilsbury, at:
c/o Teck Exploration Ltd.
268 Orchard Road
#16-01 Yen San Building
0923 Singapore
Fax No.: 65-738-3712
(g) if to the Corporation, at:
Minco Mining and Metals Corporation
Suite 1870, 401 W. Georgia Street
Vancouver, B.C.
V6B 5A1
Fax No.: 1-604-688-8030
Attention: Mr. Peter Tsaparas, Chairman & C.E.O.
Any notice, requisition, consent, direction or other instrument aforesaid, if
delivered, shall be deemed to have been given or made on the day in which it was
delivered and if sent by telegram, telegraph, telecommunication or other similar
form of communication shall be deemed to have been given or made on the next
business day following the day on which it was so sent and if mailed shall be
deemed to have been given or made on the seventh business day following the date
on which it was so mailed. Any party hereto may given written notice of change
of address in the same manner in which any notice shall thereafter be given to
it as above provided at such changed address.
IN WITNESS WHEREOF the parties hereto have duly executed these presents.
THE CORPORATE SEAL OF PACIFIC
CANADA RESOURCES INC. was hereunto
affixed in the presence of:
__________________________________ C/S
Authorized Signatory
__________________________________
Authorized Signatory
<PAGE> 59
- 10 -
SIGNED, SEALED and DELIVERED by
PETER TSAPARAS in the presence of:
- -----------------------------------
Signature
- ----------------------------------- -----------------------------------
Address PETER TSAPARAS
- -----------------------------------
- -----------------------------------
- -----------------------------------
Occupation
SIGNED, SEALED and DELIVERED by
COLIN McALEENAN in the presence of:
- -----------------------------------
Signature
- ----------------------------------- -----------------------------------
Address COLIN McALEENAN
- -----------------------------------
- -----------------------------------
Occupation
<PAGE> 60
- 11 -
SIGNED, SEALED AND DELIVERED by
KEN CAI in the presence of:
- -----------------------------------
Signature
- ----------------------------------- -----------------------------------
Address KEN CAI
- -----------------------------------
- -----------------------------------
Occupation
SIGNED, SEALED AND DELIVERED by
DONALD HICKS in the presence of:
- -----------------------------------
Signature
- ----------------------------------- -----------------------------------
Address DONALD HICKS
- -----------------------------------
- -----------------------------------
Occupation
SIGNED, SEALED AND DELIVERED by
WAYNE SPILSBURY in the presence of:
- -----------------------------------
Signature
- ----------------------------------- -----------------------------------
Address WAYNE SPILSBURY
- -----------------------------------
- -----------------------------------
Occupation
<PAGE> 61
- 12 -
THE CORPORATE SEAL OF MINCO
MINING AND METALS CORPORATION
was hereunto affixed in the presence of:
- ----------------------------------- C/S
Authorized Signatory
- -----------------------------------
Authorized Signatory
<PAGE> 62
SCHEDULE "A"
------------
TO:
RE: SHAREHOLDERS AGREEMENT DATED FEBRUARY ___, 1996 BETWEEN PACIFIC CANADA
RESOURCES INC., PETER TSAPARAS, COLIN McALEENAN, KEN CAI, DONALD HICKS,
WAYNE SPILSBURY AND MINCO MINING AND METALS CORPORATION
The undersigned, _________________________________, hereby acknowledges having
received __________common shares of MINCO MINING AND METALS CORPORATION (the
"Common Shares") for the purpose of security for indebtedness of _____________.
In consideration of the security interest granted in the Common Shares, the
undersigned hereby acknowledges that the Common Shares are subject to the
restrictions contained in the Agreement (a copy of which has been received and
reviewed by the undersigned) and agrees that the Common Shares will not be sold
by the undersigned except in compliance with the Agreement.
DATED: _____________________________
PER: _______________________________
<PAGE> 63
This is SCHEDULE "O" of the Assignment of Contracts and
Share Purchase Agreement dated for reference February 19, 1996
between Minco Mining and Metals Corporation and
Pacific Canada Resources Inc.
PACIFIC CANADA RESOURCES INC.
350 BAY STREET, 7TH FLOOR, TORONTO, ONTARIO, M5H 2S6
TEL: (416) 364-9382 FAX: (416) 368-2579
CONFIDENTIAL
BY FACSIMILE: 604-688-8030
January 2, 1995
Mr. Colin McAleenan
Minco Mining & Metals Corporation
Suite 1870
401 West Georgia Street
Vancouver, British Columbia
V6B 5A1
Dear Colin:
RE: CONFIDENTIALITY AGREEMENT
Pacific Canada Resources Inc. ("PCR") and Minco Mining and Metals
Corporation ("MINCO") are contemplating a possible business transaction (the
"TRANSACTION"). In connection with this possible Transaction, each of us will
need to review information held by the other as part of a due diligence process.
As set out in this letter, each of us agree that, as a condition to each of us
furnishing such information to the other, each will be required to treat
confidentially such information and any other information each of us or our
agents furnish to the other, whether furnished before or after the date of this
letter (collectively, the "EVALUATION MATERIAL").
Each of the parties agrees not use the Evaluation Material in any way
detrimental to the other, and that such information, as well the existence,
nature and scope of the discussions between us, will be kept confidential by
each of the parties and their agents; provided, however, that any of such
information may be disclosed to the parties' directors, officers, employees and
representatives and to individuals acting in similar capacities on their behalf,
who need to know such information for the purposes of considering the
Transaction, (it being understood that such directors, officers, employees
1
<PAGE> 64
and representatives shall be informed by each of the parties of the
confidential nature of such information and shall be requried by each of the
parties to treat such information confidentially).
Without the prior written consent of an authorized officer of each of
the parties, as applicable, or such other persons as such officers may
designate, the parties will not disclose, and each of the parties will direct
their directors, officers, employees and representatives not to disclose, to
any person, any of the Evaluation Material or the fact that discussions are
taking place concerning the potential Transaction unless, in the opinion of
legal counsel, disclosure is required to be made under any applicable
securities laws or regulations; provided, however, that if either party
proposes to make any disclosure based upon the opinion of legal counsel as
aforesaid, such party will advise and consult with the other party prior to
such disclosure concerning the information which is proposed to be disclosed.
The term "person" as used in this letter shall be broadly interpreted to
include, without limitation, any corporation, company, partnership, or
individual.
If either party is required by legal process to disclose any Evaluation
Material supplied to it or to its representatives, it is agreed that such party
will provide the other party with prompt notice of such requirement(s), so that
such other party may seek either an appropriate protective order, or waive the
requirement to comply with the provisions of this letter.
If an agreement regarding the proposed Transaction is not reached
between us subsequent to the review of the Evaluation Material, each party will
promptly, upon request, deliver to the other party the Evaluation Material
provided to it, without retaining any copies of it.
The term "Evaluation Material" does not include any information which:
(i) becomes generally available to the public other than as a
result of improper disclosure by a party or its
representatives;
(ii) was available on a non-confidential basis prior to its
disclosure to a party; or
2
<PAGE> 65
(iii) becomes available to a party on a non-confidential basis from a
source other than from the other party (the "OTHER PARTY") or its
representatives, provided that such source is not bound by an
obligation of confidentiality to such Other Party or to its
representatives.
No representation or warranty is made by either party or its agents,
consultants, representatives or advisors as to the completeness or accuracy of
the Evaluation Material and each party agrees that neither party, nor its
agents, consultants, representatives or advisors shall have any liability to the
other party, or to any of its agents, consultants, representatives or advisors
resulting from the use of the Evaluation Material.
Each party (an "INDEMNITOR") agrees to indemnify and save harmless the
other party (an "INDEMNITEE") and its directors, officers, employees and agents
from any loss whatsoever, arising out of a breach by an Indemnitor of any of the
terms and conditions set out in this letter.
It is further understood and agreed that no failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further excercise thereof, or the exercise of any other right, power or
pivilege hereunder.
3
<PAGE> 66
If you are in agreement with the foregoing, would you kindly so indicate
by signing a copy of this letter and returning it to me by facsimile.
Yours truly,
/s/D.S. Hicks
- -------------
Donald S. Hicks
Vice-President
I have read the letter set out above and, by my signature below, I indicate that
I agree to the terms set out in such letter.
Minco Mining and Metals Corporation
By: /s/ Colin McAleenan
-------------------------
Colin McAleenan
Date: January 2, 1996
4
<PAGE> 67
THIS IS SCHEDULE "P" OF THE ASSIGNMENT OF CONTRACTS AND SHARE PURCHASE
AGREEMENT DATED FEBRUARY 19, 1996 BETWEEN MINCO MINING AND METALS
CORPORATION AND PACIFIC CANADA RESOURCES INC.
THIRD PARTY LIABILITIES OF PCR
<TABLE>
<CAPTION>
CATEGORY OR THIRD PARTY AMOUNT
----------------------- ------
<S> <C>
1. Legal and Accounting Services $22,000
2. Consulting $75,800
A.C.A Howe International Limited 5,800
Kaisun Group (Canada) Inc. 40,000
1066098 Ontario Inc. 30,000
3. TOTAL $97,800
</TABLE>
<PAGE> 1
Exhibit 3b
SALE AND PURCHASE AGREEMENT
THIS AGREEMENT dated for reference the 27th day of February, 1997.
BETWEEN:
MINCO MINING AND METALS CORPORATION, a body corporate validly
subsisting under the laws of British Columbia and having an
office at #1200-543 Granville Street, Vancouver, British
Columbia, V6C 1X8
(the "Purchaser")
OF THE FIRST PART
AND:
CHINA CLIPPER GOLD MINES LTD., a body corporate incorporated
pursuant to the laws of Ontario and having an office at
704-850 West Hastings Street, Vancouver, British Columbia, V6E
1E1
(the "Vendor")
OF THE SECOND PART
WHEREAS:
A. Pursuant to a Letter Agreement dated March 7, 1995 (the "Letter Agreement"),
the Vendor and the Purchaser agreed to participate as co-venturers in the
exploration and development of certain mineral properties in the Peoples
Republic of China known as the Emperor's Delight, Stone Lake and Crystal Valley
properties (the "Joint Venture Business");
B. The Joint Venture Business has been carried out by the parties primarily
through Triple Eight Mineral Corporation, a company incorporated pursuant to the
laws of the British Virgin Islands ("Temco");
C. Pursuant to a Joint Venture Contract between Temco and Geoexploration
Corporation of the First Geoexploration Bureau ("GEC-FGEB"), Temco has an
interest in Chende Huajia Mineral Industry Co., Ltd. ("Huajia"), a cooperative
joint venture formed under the laws of the Peoples Republic of China through
which Temco and GEC-FGEB are conducting exploration and development work on,
initially, the Emperor's Delight property;
D. There are a total of 1,000 shares issued and outstanding in the capital of
Temco, 400 of which are registered in the name of and are beneficially owned by
the Vendor (the
<PAGE> 2
- 2 -
"Vendor's Shares") and 600 of which are registered in the name of and are
beneficially owned by the Purchaser;
E. In addition to its interests in Temco, the Vendor also has an interest in the
Joint Venture Business through its interests in a Cooperation Agreement
Regarding Certain Mineral Deposit Properties made between Pacific Canada
Resources Inc. and Patrician Gold Mines Ltd. (the predecessor of the Vendor) and
The First Geoexploration Bureau of the Ministry of Metallurgical Industry dated
November 24, 1994 which deals with the Emperor's Delight, Stone Lake and Crystal
Valley properties (the "Cooperation Agreement");
F. The parties have agreed to terminate their relationship as co-venturers and,
incidental thereto, the Vendor has agreed to transfer and assign to the
Purchaser all the Vendor's right, title and interest in and to the Vendor's
Shares, the Vendor's interests in the Cooperation Agreement and all other rights
and interests that the Vendor may have in the Joint Venture Business, subject to
the following terms and conditions.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
promises, covenants, terms, conditions representations and warranties
hereinafter set forth, the parties hereto agree each with the other as follows:
1. TERMINATION OF JOINT VENTURE RELATIONSHIP AND TRANSFER AND ASSIGNMENT
OF VENDOR'S INTERESTS
1.1 The parties agree that, effective as at the date of Closing, as hereinafter
defined, the Letter Agreement shall be terminated and shall have no further
force and effect.
1.2 The Purchaser agrees to purchase and the Vendor agrees to sell, assign and
transfer the Vendor's Shares at a price of One Hundred Seventy Five Thousand
($175,000) Dollars in lawful money of Canada (the "Purchase Price") to be paid
by the Purchaser to the Vendor on the date of Closing.
1.3 The Vendor agrees to assign to the Purchaser all its rights and interests in
and to the Cooperation Agreement for the sum of One ($1.00) Dollar in lawful
money of Canada (the "Assignment Price") to be paid by the Purchaser to the
Vendor on the date of Closing.
1.4 The Vendor acknowledges that it may be required to execute and deliver such
other documents as may be requested by counsel for the Purchaser in order to
obtain necessary regulatory approval of the transactions herein contemplated and
the Vendor hereby agrees to execute and deliver any and all such documents
forthwith at the request of the Purchaser or their solicitors, without any
expense to the Vendor.
2. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS OF THE VENDOR AND THE
PURCHASER
2.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendor represents and warrants to the Purchaser as follows:
<PAGE> 3
- 3 -
(a) the Vendor has due and sufficient right and authority to enter into
this Agreement on the terms and conditions herein set forth and to
sell, assign and transfer the legal and beneficial title and ownership
of the Vendor's Shares to the Purchaser;
(b) the Vendor has no interests, beneficial or otherwise, in or to the
Joint Venture Business other than its interests in the Vendor's Shares
and the Cooperation Agreement;
(c) no individual, corporation, partnership, firm, joint venture,
syndicate, association, trust, government, governmental agency or board
or commission or authority, incorporated association, incorporated
syndicate, incorporated organization and other form of entity or
organization has any agreement, option, understanding or commitment, or
any right or privilege, whether by law, pre-emptive or contractual,
capably of becoming an agreement, option or commitment, including
convertible securities, warrants or convertible obligations of any
nature, for the purchase, subscription, allotment or issuance of, or
conversion into, any of the Vendor's Shares;
(d) the Vendor is not under any obligation, contractual or otherwise, to
request or obtain the consent of any person to any of the transactions
contemplated herein or any part thereof or to the sale, transfer,
assignment or delivery of any of the Vendor's Shares;
(e) to the best of the Vendor's knowledge, no permits, licenses,
certifications or approvals of any Canadian, provincial or local
governmental agency, board, commission or authority are required for
the execution, delivery or performance by the Vendor the provisions of
this Agreement or the transactions contemplated herein;
(f) Temco is not indebted to the Vendor or any affiliate or director or
officer of the Vendor and specifically Temco is not liable to pay any
outstanding management fees;
(g) Temco does not have any contracts, agreements, pension plans, profit
sharing plans, bonus plans, undertakings, or arrangements whether oral,
written or implied with the Vendor or any affiliate or director or
officer of the Vendor;
(h) neither of the Vendor nor any officer, director, employee or
shareholder of the Vendor are indebted or under obligation to or have
provided any guarantees, bonds, letters of credit in favour of Temco on
any account whatsoever;
(i) the performance of this Agreement will not be in violation or of any
agreement to which the Vendor or Temco are a party and will not give
any person or company any right to terminate or cancel any agreement or
any right enjoyed by Temco and will not result in the creation or
imposition of any lien, encumbrance or restriction of any nature
whatsoever in favour of a third party upon or against the assets of
Temco;
<PAGE> 4
- 4 -
(j) the Vendor's Shares are validly issued, fully-paid and
non-assessable common shares not subject to any trading
restrictions other than as set out in the Bylaws of Temco; and
(k) the Vendor knows of no action proceeding or investigation
pending or threatened involving the Vendor or the Joint
Venture Business which places in question the validity or
enforceability of this Agreement.
2.2 The Vendor represents and warrants that it is a resident of Canada for the
purpose of Section 116 of the Income Tax Act of Canada.
2.3 The Purchaser represents and warrants to the Vendor that;
(a) the Purchaser has all necessary corporate power and capacity
to enter into this agreement and to perform its obligations
hereunder;
(b) the fulfilment of the Purchaser's obligations hereunder will
not be in contravention of any articles or by-laws of the
Purchaser or any contracts or instruments to which the
Purchaser is a party or by which it is bound; and
(c) the Purchaser knows of no action, proceeding or investigation
pending or threatened involving Temco which places in question
the validity or enforceability of this Agreement.
2.4 The representations, warranties, covenants and agreements by each of the
Vendor and the Purchaser contained in this Agreement or any certificates or
documents delivered pursuant to the provisions hereof or in connection with the
transaction contemplated hereby shall be true at and as of the date of Closing
of this Agreement as though such representations and warranties were made at and
as of such time. Notwithstanding any investigations or inquiries made by the
Vendor or the Purchaser, as the case may be, prior to the execution of this
Agreement or the waiver of any condition by the Vendor or the Purchaser, the
representations, warranties, covenants and agreements of the Vendor or the
Purchaser shall survive the execution and Closing of this Agreement and
notwithstanding the purchase and sale herein provided for, shall continue in
full force and effect.
3. OTHER AGREEMENTS
3.1 The Vendor acknowledges that and agrees that subsequent to the completion of
the transactions specified herein, the Vendor shall have no further right, title
or interest, beneficial or otherwise, in or to the Joint Venture Business
including but not limited to any right, title or interest in Huajia and that,
upon completion of the transactions specified herein, the Vendor shall be deemed
to have relinquished any and all claims to Huajia, and all assets of Huajia,
including but not limited to Huajia's working capital and properties. The Vendor
further acknowledges and agrees that Temco may continue to expend Huajia's
working capital on the Emperor's Delight project, which is currently the subject
matter of the joint venture being conducted through Huajia by Temco or,
alternatively, Huajia may in the future, by agreement between Temco and
GEC-FGEB, or other Chinese parties, conduct exploration and development
<PAGE> 5
- 5 -
work on mineral resource properties in the Peoples Republic of China other than
the Emperor's Delight Property, in which case all or a portion of the Huajia
Funds may be applied towards work commitments and other costs relating to such
other properties.
3.2 The parties acknowledge and agree that, upon Closing, neither party shall
have any right, title, claim or interest in or to any mineral property in the
Peoples Republic of China in which the other party holds an interest as at the
date of Closing.
3.3 Each of the Vendor and Purchaser covenant to indemnify and save harmless the
other party with respect to any and all losses, damages, liabilities, claims,
deficiencies, costs, expenses and expenditures which the other party may sustain
or incur as a result of the incorrectness or breach of any representation,
warranty or covenant of the such party contained in this Agreement or in any
document delivered to the other party in connection with this Agreement.
3.4 The Vendor acknowledges that it has received from the Purchaser and has
reviewed all geological reports, data and other information relating to the work
program conducted on the Emperor's Delight project during 1996 including the
following reports prepared by Huajia in Chinese:
(a) Report on geophysical and geochemical exploration at the east
section of Guzigou Area, Chengde, Hebei dated August 1996;
(b) Report on geophysical and geochemical exploration in
Qiujiaying Area, Chengde, Hebei dated October 1996;
(c) Brief summary on the following-up for geophysical and
geochemical anomalies at the east section of Guzigou Area,
Chengde, Hebei, and proposals for further exploration dated
December 1996; and
(d) Report on comprehensive geological exploration in Qiujiaying
Area and proposals for further exploration dated December
1996.
4. CLOSING
4.1 In this Agreement, the "Closing" means the date mutually agreed to by the
parties within ten days of the Approval Date, as defined in paragraph 5.5, upon
which the Vendor and the Purchaser shall complete the transactions contemplated
by this Agreement and provide the documents herein described to complete the
transactions. The Closing shall be held at the offices of Beach, Hepburn of 36
Toronto Street, Suite 1000, Toronto, Ontario or such other place as may be
agreed to by the parties.
4.2 Upon the Closing of this Agreement, the following events shall occur:
(a) the Vendor shall cause to be delivered to the Purchaser the
share certificates representing the Vendor's Shares duly
endorsed for transfer to the Purchaser and an assignment of
the Cooperation Agreement;
<PAGE> 6
- 6 -
(b) the Purchaser shall deliver to the Vendor a cheque, payable to
Beach, Hepburn in trust for China Clipper, in the amount of
the Purchase Price and the Assignment Price; and
(c) the Vendor shall deliver to the Purchaser the written
resignation of Robin Dow, as director and officer of Temco and
Huajia.
5. NOTICES
5.1 All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed postage prepaid addressed to the addressee at the address appearing on
the first page hereof or to such other address as may be given in writing by the
Vendor or the Purchaser, and shall be deemed to have been received, if
delivered, on the date of delivery and if mailed as aforesaid at Vancouver,
British Columbia then on the next business day following the posting thereof.
6. GENERAL
6.1 This Agreement shall enure to the benefit of and shall be binding upon the
Vendor and the Purchaser and their respective successors and assigns.
6.2 Time shall be of the essence of this Agreement.
6.3 The terms and provisions herein contained constitute the entire agreement
between the parties and shall supersede all previous oral or written
communications.
6.4 If any part of this Agreement is held invalid or unenforceable by a Court of
law, then this Agreement shall be read as if such invalid or unenforceable
provision were removed.
6.5 This Agreement shall be first subject to the approval of the Vancouver Stock
Exchange and the Alberta Stock Exchange (the "Approval Date"), such Approval
Date to occur on or before March 31, 1997 or this Agreement shall be of no
further force or effect.
6.6 Each party covenants and agrees to execute all further and other documents
and instruments and to do all further and other things that may be necessary to
implement and carry out the intent of this Agreement.
6.7 This Agreement shall be construed and interpreted in accordance with the
laws of Ontario and the laws of Canada applicable therein.
6.8 No modification or amendment to this Agreement may be made unless agreed to
by the parties hereto in writing.
<PAGE> 7
- 7 -
IN WITNESS WHEREOF the Vendor and the Purchaser have duly executed this
Agreement on the day and year first above written.
THE CORPORATE SEAL OF MINCO )
MINING & METALS CORPORATION )
was hereunto affixed in )
the presence of: )
)
/s/ Ken Z. Cai )
- ---------------------------- ) C/S
Authorized Signatory )
)
/s/ Colin McAleenan )
- ---------------------------- )
Authorized Signatory )
)
THE CORPORATE SEAL OF CHINA )
CLIPPER GOLD MINES LTD. was )
hereunto affixed in the )
presence of: )
)
/s/ Robin Dow )
- ---------------------------- ) C/S
Authorized Signatory )
)
)
- ---------------------------- )
Authorized Signatory )
<PAGE> 8
THIS ASSIGNMENT AGREEMENT made the 26th day of March, 1997.
BETWEEN:
CHINA CLIPPER GOLD MINES LTD., a company duly incorporated
pursuant to the laws of Ontario with an office at 12th Floor,
20 Toronto Street, Toronto, Ontario, M5C 2B8
(hereinafter called the "Assignor")
OF THE FIRST PART
AND:
MINCO MINING AND METALS CORPORATION, a company duly
incorporated pursuant to the laws of British Columbia with an
office at Suite 1200, 543 Granville Street, Vancouver, B.C.,
V6C lX8
(hereinafter called the "Assignee")
OF THE SECOND PART
WHEREAS:
A. Pursuant to a Sale and Purchase Agreement dated February 27, 1996 (the
"Agreement") between the Assignor and the Assignee the Assignor agreed to assign
and transfer to the Assignee all of the Assignor's interests in the Cooperation
Agreement Regarding Certain Mineral Deposit Properties made between Pacific
Canada Resources Inc. and Patrician Gold Mines Ltd. (the predecessor to the
Assignor) and The First Geoexploration Bureau of the Ministry of Metallurgical
Industry dated November 24, 1994 which deals with the Emperor's Delight, Stone
Lake and Crystal Valley properties (the "Cooperation Agreement");
D. The Assignor now wishes to assign and the Assignee wishes to acquire all of
the Assignor's right, title and interest in and to the Cooperation Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
Assignee paying to the Assignor the sum of One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged by the Assignor, the parties hereto covenant and agree each with
the other as follows:
1. The Assignor hereby grants, assigns, transfers and sets over onto the
Assignee, its successors and assigns, all its right, benefit, title and interest
of the Assignor in and to each of the Cooperation Agreement, including, without
limitation, the right to take legal action to enforce the terms of the
Agreements in the name of the Assignor, if required.
<PAGE> 9
- 2 -
2. The Assignor hereby covenants with the Assignee as follows:
(a) there are no existing defaults on the part of the Assignor
under the Cooperation Agreement;
(b) the Assignor has performed all obligations and requirements to
be performed by it pursuant to the terms of the Cooperation
Agreement;
(c) the Assignor is the lawful owner of its right, title and
interest in and to the Cooperation Agreement, and has the
right to assign its interests therein to the Assignee;
(d) the Assignor has not done nor permitted any act, matter or
thing whereby its interests in the Cooperation Agreement have
been assigned, in whole or in part, or encumbered; and
(e) there are no disputes of which the Assignor is aware between
the Assignor and any third parties in respect to the
Cooperation Agreement.
3. The Assignor hereby covenants with the Assignee that the Assignor will, at
the request of the Assignee, perform and execute every act, matter or thing,
instrument, document, writing, agreement or covenant necessary, desirable or
useful in connection with the full performance of this Agreement.
4. The Assignee covenants with the Assignor that it will observe and perform all
obligations, covenants and requirements to be performed by the Assignor pursuant
to the Cooperation Agreement when required to be performed.
5. This Agreement shall enure to the benefit of and be binding upon the
successors and assigns of the parties hereto, and shall be governed by and
construed in accordance with the laws of the Province of Ontario, Canada.
6. This Agreement may be signed by facsimile and in counterpart. Signed
counterpart copies, when read together, shall be irrevocably deemed to
constitute a single binding Agreement signed by both parties.
<PAGE> 10
- 3 -
IN WITNESS WHEREOF THIS AGREEMENT has BEEN EXECUTED BY THE parties hereto
on the DAY and YEAR first above WRITTEN.
THE CORPORATE SEAL OF CHINA )
CLIPPER GOLD MINES LTD. was )
hereunto affixed in the )
presence of: )
)
/s/ Robin Dow )
- ---------------------------- ) C/S
Authorized Signatory )
)
)
- ---------------------------- )
Authorized Signatory )
)
THE CORPORATE SEAL OF MINCO )
MINING AND METALS CORPORATION )
was hereunto affixed in the )
presence of: )
)
/s/ Ken Z. Cai )
- ---------------------------- ) C/S
Authorized Signatory )
)
/s/ Peter Tsaparas )
- ---------------------------- )
Authorized Signatory )
<PAGE> 11
TRIPLE EIGHT MINERAL CORPORATION
(the "Company")
RESIGNATION
I, Robin Dow hereby tender my resignation as a director and
officer of the Company, effective this 27th day of March, 1997.
/s/ ROBIN DOW
----------------------
ROBIN DOW
<PAGE> 12
CHENDE HUAJIA MINERAL INDUSTRY CO., LTD.
(the "Company")
RESIGNATION
I, Robin Dow hereby tender my resignation as a director and officer of
the Company, effective this 27th day of March, 1997.
/s/ ROBIN DOW
----------------------
ROBIN DOW
<PAGE> 13
SHARE TRANSFER
TO: MINCO MINING AND METALS CORPORATION
FOR VALUE RECEIVED, the undersigned hereby transfers to you 400 shares
of Triple Eight Mineral Corporation that are now registered in the name of
Orient Gold Mines Ltd.
DATED as of the 27th day of March, 1997.
/s/ ROBIN DOW
----------------------
ROBIN DOW
<PAGE> 14
TRIPLE EIGHT MINERAL CORPORATION
(the "Company")
RESOLUTION OF DIRECTORS
The following Resolution having been consented to in writing by all the
Directors of the Company shall be deemed to have the same force and effect as if
passed at a Meeting of Directors duly called and properly constituted for the
transaction of business:
WHEREAS by an agreement dated February 27, 1997 between China Clipper
Gold Mines Ltd. ("China Clipper") and Minco Mining and Metals Corporation
("Minco"), China Clipper has agreed to transfer and assign to Minco all of China
Clipper's right, title and interest in and to 400 shares of the Company
beneficially owned by China Clipper for the price of One Hundred Seventy Five
Thousand (CDN$175,000) Canadian Dollars, with the result that Minco will become
the sole shareholder of the Company holding 1,000 issued shares of the Company.
BE IT RESOLVED that:
1. The following share transfers are approved:
NUMBER
TRANSFEROR TRANSFEREE CLASS OF SHARES
China Clipper Gold Mines Ltd. Minco Mining and Metals 400 Common Shares
(formerly Orient Gold Mines Corporation
Ltd.)
2. The following share certificate is cancelled:
CERTIFICATE NUMBER AND
NUMBER NAME CLASS OF SHARES
Orient Gold Mines Ltd. 400 Common Shares
3. The following share certificate is issued:
CERTIFICATE NUMBER AND
NUMBER NAME CLASS OF SHARES
Minco Mining and Metals 400 Common Shares
Corporation
<PAGE> 15
-2-
and any Director of the Company is authorized to execute the share certificate
in pursuance of this resolution.
DATED as of the 27th day of March, 1997.
- -------------------------- ------------------------------
Donald S. Hicks Ken Z. Cai
- -------------------------- ------------------------------
John Pugsley Kiana Delamare
/s/ Robin Dow
- --------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: Per:
- -------------------------- -----------------------------
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 1
-2-
and any Director of the Company is authorized to execute the share certificate
in pursuance of this resolution.
DATED as of the 27th day of March, 1997.
/s/ Donald S. Hicks /s/ Ken Z. Cai
- ----------------------------- -------------------------------
Donald S. Hicks Ken Z. Cai
- ----------------------------- -------------------------------
John Pugsley Kiana Delamare
/s/ Robin Dow
- -----------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: Per:
- ----------------------------- -------------------------------
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 2
-2-
and any Director of the Company is authorized to execute the share certificate
in pursuance of this resolution.
DATED as of the 27th day of March, 1997.
/s/ Ken Z. Cai
- ----------------------------- -------------------------------
Donald S. Hicks Ken Z. Cai
/s/ John A. Pugsley /s/ Kiana Delamare
- ----------------------------- -------------------------------
John Pugsley Kiana Delamare
/s/ Robin Dow
- -----------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: Per:
- ----------------------------- -------------------------------
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 3
-2-
and any Director of the Company is authorized to execute the share certificate
in pursuance of this resolution.
DATED as of the 27th day of March, 1997.
/s/ Ken Z. Cai
- ----------------------------- -------------------------------
Donald S. Hicks Ken Z. Cai
- ----------------------------- -------------------------------
John Pugsley Kiana Delamare
/s/ Robin Dow
- -----------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: For and on behalf of Per: For and on behalf of
EAST ASIA CORPORATE SERVICES ESSEX NOMINEES LIMITED
(NOMINEES) LTD.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------- -------------------------------
Authorized Signature(s) Authorized Signature(s)
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 4
CONSENT RESOLUTIONS OF THE DIRECTORS OF
TRIPLE EIGHT MINERAL CORPORATION
(the "Company")
The following Resolutions having been consented to in writing by all the
Directors of the Company shall be deemed to have the same force and effect as if
passed at a meeting of Directors duly called and properly constituted for the
transaction of business:
WHEREAS:
A. Robin Dow has resigned as a Director and Officer of the Company effective
March 27, 1997.
BE IT RESOLVED THAT:
1. The resignation of Robin Dow as a Director and Officer of the Company be
accepted, and that effective the date of these resolutions, he shall no
longer be a Director or Officer of the Company.
DATED AS OF the 27th day of March, 1997.
/s/ Donald S. Hicks /s/ Ken Z. Cai
- -------------------------- ---------------------------
Donald S. Hicks Ken Z. Cai
- -------------------------- ---------------------------
John Pugsley Kiana Delamare
Abstained from voting
- --------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: Per:
- -------------------------- -----------------------------
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 5
CONSENT RESOLUTIONS OF THE DIRECTORS OF
TRIPLE EIGHT MINERAL CORPORATION
(the "Company")
The following Resolutions having been consented to in writing by all the
Directors of the Company shall be deemed to have the same force and effect as if
passed at a meeting of Directors duly called and properly constituted for the
transaction of business:
WHEREAS:
A. Robin Dow has resigned as a Director and Officer of the Company effective
March 27, 1997.
BE IT RESOLVED THAT:
1. The resignation of Robin Dow as a Director and Officer of the Company be
accepted, and that effective the date of these resolutions, he shall no
longer be a Director or Officer of the Company.
DATED AS OF the 27th day of March, 1997.
/s/ Ken Z. Cai
- -------------------------- ---------------------------
Donald S. Hicks Ken Z. Cai
/s/ John Pugsley /s/ Kiana Delamare
- -------------------------- ---------------------------
John Pugsley Kiana Delamare
Abstained from voting
- --------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: Per:
- -------------------------- -----------------------------
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 6
CONSENT RESOLUTIONS OF THE DIRECTORS OF
TRIPLE EIGHT MINERAL CORPORATION
(the "Company")
The following Resolutions having been consented to in writing by all the
Directors of the Company shall be deemed to have the same force and effect as if
passed at a meeting of Directors duly called and properly constituted for the
transaction of business:
WHEREAS:
A. Robin Dow has resigned as a Director and Officer of the Company effective
March 27, 1997.
BE IT RESOLVED THAT:
1. The resignation of Robin Dow as a Director and Officer of the Company be
accepted, and that effective the date of these resolutions, he shall no
longer be a Director or Officer of the Company.
DATED AS OF the 27th day of March, 1997.
/s/ Ken Z. Cai
- -------------------------- ---------------------------
Donald S. Hicks Ken Z. Cai
- -------------------------- ---------------------------
John Pugsley Kiana Delamare
Abstained from voting
- --------------------------
Robin Dow
East Asia Corporate Services (Nominees) Ltd. Essex Nominees Limited
Per: For and on behalf of Per: For and on behalf of
EAST ASIA CORPORATE SERVICES ESSEX NOMINEES LIMITED
(NOMINEES) LTD.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- -------------------------- -----------------------------
Authorized Signature(s) Authorized Signature(s)
(THIS RESOLUTION MAY BE SIGNED IN COUNTERPART)
<PAGE> 7
EXHIBIT 3c
COOPERATION AGREEMENT
REGARDING THE DEVELOPMENT OF
THE CHANGBA-LIJIAGOU LEAD-ZINC DEPOSIT
THIS AGREEMENT is executed on the 18th day of October, 1996, in Baiyin City,
Gansu Province, China.
BETWEEN:
MINCO MINING & METALS CORPORATION
a public corporation incorporated under the laws of British Columbia
(referred to herein as "MINCO")
REGISTERED ADDRESS: 1870-401 W. Georgia St., Vancouver
BC Canada V6B 5A1
AUTHORIZED REPRESENTATIVE: Mr. Ken Z. Cai, the President of MINCO
PHONE: (604) 688-8002; FAX: (604) 688-8030
AND:
BAIYIN NON-FERROUS METALS COMPANY
a corporation incorporated under the laws of the People's Republic of
China (referred to herein as "BAIYIN")
REGISTERED ADDRESS: Baiyin City, Gansu Province, China
AUTHORIZED REPRESENTATIVE: Mr. Shichang Ren, the Deputy General
Manager of BAIYIN
PHONE: (09430) 812-171; FAX: (09430) 223-449
(collectively, the "PARTIES", or individually a "PARTY")
<PAGE> 8
WHEREAS:
1. BAIYIN has established an enterprise to mine and process the Changba
lead-zinc deposit and has been authorized and approved by China National
Non-Ferrous Metals Industries Corporation ("CNNC") to develop the Lijiagou
lead-zinc deposit.
2. BAIYIN has been authorized by CNNC to seek various sources of capital
(including foreign capital and investment) to develop and exploit the large
Changba-Lijiagou lead-zinc deposits (the "PROJECT"). CNNC has agreed in
principle to permit foreign investors to acquire the majority interest in the
joint venture enterprise to be established for the Project.
3. BAIYIN faxed to MINCO invitations for a site visit for purposes of discussing
a joint venture for the Project in August, 1994 and April, 1995,
respectively. After receiving such invitations and a summary of geological
data related to the Project, MINCO visited BAIYIN three times during each of
May 1995, October 1995, and May 1996 respectively and the Parties signed a
letter of intent (the "LETTER OF INTENT") pursuant to which they would
cooperate to develop and exploit jointly the Changba-Lijiagou lead-zinc
deposits.
4. In October 1995, MINCO visited CNNC in Beijing and had friendly discussions
with CNNC concerning the Project.
5. On the basis of mutual exchanges of views, extensive discussions and
negotiation, MINCO conducted a preliminary evaluation and later a detailed
assessment (the "DETAILED ASSESSMENT") of the Project and concluded that the
Project has high geological potential, favorable geological characteristics,
and very good infrastructure conditions. Accordingly and subsequently, MINCO
expressed strong interest in the Project.
6. The Parties conducted further discussions and negotiations during October
15-18, 1996 at the offices of Baiyin. MINCO provided BAIYIN the report of the
Detailed Assessment and a computerized database of the Changba-Lijiagou
deposits. After friendly discussions and negotiations, both Parties are
willing to enter into this Cooperation Agreement (the "AGREEMENT").
2
<PAGE> 9
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below, BAIYIN and MINCO agree as follows:
1.0- ESTABLISHMENT OF THE JOINT VENTURE
1.1 The Parties agreed to establish a Co-operative joint venture (the "JOINT
VENTURE") constituted as a separate legal person for the Project.
1.2 The Joint Venture shall have limited liability. Both Parties will make
contributions to, and share the risk and profits of, the Joint Venture in
accordance with their respective beneficial interests in the Joint Venture.
1.3 The term of the Joint Venture shall be thirty (30) years such period to be
extendible upon mutual agreement between the Parties if the circumstances so
warrant.
1.4 The purpose of the Joint Venture is to develop and exploit jointly the
Changba-Lijiagou deposits on the basis of mutual benefits. The Parties will
each use their respective advantages including mineral resources, capital, and
technology, to achieve satisfactory profitability to both Parties.
1.5 The business scope of the Joint Venture is to explore, develop, exploit,
and process mineral resources using an integrated mining company model which
combines exploration, development, and production. In addition to the
exploration and exploitation on the area covered by the existing mining license
or the potentially acquired mining license, the Joint Venture will apply for
the exploration permit which will cover, including but not limited to, the
strike and dip extension of the ore bodies to be mined at the Changba-Lijiagou
deposits, and adjacent ore bodies in Lijiagou area.
2.0- OPERATION AND MANAGEMENT OF THE JOINT VENTURE
2.1 The Joint Venture will be managed by the board of directors which will
possess the highest authority over the operation and management of the Joint
Venture. Each Party will appoint a number of directors in proportion with its
relative beneficial interest in the Joint Venture. The Chairman of the board of
directors shall be appointed by the controlling shareholder.
3
<PAGE> 10
2.2 The day-to-day operation of the Joint Venture will be managed by the
general manager which shall be appointed and controlled by the board of
directors.
3.0- JOINT VENTURE AREA AND PRODUCT SCHEMES
3.1 Three joint venture alternatives for the joint venture scope were
proposed initially under the Letter of Intent. After further assessment, both
Parties agreed that the area for the Joint Venture (the "JOINT VENTURE AREA")
includes:
1) the Changba open-pit mine, including phases I and II;
2) deep Changba outside and beneath the ultimate designed boundary of the
Changba open-pit mine;
3) the Lijiagou deposit; and
4) the joint area between the Changba and Lijiagou deposits.
The Parties further agreed that the Joint Venture shall exercise its best
efforts to acquire the exploration permit for the area surrounding the Changba
and Lijiagou deposits. If such exploration permit is obtained, the Joint
Venture would conduct mineral exploration on the permitted area and enjoy the
results and benefits from the exploration. Neither BAIYIN nor MINCO shall
conduct such exploration for its own benefit.
3.2 The initial cooperation area includes the Changba open mine and the
Lijiagou deposit. The initial mining and milling capacity is 5,000 and 6,000
tonnes of ore per day. The Parties currently expect the capacity to increase to
8,000 tonnes of ore per day.
3.3 The Parties agree to use the product from the Joint Venture either to
produce concentrate for sale or to produce metals or metals products for sale
through custom smelting.
4.0- BENEFICIAL INTEREST AND CONTRIBUTIONS TO THE JOINT VENTURE
4.1 The Parties agree that MINCO will be the controlling shareholder of the
Joint Venture. The beneficial interest in the Joint Venture is determined as
sixty percent (60%) for MINCO and forty percent (40%) for BAIYIN.
4
<PAGE> 11
4.2 The contributions to be made to the Joint Venture by each Party are as
follows:
4.2.1 BAIYIN shall contribute the mining rights of the Joint Venture Area; the
land using rights; the net values of the total assets at Changba-Lijiagou
(including fixed assets, moveable assets, projects under construction, and
other assets) (collectively referred to herein as the "BAIYIN'S CONTRIBUTION").
The Value of BAIYIN's Contribution shall be determined by the Parties,
qualified independent evaluators, and the state asset and mineral
administration authorities of the People's Republic of China.
4.2.2 MINCO shall contribute capital in foreign currency and advanced
equipment, the value of which shall be determined by the Parties, qualified
independent evaluators, and commercial and custom authorities of the People's
Republic of China.
5.0- CO-OPERATION PROCEDURE
5.1 In order to promote the Project in a timely fashion, the Parties agreed
to use the following procedure:
1) After the execution of this Agreement, BAIYIN will prepare a detailed
application for the Joint Venture in a timely fashion based on the
information and reports provided by the Parties, and then apply to the
appropriate Chinese government authorities for approval of the Joint
Venture (the "JOINT VENTURE APPROVAL"). BAIYIN will inform MINCO in a
timely fashion once the Joint Venture Approval has been obtained.
2) When the Joint Venture Approval has been obtained, BAIYIN, assisted by
MINCO, shall compile the proposal and preliminary feasibility study for
the Joint Venture and apply to the appropriate Chinese government
authorities for approval (the "JV PROPOSAL APPROVAL").
3) When the JV Proposal Approval has been obtained, both Parties will jointly
prepare a feasibility study of the Joint Venture (the "JOINT VENTURE
FEASIBILITY STUDY"). When such Joint Venture Feasibility Study has been
completed, BAIYIN shall apply to the appropriate Chinese government
authorities for approval of such Joint Venture Feasibility Study (the
"JOINT VENTURE FEASIBILITY STUDY APPROVAL").
5
<PAGE> 12
4) When the Joint Venture Feasibility Study Approval has been obtained, both
Parties will negotiate in good faith and execute a preliminary joint
venture contract (the "PRELIMINARY JVC") which shall set out in detail the
rights and obligations of the Parties in respect of the Joint Venture.
5) When the Preliminary JVC has been executed, the Parties shall jointly
conduct preliminary works (the "PRELIMINARY WORKS") on the property to
advance the Project to meet the conditions of feasibility study of the
Project, including underground exploration, hydrological and engineering
assessment, metallurgical testing, environmental evaluation, and asset
appraisal.
6) When the Preliminary Works have been completed, the Parties will jointly
conduct a technical feasibility study (the "TECHNICAL FEASIBILITY STUDY")
of the Project, including Chinese feasibility study, preliminary mine
design and construction design. MINCO will play a leading role for the
Feasibility Study with the participation of Lanzhou Engineering & Research
Institute of Non-Ferrous Metallurgy of CNNC.
7) If the conclusion of the Technical Feasibility Study is that the Project
meets the investment criteria and is economically and socially attractive
to both of the Parties, then the Parties shall negotiate in good faith and
execute a formal joint venture contract (the "JOINT VENTURE CONTRACT") and
articles of association for the Joint Venture. BAIYIN shall then apply to
the appropriate Chinese government authorities for approval of the Joint
Venture Contract.
8) When the Joint Venture Contract has been approved, BAIYIN shall obtain
business licenses from the appropriate Chinese government authorities to
establish the Joint Venture. MINCO shall provide all reasonable assistance
to BAIYIN.
9) When the Joint Venture is established, both Parties shall carry out the
Project pursuant to the terms of the Joint Venture Contract and the
Articles of Association.
5.2 The Parties agree that the expenditures incurred for the Preliminary
Works and for the Technical Feasibility Study (as defined in section 5.1 (6))
will be contributed by both Parties in proportion to their respective relative
beneficial interests (i.e. MINCO 60% and BAIYIN 40%). If the Project is
unsuccessful, both Parties will assume their respective expenditures as a loss
pursuant to a risky
6
<PAGE> 13
investment and neither Party shall be compensated by the other Party. If the
Project is successful, the expenditures incurred respectively by each of the
Parties will be credited as part of each Party's respective capital
contribution to the Joint Venture.
6.0-CLEARING LOCAL MINERS
The Parties acknowledge and agree that it is critical to the success of the
Joint Venture, and a condition of further investment by MINCO in the Project,
that the mining activities being conducted by the local farmers on the Joint
Venture Area be stopped peacefully and permanently and without leaving any
hidden unresolved issue which could later adversely affect the Joint Venture.
7.0-EXCLUSIVE NEGOTIATION AND INVESTMENT RIGHTS
7.1 By this Agreement, BAIYIN grants and guarantees to MINCO the exclusive
rights to negotiate and to invest in the Project.
7.2 Both Parties further agree that:
1) BAIYIN shall have right to invite other Chinese enterprises
(non-foreign) to invest in the Project and participate in its 40%
interest provided that all Chinese investors collectively shall form a
single entity which will be the sole Chinese shareholder to participate
in the Joint Venture.
2) MINCO shall have right to invite other foreign enterprises
(non-Chinese) to invest in the Project and participate in its 60%
interest provided that all the non-Chinese investors shall form a single
entity which will be the sole non-Chinese shareholder to participate in
the Joint Venture.
8.0-OTHER PROMISES OF THE PARTIES
8.1 The Parties agree that the Joint Venture shall conduct the Project
under the environmental standards not lower than the requirements of the
Chinese environmental laws and regulations. BAIYIN promised that the Joint
Venture shall
7
<PAGE> 14
not be responsible for any environmental liability of BAIYIN's operations
incurred before the creation of the Joint Venture.
8.2 MINCO promised that BAIYIN shall have exclusive concentrate purchasing
rights or custom smelting rights if BAIYIN can match the same terms of sales
prices of concentrates or custom smelting charges, final product quality, and
processing time in case of custom smelting.
8.3 Both Parties promised to preserve the confidentiality of all
information (the "INFORMATION") obtained from the other Party. Subject to the
exception set out at the end of this section, neither Party shall disclose such
Information to any third party without consent from the other Party. If this
Agreement, or any successor agreement, is terminated, each Party shall return
to the other Party all such Information. However, each Party can disclose such
Information to its respective regulatory authorities (including government
authorities, security commissions, and stock exchanges, etc.), joint venture
partners, and third parties under contract to a Party to work on the Project.
8.4 Before the execution of the Joint Venture Contract, each of the Parties
shall be responsible for its own expenses incurred related to the Project. If
the Joint Venture is successfully established, then expenses actually incurred
by each of the Parties shall be credited as part of the capital contribution to
the Joint Venture.
8.5 The Joint Venture shall use the Project as a starting point to develop
a long-term cooperation between the Parties in a wider area. Both Parties agree
that if circumstances warrant, the Joint Venture can be listed on the Chinese
and foreign stock exchanges (e.g. Toronto Stock Exchange) in order to attract
more international investors, widen the capital sources, and achieve strategic
growth of the Joint Venture.
9.0-GENERAL
9.1 If the contents of this Agreement have any conflict with the Letter of
Intent and the memorandum of understanding previously signed, the terms of this
Agreement shall prevail.
9.2 This Agreement is written in duplicate in both Chinese and English,
with both texts having equal authority.
8
<PAGE> 15
9.3 Each of the Parties acknowledge the receipt of one executed copy of the
English version of this Agreement and of one executed copy of the Chinese
version of this Agreement. The English version of this Agreement may be
executed in counterparts and transmitted by facsimile transmission. A copy
which has been executed in counterparts and transmitted by facsimile
transmission shall have equal authority as an originally executed copy.
IN WITNESS WHEREOF the Parties have dully executed this Cooperation Agreement
as evidenced by each signature below.
BAIYIN NON-FERROUS METALS COMPANY
LEGAL REPRESENTATIVE:
- ---------------------------------------------
Ziming Cai, General Manager
AUTHORIZED REPRESENTATIVE:
- ---------------------------------------------
Shichang Ren, Deputy General Manager
MINCO MINING AND METALS CORPORATION
LEGAL REPRESENTATIVE:
/s/ Peter Tsaparas
- ---------------------------------------------
Peter Tsaparas, Chairman of the Board
AUTHORIZED REPRESENTATIVE:
- ---------------------------------------------
Ken Z. Cai, President and CEO
9
<PAGE> 1
Exhibit 3d
COOPERATION AGREEMENT REGARDING
CERTAIN MINERAL DEPOSIT PROPERTIES
AMONG:
PACIFIC CANADA RESOURCES INC.
a corporation incorporated under the laws of Ontario
(referred to herein as "PCR")
AND:
PATRICIAN GOLD MINES LTD.
a corporation incorporated under the laws of Ontario
(referred to herein as "PATRICIAN")
AND:
THE FIRST GEOEXPLORATION BUREAU OF MINISTRY OF METALLURGICAL INDUSTRY
a bureau of the ministry of metallurgical industry of the People's
Republic of China
(referred to herein as "FGEB")
WHEREAS:
1. after extensive discussions and negotiations, the parties to this
co-operation agreement (the "CO-OPERATION AGREEMENT") agreed to form an
equity joint venture (an "EJV") under which the parties will each use
their respective advantages including mineral resources, capital, and
technology, to explore, develop, and produce certain mineral properties
(as such properties are defined below);
2. FGEB and various other levels of government and other legal entities
within China (the "CHINESE ENTITIES") have various kinds and degrees
of interests in certain mineral properties;
3. such Chinese Entities wish to enter into negotiations with PCR and
PATRICIAN (the "CANADIAN ENTITIES") regarding a possible joint venture
agreement (a "JOINT VENTURE CONTRACT") under which both such Chinese
Entities and such Canadian Entities would operate a joint venture (the
"JOINT VENTURE") to explore, develop and produce such properties;
4. the Canadian Entities expressed an interest in visiting such properties
and were invited to visit them by FGEB with a view to determining
whether they were interested in entering into a Co-operation Agreement
under which, among other terms including, without limitation, many of
the terms which will form the basis of a Joint Venture Contract:
<PAGE> 2
1. FGEB will:
a) facilitate and co-ordinate the activities of all of the Chinese
Entities with a view to creating one entity which would represent
all such Chinese Entities and which would be one of only two
entities which would enter into a Joint Venture Contract;
b) seek approval from the appropriate Chinese authorities to enter
into a Joint Venture Contract regarding such Properties;
c) provide, or assist in obtaining from such other of the Chinese
Entities which have relevant information, all information reasonably
requested by the Canadian Entities to allow them to determine
whether they wish to enter into a Joint Venture Contract;
d) if considered convenient, send several experts to visit the
Canadian Entities ensuring the Chinese Entities that the Canadian
Entities have adequate financial means to invest in the Joint
Venture; and
2. PCR will:
a) facilitate and co-ordinate the activities of all of the Canadian
Entities (or such corporations as are under common control of such
Canadian Entities) with a view to creating one entity which would
represent all such Canadian Entities and which would be one of only
two entities which would enter a Joint Venture Contract;
b) review all information obtained from the Chinese Entities in a
timely fashion or, if considered appropriate, seek additional
information by sending other experts to visit the Properties; and
c) obtain the exclusive right to negotiate and enter into a Joint
Venture Contract with the Chinese Entities with respect to the
Properties.
5. FGEB, PCR and PATRICIAN are willing to enter into this Co-operation
Agreement on the basis of the premises set out above and on the terms
set out below.
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below FGEB, PCR and PATRICIAN agree as follows:
<PAGE> 3
1.0 -- INTERPRETATION
1.1 DEFINITION OF "PROPERTIES"
"PROPERTIES" shall mean the following three mineral properties which
are located within the boundaries of Hebei Province, in the People's Republic
of China as more precisely defined using the map which is attached as
Schedule "A" to this Co-operation Agreement:
1. "STONE LAKE" AU-AG POLYMETALLIC PROPERTY of Lingshou County in the
province of Hebei with a core claim area of 20 square kilometers and an area of
interest of 100 square kilometers surrounding such core claim area;
2. "CRYSTAL VALLEY" AU EXPLORATION PROPERTY of Zhangjiakou District of
the province of Hebei with a core claim area of 20 square kilometers and an area
of interest of 100 square kilometers surrounding such core claim area;
3. "EMPEROR'S DELIGHT" AU-AG POLYMETALLIC PROPERTY of Chende District
of the province of Hebei with a core claim area of 20 square kilometers and an
area of interest of 100 square kilometers surrounding such core claim area.
1.2 LANGUAGE
The parties agree that the English and Chinese language versions of
this Co-operation Agreement are of equal validity and effect provided that, if
there is a dispute as to its interpretation or application, the English version
shall be used and having binding effect.
2.0 -- REPRESENTATIONS AND WARRANTIES
2.1 FGEB
FGEB represents and warrants that:
1. it is fully authorized and empowered to enter into this
Co-operation Agreement on these Properties;
2. it has full and unencumbered title to the surface and mineral
rights in the Properties.
2.2 PCR AND PATRICIAN
PCR and PATRICIAN represent and warrant that they are fully authorized
and empowered to enter into this Co-operation Agreement.
3
<PAGE> 4
3.0 - UNDERTAKINGS LEADING TOWARDS A JOINT VENTURE CONTRACT
In order to complete the Joint Venture Contract as soon as possible, the
parties agree to undertake the following activities as set out below:
1. FGEB will provide the Canadian Entities with technical reports
and location maps, including regional geological maps, regional
geochemical anomaly maps, regional geophysical anomaly maps,
property topographic and geological maps, and typical
cross-section maps in order to allow the Canadian Entities to
further assess the exploration potential of the Properties and
to make a fully informed investment decision.
1. Upon receiving the information set out above, the Canadian
Entities will assess the exploration and investment potential of
the Properties in a timely fashion and will then confirm to FGEB
the level of their interest in the Properties.
3. As soon as possible after executing this Co-operation Agreement,
FGEB will:
a) seek approval from the appropriate government
authorities to form an equity joint venture in respect
of each of the Properties; and
b) apply to incorporate a corporation in which each of the
Chinese Entities and the Canadian Entities will
subscribe for shares.
The Canadian Entities will provide to FGEB all reasonable
assistance.
4. Upon receiving the approval from the appropriate government
authorities to form an equity joint venture in respect of each
of the Properties, the parties will appoint an independent
evaluator to assess the contributions made by each of the
parties to the proposed equity joint ventures in respect of each
of the Properties, including particularly, but not limited to,
the previous exploration work and data collected and created by
FGEB.
5. After completing the assessment of the contributions as set out
above, the parties will negotiate a full and final Joint Venture
Contract in good faith.
6. Upon entering into a Joint Venture Contract in respect of each
of the Properties, the parties will conduct an exploration,
development, and production program.
4.0 - EXCLUSIVE NEGOTIATION AND INVESTMENT RIGHT
Upon execution of this Co-operation Agreement, FGEB grants the Canadian
Entities an exclusive right to negotiate and enter into a Joint Venture
Contract with the Chinese Entities with respect to the Properties for a
period of eight (8) months. Such period of
4
<PAGE> 5
exclusivity may be extended for a reasonable period of time if
the parties agree that such extension is warranted in the
circumstances. From the date on which the parties begin the
negotiations to enter into the Joint Venture Contract, FGEB
shall automatically grant to the Canadian Entities the exclusive
right to continue such negotiations for so long as the parties
continue such negotiations in good faith.
5.0 - CONFIDENTIALITY OBLIGATIONS
5.1 THE CHINESE ENTITIES
The Chinese Entities agree to preserve the confidentiality of
all information obtained pursuant to this Co-operation Agreement
(including, without limitation, any documents evidencing
agreements between the parties) and not to disclose such
information other than in accordance with the terms of this
Co-operation Agreement excluding those Chinese government bodies
which have right to know.
5.2 THE CANADIAN ENTITIES
The Canadian Entities agree to preserve the confidentiality of
all information obtained pursuant to this Co-operation Agreement
(including, without limitation, any documents evidencing
agreements between the parties) and not to disclose such
information other than in accordance with the terms of this
Co-operation Agreement provided that they may disclose such
information to:
1. consultants and other third parties who are retained to
advise the Canadian Entities provided that such third
parties enter into an appropriate form of
confidentiality agreement; and
2. regulatory authorities including, without limitation,
Canadian government bodies, securities commissions and
stock exchanges provided that no disclosure shall be
made to any stock exchange until on or after the date on
which a Joint Venture Contract is fully executed.
6.0 - THE JOINT VENTURE CONTRACT
6.1 TYPE
The parties agree to use the equity joint venture form of
foreign investment enterprises with two shareholders, one
shareholder (the "CHINESE SHAREHOLDER") being a legal entity
formed by the Chinese Entities and the other shareholder (the
"CANADIAN SHAREHOLDER") being a legal entity formed by the
Canadian Entities.
5
<PAGE> 6
6.2 TERM
The term of any Joint Venture Contract shall commence on the
date on which it is fully executed and shall continue for a
period of thirty (30) years such period to be extendible upon
mutual agreement between the parties.
6.3 STANDARDS OF OPERATION AND APPLICABLE LAW
The Joint Venture will be operated in accordance with:
1. the "Law of the People's Republic of China on Joint
Ventures Using Chinese and Foreign Investment" (the "EJV
LAW"), effective July 1, 1979;
2. the Regulations for the Implementation of the EJV Law
(the "EJV REGULATIONS"), effective September 20, 1983;
3. other applicable laws of the People's Republic of China;
and
4. generally accepted international practice and standards
for such operations.
6.4 MANAGEMENT
The Joint Venture will be managed by a board of directors which
will possess the highest authority over the operation and
management of the Joint Venture. Each party will appoint a
number of directors in proportion to each party's equity
interest in the Joint Venture.
6.5 CONTRIBUTIONS TO THE JOINT VENTURE
6.5.1 THE CHINESE ENTITIES
In consideration for its equity participation, the Chinese
Entities shall contribute to the joint venture the following
assets: (1) the Properties, (2) the exploration and development,
production, production permits, (3) the data which has been
collected or created to date, and (4) future contributions of
capital based upon the proportion of the total equity held the
Chinese Entities in the Joint Venture.
6.5.2 THE CANADIAN ENTITIES
1. TECHNOLOGY AND MANAGEMENT TECHNIQUES
In consideration for its equity participation, the Canadian
Entities shall contribute to the joint venture the following
assets: (1) certain advanced equipment and (2) such amount of
capital as is calculated using the formula more fully described
below.
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<PAGE> 7
2. CAPITAL
a) CONTRIBUTION OF CAPITAL TO EARN INITIAL EQUITY INTEREST
Following the execution of the Joint Venture Contract, and the assessment
of the previous exploration work and research conducted by FGEB, the
Canadian Entities will contribute capital to earn its equity interest
based upon both the total amount of capital expended by the Chinese
Entities as at the date of execution of the Joint Venture Contract and
the proportion of the total equity interest held by the Canadian Entities
in the Joint Venture.
(for example:
if: 1. the Chinese Entities have expended the equivalent of
$400,000 USD; and
2. the Chinese Entities hold a 40% interest in the
Joint Venture;
then: the Canadian Entities must contribute $600,000 USD to
acquire its initial equity interest.
b) CONTRIBUTION OF CAPITAL TO FUND ONGOING JOINT VENTURE ACTIVITIES
Upon contributing the amount of capital required to acquire its initial
equity interest as set out above, the Canadian Entities shall contribute
additional capital to fund the ongoing activities of the Joint Venture,
along with the contributions by the Chinese Entities, in accordance with
the proportion of the total equity interest held by both the Canadian
Entities and the Chinese Entities.
6.6 EQUITY INTERESTS
6.6.1 ESTABLISHING THE INITIAL EQUITY INTERESTS
The entity which will enter into the Joint Venture Contract on behalf of
the Canadian Entities will acquire a controlling interest under the
Joint Venture Contract which is not less than:
fifty-five percent (55%) of the equity specified in such Joint
Venture Contract in respect of those Properties for which approval
has been granted to explore, develop and produce a gold Property; and
sixty percent (60%) of the equity specified in such Joint Venture
Contract in respect of those Properties for which approval has been
granted to explore, develop and produce a base metals Property;
7
<PAGE> 8
with the exact percentage to be subject to further negotiation taking
into account all relevant factors including, but not limited to:
1. a valuation of the Properties as established by the assessment set
out in Article 3.0;
2. the total amount of investment made by each of the parties in each of
the Properties at the time of such negotiations; and
3. the existing and expected economic and political conditions.
6.6.2 DILUTION OF EQUITY INTEREST UPON FAILURE TO CONTRIBUTE CAPITAL
If either party fails to contribute capital to the Joint Venture in
accordance with the requirements set out in the Joint Venture Contract,
the equity interest of such defaulting party shall be diluted down in
accordance with a mutually agreeable and generally accepted formula for
such dilution of interest.
7.0 GENERAL
7.1 ASSIGNMENT
FGEB agrees to allow PCR and PATRICIAN to assign this Co-operation
Agreement to a company which is under common control of each respective
company.
7.2 ADDITIONAL INVESTORS
7.2.1 ADDITIONAL NON-CHINESE INVESTORS
PCR and PATRICIAN may invite other companies to invest in the Joint
Venture provided that:
1. such companies are non-Chinese; and
2. such companies invest in the Joint Venture through the Canadian
Shareholder.
7.2.2 FGEB may invite other companies to invest in the Joint Venture provided
that;
1. such companies are Chinese; and
2. such companies invest in the Joint Venture through the Chinese
Shareholder.
8
<PAGE> 9
7.3 COUNTERPARTY
The Co-operation Agreement, and any notices or other documents permitted
or required by it, may be executed in counterparts, including copies
which have been executed and then deferred by facsimile transmission.
IN WITNESS WHEREOF the parties have duly executed the English version of this
Co-operation Agreement as of the date indicated beneath each signature below.
PACIFIC CANADA RESOURCES INC.
By: /s/ KEN Z. CAI /s/ DONALD S. HICKS
-------------- -------------------
Ken Z. Cai Donald S. Hicks
TITLE: Managing Director Vice-President
DATE: Nov. 17, 94 17 Nov. '94
PATRICIA GOLD MINES LTD.
By: /s/ ROLLIN DOW
--------------
Rollin Dow
TITLE: President
DATE: 17 Nov. '94
THE FIRST GEOEXPLORATION BUREAU OF MINISTRY OF METALLURGICAL INDUSTRY
BY: /s/ LEI ZI MIN
--------------
Lei Zi Min
TITLE: Chief Geologist
DATE: 24.11.94
9
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Exhibit 3e
GEOEXPLORATION CORPORATION OF
THE FIRST GEOEXPLORATION BUREAU
- and -
TRIPLE EIGHT MINERAL CORPORATION
JOINT VENTURE CONTRACT
DECEMBER 25, 1995
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I N D E X
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PARTIES 1
RECITALS 1
1.0 DEFINITIONS AND INTERPRETATION.................................................................... 3
1.1 Definitions............................................................................... 3
1.2 Headings.................................................................................. 7
1.3 Contract Paramount........................................................................ 7
1.4 Extended Meanings......................................................................... 7
1.5 Calculation of Time....................................................................... 7
1.6 Currency.................................................................................. 7
1.7 Severability.............................................................................. 7
1.8 Schedules................................................................................. 7
2.0 ESTABLISHMENT OF JOINT VENTURE.................................................................... 8
2.1 Legal Basis of Joint Venture.............................................................. 8
2.2 Status of TEMCO........................................................................... 8
2.3 Status of GEC-FGEB........................................................................ 8
2.4 Certificate of Approval and Business License.............................................. 8
2.5 Effect of Contract........................................................................ 8
2.6 Beneficial Interests...................................................................... 8
2.7 Liability of the Parties.................................................................. 9
2.8 Articles of Association................................................................... 9
2.9 Name of the Joint Venture................................................................. 9
2.10 Registered Office......................................................................... 9
2.11 Fiscal Year............................................................................... 9
3.0 PURPOSES AND SCOPE OF JOINT VENTURE............................................................... 9
3.1 Purpose and Scope......................................................................... 9
3.1.1 Purpose and Scope of Business................................................. 9
3.1.2 Use of International Mining Industry Standards................................ 10
3.2 Mutual Obligations of the Parties......................................................... 10
4.0 COMPOSITION OF BENEFICIAL INTERESTS............................................................... 10
4.1 Initial Investment........................................................................ 10
4.1.1 Total Initial Investment of the Joint Venture................................. 10
4.1.2 First Program and Budget...................................................... 11
4.1.3 Voting Interest............................................................... 11
4.2 Changing Beneficial Interests............................................................. 11
4.3 Contribution by GEC-FGEB and Warranty..................................................... 11
4.3.1 Assignment of Exploration Rights and Related Information ..................... 11
4.3.2 Warranty of Title ............................................................ 12
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4.3.3 Continuing Obligation of GEC-FGEB .................................................. 12
4.4 Continuing Assistance of GEC-FGEI3 ............................................................. 12
4.4.1 Importation or Exportation of Equipment ............................................ 12
4.4.2 Public Relations and Monitoring of Legislation and Regulation....................... 13
4.5 Contribution by each Party to Project Expenditure............................................... 13
5.0 DURATION OF THE JOINT VENTURE............................................................................ 13
5.1 Duration........................................................................................ 13
5.2 Disposition of Property......................................................................... 13
5.3 Extension....................................................................................... 13
6.0 BOARD OF DIRECTORS....................................................................................... 14
6.1 Commencement.................................................................................... 14
6.2 Purpose and Scope of Authority of Board......................................................... 14
6.3 Composition..................................................................................... 14
6.4 Appointment and Removal of Directors............................................................ 14
6.4.1 Term and Eligibility................................................................ 14
6.4.2 Method of Appointment or Removal.................................................... 14
6.5 Casual Vacancies on Board....................................................................... 15
6.6 Alternate Directors............................................................................. 15
6.7 Convening and Place of Meetings................................................................. 16
6.7.1 Convening and Place of Meeting...................................................... 16
6.7.2 Notice Periods...................................................................... 16
6.7.3 Venues other than Beijing........................................................... 16
6.8 Quorum.......................................................................................... 16
6.8.1 Quorum.............................................................................. 16
6.8.2 Adjournment of Meeting if no Quorum................................................. 16
6.9 Votes at Meetings............................................................................... 17
6.9.1 Voting Deemed Beneficial Interest................................................... 17
6.9.2 Voting by Director of Non-Contributing Party........................................ 17
6.10 Powers of Attorney.............................................................................. 17
6.11 Special Resolutions............................................................................. 17
6.12 Written Resolutions............................................................................. 17
6.13 Decisions Binding............................................................................... 18
6.14 Sub-Committees of the Board..................................................................... 18
7.0 CHAIRMAN AND GENERAL MANAGER ............................................................................ 18
7.1 Role of Chairman ............................................................................... 18
7.2 Eligibility and Appointment of Chairman ........................................................ 18
7.2.1 Eligibility ........................................................................ 18
7.2.2 Right to Nominate .................................................................. 18
7.2.3 Agreement to Appoint ............................................................... 19
7.3 Eligibility and Authority ...................................................................... 19
7.4 No Casting Vote................................................................................. 19
7.5 Delegation of Authority......................................................................... 19
7.5.1 Confer with General Manager ........................................................ 19
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7.5.2 Delegate to General Manager................................................................. 19
7.5.3 Nominate General Manager as Temporary Stand-in.............................................. 19
7.6 Authority over Property of Joint Venture................................................................ 20
7.7 Duties of Chairman...................................................................................... 20
7.8 Powers of Chairman...................................................................................... 21
7.9 Standard of Performance................................................................................. 21
7.10 Excess Expenditure...................................................................................... 22
7.10.1 General Permitted Overrun................................................................... 22
7.10.2 Additional Permitted Overrun in case of Accident or
Emergency .................................................................................. 22
7.11 Accounting Procedure ................................................................................... 22
7.11.1 International Standards for Record Keeping and Information
Disclosure.................................................................................. 22
7.12 General Manager and Deputy General Manager.............................................................. 23
7.12.1 Right to Nominate........................................................................... 23
7.12.2 Power to Appoint Deputy General Manager..................................................... 23
7.12.3 Duration of Appointments.................................................................... 23
........................................................................................................ 24
7.12.4 Act as General Manager...................................................................... 24
8.0 EXPLORATION RIGHTS AND AREA OF INTEREST............................................................................. 24
8.1 Exploration Rights...................................................................................... 24
8.1.1 Exploration Rights.......................................................................... 24
8.1.2 Schedule A.................................................................................. 24
8.1.3 Schedule B.................................................................................. 24
8.2 Maintenance of Exclusive Rights......................................................................... 24
8.3 Guarantee of Exploration Rights......................................................................... 25
8.3.1 GEC-FGEB's Obligation to Assist with Obtaining Additional
Exploration Rights ......................................................................... 25
8.3.2 GEC-FGEB's Obligation to obtain Land Access and to deal with
Local Landholders .......................................................................... 25
8.3.3 GEC-FGEB's Obligation to deal with Adverse Title Defects and
Claims...................................................................................... 25
8.3.4 Reimbursement of GEC-FGEB's Reasonable Costs................................................ 25
8.4 Purpose for the Area of Interest........................................................................ 26
8.5 Areas not Available for Exploration Rights.............................................................. 26
8.6 Revision of Schedule A and Schedule B................................................................... 26
8.7 Property Extensions..................................................................................... 26
8.8 Right of First refusal on Jingshan Mine................................................................. 27
9.0 PROGRAMS AND BUDGETS .............................................................................................. 27
9.1 Compliance with First Program and Budget ............................................................... 27
9.2 Setting of Programs and Budgets ........................................................................ 27
9.2.1 Periodic Setting of Programs and Budgets ................................................... 27
9.2.2 Periods for Exploration based on Program Parameters ........................................ 27
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9.2.3 Periods for Mine Development and Mining................................................ 27
9.3 Supplementary or Revised Programs and Budgets...................................................... 28
9.4 Approval by Board of Directors..................................................................... 28
9.5 Budgetary Approval................................................................................. 28
9.6 Supply of information.............................................................................. 28
10.0 CONTRIBUTIONS TO PROJECT EXPENDITURE AND CHANGES IN
BENEFICIAL INTERESTS AND SHARE INTERESTS.................................................................... 29
10.1 Liability for Project Expenditure................................................................. 29
10.1.1 According to Beneficial Interests...................................................... 29
10.1.2 Project Overrun Contributions.......................................................... 29
10.2 Contribution by each Party........................................................................ 29
10.2.1 No Contribution by GEC-FGEB............................................................ 29
10.2.2 Post Initial Investment Contributions.................................................. 29
10.3 Election to Contribute............................................................................ 29
10.3.1 Permitted Election Not to Contribute................................................... 29
10.3.2 Required Notice upon Election Not to Contribute........................................ 30
10.4 Election of Contributing Party.................................................................... 30
10.5 Calculation of Beneficial Interest................................................................ 30
10.6 Chairman to Calculate Beneficial Interests........................................................ 31
10.7 Payments following Completion of TEMCO's Initial Investment....................................... 32
10.7.1 Call for Contributions................................................................. 32
10.7.2 Due Date for Contributions............................................................. 32
10.8 Periodic Statements............................................................................... 32
10.9 Challenge to Correctness.......................................................................... 32
10.10 Interest Payable on Overdue Payments.............................................................. 32
10.10.1 Interest Rate on Overdue Payments...................................................... 32
10.10.2 Method of Calculating Interest Rate.................................................... 33
10.11 Procedure for Adjusting Changes in Beneficial Interests........................................... 33
10.11.1 Provide all necessary Co-operation and Authority to Transfer
Shares................................................................................. 33
11.0 DEVELOPMENT AND PRODUCTION................................................................................... 33
11.1 Board of Directors to Rule on Development......................................................... 33
11.2 Obligation to Contribution........................................................................ 34
11.3 Sole Risk Development............................................................................. 34
11.4 Required Authorizations and Parameters for Mining Operation....................................... 34
11.4.1 GEC-FGEB's Obligation to Obtain all Required Authorizations............................ 34
11.4.2 Parameters of Mining Operations........................................................ 34
11.5 Marketing of Minerals from the Joint Venture...................................................... 35
11.5.1 Marketing Policy....................................................................... 35
11.5.2 Exporting Rights....................................................................... 35
12.0 LABOUR, TRAINING OF JOINT VENTURE PERSONNEL AND
TECHNOLOGY TRANSFERS ....................................................................................... 35
12.1 Labour Policy of the Joint Venture ............................................................... 35
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12.1.1 Flexible Labour Requirements............................................................... 35
12.1.2 Priority to Efficiency of the Operations................................................... 36
12.2 Selection of Labour................................................................................... 36
12.3 Contributions to Statutory Labour Funds............................................................... 36
12.4 Training of Joint Venture Personnel and Transfer of Technology........................................ 36
12.4.1 Guidelines for Training Program............................................................ 36
12.4.2 Introduction of Appropriate Advanced Technology............................................ 37
13.0 LOCAL GOODS AND SERVICES...................................................................................... 37
14.0 ASSIGNMENT AND SUCCESSION..................................................................................... 37
14.1 Assignment............................................................................................ 37
14.2 Assumption Agreement.................................................................................. 38
14.3 Restrictions ......................................................................................... 38
15.0 ELECTION TO CAP CONTRIBUTIONS ................................................................................ 38
15.1 Election After First Work Program .................................................................... 38
15.2 Effective Date of Cap ................................................................................ 38
15.3 Effect of Cap ........................................................................................ 38
15.4 Withdrawal from Property ............................................................................. 39
16.0 ACCOUNTING, REPORTING, AUDITING AND BANK ACCOUNTS ............................................................ 39
16.1 Accounting ........................................................................................... 39
16.1.1 Yearly Financial Statements using International Accounting
Standards.................................................................................. 39
16.1.2 Treatment of Foreign Currency Exchange Rates............................................... 40
16.1.3 Treatment of Foreign Currency Exchange Gains or Losses..................................... 40
16.2 Financial aspects of Operations and Annual Reports.................................................... 40
16.2.1 Submission of Financial Summary of Prior Budgetary Period.................................. 40
16.2.2 Submission of Annual Report using International Accounting
Standards.................................................................................. 40
16.3 Audits................................................................................................ 40
16.4 Bank Accounts......................................................................................... 41
17.0 INSURANCE .................................................................................................... 41
17.1 Chairman to Devise Insurance Program ................................................................. 41
17.2 Insurance Coverage ................................................................................... 41
17.3 Party's Personal Accident Insurance .................................................................. 42
17.4 Reinsurance .......................................................................................... 42
17.5 Premiums as Project Expenditure ...................................................................... 42
18.0 CONFIDENTIALITY .............................................................................................. 42
18.1 Definition of Confidential Information................................................................ 42
18.2 Prohibition on Disclosure of Confidential Information................................................. 43
18.2.1 General Prohibition and Specified Exceptions............................................... 43
18.2.2 Application of Chinese Law when removing Confidential
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Information from China..................................................................... 44
18.3 Public Announcements................................................................................... 44
19.0 PROTECTION OF THE ENVIRONMENT.................................................................................. 44
20.0 FORCE MAJEURE.................................................................................................. 44
20.1 Consequence of Force Majeure........................................................................... 44
20.2 Definition of Force Majeure............................................................................ 45
20.3 Notice Requirements.................................................................................... 45
21.0 APPLICABLE LAWS................................................................................................ 45
21.1 Chinese Law............................................................................................ 45
21.2 Treaties to Prevail.................................................................................... 45
21.3 Common Practice in Operations.......................................................................... 45
21.4 Changes in Law......................................................................................... 45
22.0 SETTLEMENT OF DISPUTES......................................................................................... 46
22.1 Consultation........................................................................................... 46
22.2 Expert Conciliation.................................................................................... 46
22.2.1 Notice of Intent to Submit to Expert Conciliation.......................................... 46
22.2.2 Appointment of Expert...................................................................... 46
22.2.3 Convening a Hearing........................................................................ 46
22.2.4 Rendering of Written Decision.............................................................. 46
22.2.5 When Decision Becomes Final and Binding.................................................... 47
22.3 Arbitration............................................................................................ 47
22.3.1 Use of Arbitration......................................................................... 47
22.3.2 Language of Proceedings.................................................................... 47
22.3.3 Relevant Matters to Consider............................................................... 47
22.3.4 Powers of Arbitrator Regarding Expert Conciliation......................................... 47
22.3.5 Decision is Final, Binding and Non-appealable.............................................. 48
22.3.6 Power to Award Costs....................................................................... 48
22.4 Failure to Comply with Binding Expert's Award.......................................................... 48
22.5 Validity During Arbitration............................................................................ 48
23.0 CHINESE LEGISLATION............................................................................................ 48
23.1 References in this Contract............................................................................ 48
23.2 Changes to Legislation................................................................................. 48
24.0 MISCELLANEOUS.................................................................................................. 49
24.1 Amendment of Contract.................................................................................. 49
24.2 Inurement.............................................................................................. 49
24.3 Notices................................................................................................ 49
24.3.1 Address for Delivery or Service............................................................ 49
24.3.2 Effective Date of Service.................................................................. 50
24.3.3 Change of Address.......................................................................... 51
24.4 Language of Text....................................................................................... 51
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24.5 Preferential Treatment.............................................................. 51
24.6 Approval of Contract Amendments..................................................... 51
24.7 Additional Documents................................................................ 51
24.8 Time of the Essence................................................................. 51
24.9 Waivers and Remedies................................................................ 51
24.10 Counterparts........................................................................ 51
24.11 Transmission by Facsimile........................................................... 52
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SCHEDULES
Schedule A Map of Exploration Rights and Property Boundary
Schedule B Particulars, Terms and Conditions of Exploration Rights
<PAGE> 9
PREAMBLE
THIS FINAL JOINT VENTURE CONTRACT is entered into on this 25th day of December,
1995
BETWEEN
GEOEXPLORATION CORPORATION OF THE FIRST GEOEXPLORATION
BUREAU
(a subsidiary of the Ministry of Metallurgical Industry
("MMI") of the People's Republic of China, hereinafter called
the "GEC-FGEB")
Registration Place: Sanhe City, Hebei Province, China
Registered Office: Yianjao, Sanhe, Hebei, China
Legal Representative: Shi Yiandong; Position: President;
Nationality: Chinese
AND
TRIPLE EIGHT MINERAL CORPORATION (hereinafter called the
"TEMCO")
Registration Place: British Virgin Islands
Registered Office: East Asia Corporate Services
(BVI) Limited Columbus
Centre Building, Wickhams
Cay, Road Town, Tortola,
British Virgin Islands
Legal Representative: Robin B. Dow; Position:
Chairman of Board;
Nationality: Canadian
WHEREAS:
1. All mineral resources within the territory of the People's Republic
of China ("CHINA") are owned by the State.
<PAGE> 10
2.
2. The Chinese central government and the Hebei provincial government both
desire to encourage further exploration for economic deposits of Minerals
(as defined herein) which may occur within Hebei Province.
3. In China, the exploration of Minerals is conducted in three stages:
reconnaissance, detailed investigation, and exploration. The right to
conduct each of these three stages of exploration with respect to a
specified geographical area is evidenced by a form of permit (any one or
combination of which as used in these recitals and as more fully defined
herein, an "EXPLORATION RIGHT") which has associated with it specified
rights and obligations. Upon receiving the first of such three forms of
permits, the entity to which it has been issued (the "PERMIT HOLDER") has
the exclusive right to conduct such mineral exploration activity in such
geographic area as is specified therein and, provided that the Permit
Holder satisfies or performs all obligations associated with any such
permit, the Permit Holder is automatically and exclusively entitled to be
issued the next succeeding level of permit.
4. The authority to issue various kinds of permits to conduct exploration as
discussed above and defined as Exploration Rights is held by the Ministry
of Geological and Mineral Resources ("MGMR") and its provincial bureaus.
5. The authority to grant the right to develop mines and to produce Minerals
is held by MGMR and its provincial bureaus and MGMR evidences that it has
granted such right to an entity which wishes to develop a mine and to
produce Minerals by issuing to such entity a Mining License (as defined
herein).
6. GEC-FGEB has been granted certain Exploration Rights with respect to
certain mineral properties in Hebei province (as such mineral properties
are more fully defined herein) and wishes to form a sino-foreign joint
venture (the "JOINT VENTURE"; also as more fully defined herein) for
purposes (the "JOINT VENTURE PURPOSES") of the exploration of Minerals on
such mineral properties and, if such exploration results in the discovery
of an economic deposit of Minerals, for the further purposes of applying to
obtain a Mining License to develop one or more mines and produce and
process Minerals.
7. TEMCO holds all of the non-Chinese interests in the Joint Venture on behalf
of the Canadian side.
8. By entering into this Contract, each of GEC-FGEB and TEMCO desire to
confirm and record their respective rights and obligations participation in
the proposed Joint Venture.
NOW THEREFORE THIS CONTRACT WITNESSES THE PARTIES AGREEMENT AS FOLLOWS:
<PAGE> 11
3.
1.0 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Contract, unless the context otherwise requires, the following
expressions shall bear the following meanings:
(a) "ACCOUNTING PROCEDURE" means the procedure referred to in SECTION 7.11 and
set out in SCHEDULE C;
(b) "AREA OF INTEREST" means the area covered by the Exploration Rights listed
in SCHEDULE A but does not include the Core Area;
(c) "BENEFICIAL INTEREST" means, subject to as provided in SECTION 2.6, the
right to which a Party under this contract has to hold a specified
percentage of the capital of the Joint Venture and includes without
limitation the obligation to contribute to the Joint Venture and the right
to share in the profits of the Joint Venture in accordance with such
percentage interest;
(d) "BOARD OF DIRECTORS" means the management organization comprised of
directors appointed by TEMCO and GEC-FGEB respectively pursuant to ARTICLE
6 hereof;
(e) "BUSINESS LICENSE" means the business license issued to the Joint Venture
by the Government department in charge of the administration for industry
and commerce or any other authorized Government agency;
(f) "CERTIFICATE OF APPROVAL" means the certificate of approval issued to the
Parties in respect of this Contract by the Ministry of Foreign Trade &
Economic Co-operation and or any other Government Agency authorized to
issue certificates of approval;
(g) "CHAIRMAN" means the Chairman of the Board of Directors appointed in
accordance with SECTION 6.4;
(h) "COMMENCEMENT DATE" shall have the meaning associated with it in
SUB-SECTION 2.4.2;
(i) "CONTRACT" means this Joint Venture Contract and shall include the Recitals
set out above and all Schedules attached to this Contract;
(j) "CORE AREA" means the area chosen by the Joint Venture to be the initial
target area for Operation of the Property during the initial Program and
Budget referred to in SECTION 4.1.2;
(k) "DETAILED INVESTIGATION PERMIT" means the permit for the second stage of
mineral exploration activities issued by MGMR pursuant to which an entity
enjoys the exclusive right to conduct the second stage of mineral
exploration activities on such mineral properties as are specified in such
permit;
<PAGE> 12
4.
(l) "DIRECTORS" means collectively the Chairman, the Vice Chairman and each of
the other Directors appointed by TEMCO and GEC-FGEB respectively to the
Board of Directors which term also includes any alternate Director duly
acting as such pursuant to SECTION 6.7;
(m) "EXPLORATION PERMIT" means the permit for the third stage of mineral
exploration activities issued by MGMR pursuant to which an entity enjoys
the exclusive right to conduct the third stage of mineral exploration
activities on such mineral properties as are specified in such permit;
(n) "EXPLORATION RIGHTS" means any one, or a combination, as the context
requires, of the rights associated with Reconnaissance Permits, Detailed
Investigation Permits and Exploration Permits pursuant to which the Joint
Venture has the exclusive right to explore a geographic area which the
Joint Venture holds, or is granted from time to time, pursuant to the
Mineral Resources Law, as more particularly described, as at the date of
this Contract, in SCHEDULE A and SCHEDULE B;
(o) "FEASIBILITY STUDY" means a study which includes the confirmation of ore
reserves by conducting delineation drilling, hydrological and geo-technical
programs, environmental studies, and the mining of one or more bulk samples
for metallurgical evaluation which may require the construction of
underground workings including shafts or inclines, or other works
associated with mine development. In the process of conducting the
Feasibility Study different mining and processing alternatives will be
considered. The Feasibility Study shall describe the proposed mining
methods, and will contain estimates of both capital and operating costs to
an estimated accuracy level of plus or minus ten percent (10%) to thirty
percent (30%) and will analyze how to proceed to economically and
commercially extract Minerals and produce Products and will also include
relevant marketing and financial data referenced in the Feasibility Study;
(p) "GENERAL MANAGER" means the General Manager of the Joint Venture appointed
pursuant to SECTION 7.2;
(q) "GOVERNMENT" means the Government of the People's Republic of China, at
Central, Provincial and local levels which term shall be deemed to include
all Government departments and their authorized agencies thereof;
(r) "INITIAL INVESTMENT" has the meaning ascribed to it in SECTION 4.1.1;
(s) "INITIAL INVESTMENT PERIOD" means the period which commences on the
Commencement Date and ends on the date which is the earlier of the date on
which TEMCO completes its Initial Investment and the date on which TEMCO
delivers a notice pursuant to SECTION 15.1 that it wishes to cap its
contribution;
(t) "JOINT VENTURE" means the joint venture which pursuant to ARTICLE 2 the
Parties are to establish as a separate legal person in accordance with the
Law of the PRC on Sino-Foreign Co-operative Joint Venture Enterprises;
<PAGE> 13
5.
(u) "MINERAL RESOURCES LAW" means the Law of the PRC on Mineral Resources and
the Implementation Regulations thereunder and all relevant supplementary
provisions and interpretations as may be amended from time to time;
(v) "MINERAL RIGHTS" means either or both of Exploration Rights and Mining
Licenses held by the Joint Venture in relation to a Property or Properties
subject to this Contract;
(w) "MINERALS" means all minerals extracted from the Property and includes
without limitation, zinc, silver and gold and all other minerals commonly
and necessarily found in association with zinc, silver or gold in whatever
form or state. However, the term "Minerals" does not include minerals of
which exploitation by Sino-foreign Joint Ventures is prohibited by the
Government;
(x) "MINING LICENSE" means a license granted by MGMR to an entity pursuant to
which such entity is authorized to develop a mine and to conduct Mining
Operations in connection with the Property as specified in such Mining
License;
(y) "MINING OPERATIONS" means every kind of work in connection with the mining,
beneficiation and sale of Minerals, without limiting the generality of the
foregoing, the engineering, developing, mining, treating, refining,
transporting, handling and marketing of Products won from the Property;
(z) "MMI" means the Ministry of Metallurgical Industry of the People's Republic
of China;
(aa) "MONTH" means a Gregorian calendar month and "MONTHLY" shall bear a similar
meaning;
(ab) "OPERATIONS" means the activities of the initial startup, development and
operation of a fully integrated mine, mill and processing complex and
industrial endeavour and includes all activities which have for their
purpose the discovery and location, delineation and trial mining of
commercial deposits of Minerals within the area covered by Mineral Rights,
the testing of such deposits including drilling and other underground
reconnaissance, bulk sampling, Pre-Feasibility and Feasibility Studies, the
acquisition, maintenance and administration of Exploration Rights, and
specifically includes all development work, design and production
engineering and all activities constituting Mining Operations as well as
the administration of field and the management and administrative offices
for the performance of any of the functions specified above and all matters
inherent in or incidental to the business of the Joint Venture;
(ac) "PARTIES" means the parties to this Contract collectively when expressed in
the plural form, and "PARTY" shall mean any party to this Contract
individually when expressed in the singular form;
(ad) "PRC" means the People's Republic of China;
<PAGE> 14
6.
(ae) "PRE-FEASIBILITY STUDY" means a study which assesses the viability of
conducting Mining Operations within the Property and upon which a decision
to conduct a Feasibility Study is based;
(af) "PRODUCTS" means any ore, metals, concentrates or Minerals produced or
processed at or from the Properties;
(ag) "PROGRAM AND BUDGET" means a "PROGRAM" being a description in reasonable
detail of Operations to be conducted and objectives to be achieved by the
Chairman within the Property; and "BUDGET" means, in relation to each
Program, a detailed estimate of all Project Expenditure required in order
to conduct such Operations;
(ah) "PROJECT EXPENDITURE" means all costs and charges, whether of a capital or
operating nature, incurred, by or on behalf of the Joint Venture, on or
after the Commencement Date in relation to:
(i) acquiring and maintaining the Joint Venture's Exploration Rights; and
(ii) conducting the Operations;
A detailed list of those costs and charges characterized as Project
Expenditure (including an appropriate management fee) shall be incorporated
into the Accounting Procedure;
(ai) "PROPERTY OR PROPERTIES" means the Mineral Rights, and any interests into
which such Mineral Rights may be converted or exchanged, and shall also
include all equipment, buildings, machinery, data, analysis and other like
items acquired, as used in, or in respect of, the Mineral Rights, and the
Joint Venture formed under this Contract;
(aj) "RECONNAISSANCE PERMIT" means the permit for the first stage of mineral
exploration activities issued by MGMR pursuant to which an entity enjoys
the exclusive right to conduct the first stage of mineral exploration
activities on such mineral properties as are specified in such permit;
(ak) "VOTING INTEREST" means the percentage of the votes which a Party has a
right to vote during all meetings of the Board of Directors which shall be
determined as follows: (i) during the Initial Investment Period, TEMCO
shall have the right to vote a fifty-five percent (55%) Voting Interest and
GEC-FGEB shall have the right to vote a forty-five percent (45%) Voting
Interest; and (ii) at all times thereafter, the percentage of the votes
which each Party shall have the right to vote shall be the same as the
Beneficial Interest of each Party as is calculated from time to time in
accordance with ARTICLE 10 and subject to the approval of appropriate
Government agency.
1.2 HEADINGS
The division of this Contract into Articles and sections, and the provision of
headings relating thereto, is for convenience of reference only, and shall not
affect the construction or
<PAGE> 15
7.
interpretation of this Contract. Unless otherwise specified, a reference to an
Article, section or Schedule is a reference to an Article, section or Schedule
to this Contract.
1.3 CONTRACT PARAMOUNT
In the interpretation of this Contract, should any inconsistency exist between
an Article or Section and any part of a Schedule attached hereto, then the
relevant Article or Section in this Contract (as the case may be) shall prevail.
1.4 EXTENDED MEANINGS
When the context so requires, the singular number shall be read as if the plural
were expressed and the provisions of this Contract shall be read with all
necessary grammatical changes depending upon the nature of the Person, or of the
word or phrase which has been specifically defined in this Contract, to which
reference is made.
1.5 CALCULATION OF TIME
When calculating the period of time within which or following which any act is
to be done or step taken pursuant to this Contract, the date which is the
reference date in calculating such period shall be excluded. If the last day of
such period is not a Business Day, then the time period in question shall end on
the first Business Day following such non-Business Day.
1.6 CURRENCY
Unless otherwise provided for herein, all monetary amounts referred to herein
shall refer to the lawful money of the United States of America.
1.7 SEVERABILITY
If any Article, Section, or any portion of any Section, of this Contract is
determined to be unenforceable or invalid for any reason whatsoever then that
unenforceability or invalidity shall not affect the enforceability or validity
of the remaining portions of this Contract and such unenforceable or invalid
Article, Section or portion thereof shall be severed from the remainder of this
Contract.
1.8 SCHEDULES
The following schedules are attached hereto, and incorporated by reference
herein, and deemed to be a part hereof.
SCHEDULE SUBJECT MATTER
A Map of Exploration Rights and Property Boundary
B Particulars, Terms and Conditions of
Exploration Rights
<PAGE> 16
8.
2.0 ESTABLISHMENT OF JOINT VENTURE
2.1 LEGAL BASIS OF JOINT VENTURE
Subject to SECTION 2.4, the Parties agree to form a Joint Venture constituted as
a separate legal person in accordance with the Law of the PRC on Sino-Foreign
Co-operative Joint Venture Enterprises and other relevant Chinese laws and
regulations.
2.2 STATUS OF TEMCO
TEMCO is a corporation incorporated under the laws of the British Virgin
Islands.
2.3 STATUS OF GEC-FGEB
2.3.1 GEC-FGEB has been authorized by The First Geoexploration Bureau of MMI to
carry out its duties and enjoy the benefits under this Contract.
2.4 CERTIFICATE OF APPROVAL AND BUSINESS LICENSE
2.4.1 The efficacy of this Contract is conditional upon the Parties being
granted a Certificate of Approval for the Contract in terms satisfactory
to both TEMCO and GEC-FGEB by no later than the date ninety (90) days
after the date on which this Contract has been fully executed.
2.4.2 Subject to sub-section 2.4.1, the Commencement Date of the Joint Venture
shall be the date upon which the Business License is issued.
2.5 EFFECT OF CONTRACT
This Contract is to govern each Party's respective rights and obligations in
the Joint Venture.
2.6 BENEFICIAL INTERESTS
Each Party's Beneficial Interest shall be calculated in accordance with ARTICLE
10.
2.7 LIABILITY OF THE PARTIES
No Party shall have any greater legal interest or claim in the property, rights
and entitlements of the Joint Venture than the Beneficial Interests which such
Party holds at any time and bears in proportion to each other Party's Beneficial
Interest in relation to such property, rights and entitlements, which shall be
adjusted in accordance with Section 10.5.
<PAGE> 17
9.
2.8 ARTICLES OF ASSOCIATION
2.8.1 The Parties shall prepare articles of association consistent with the
terms of this Contract to comply with the Law of the PRC on Sino-Foreign
Co-operative Joint Venture Enterprises and the accompanying Regulations to
that Law.
2.8.2 Any articles of association prepared by the Parties shall be submitted for
approval to the relevant Government authority and shall bind the Parties
in accordance with the terms thereof from the date of approval by the said
Government authority.
2.9 NAME OF THE JOINT VENTURE
The Chinese name of the Joint Venture shall be "Chengde Huajia Kuangye Youxian
Gongsi. The English name of the Joint Venture shall be "Chengde Huajia Mining
Industry Co., Ltd.
2.10 REGISTERED OFFICE
The registered office of the Joint Venture shall be: 19 Dong Xin Rd., Chengde
Municipality, Hebei, China 067000. The Joint Venture may set up representative
offices in Beijing or other places as required.
2.11 FISCAL YEAR
The fiscal year of the Joint Venture shall be that nominated by the Board of
Directors at their first meeting.
3.0 PURPOSES AND SCOPE OF JOINT VENTURE
3.1 PURPOSE AND SCOPE
3.1.1 PURPOSE AND SCOPE OF BUSINESS
The purpose and scope of business for the Joint Venture shall be mineral
exploration, development, production and processing. The Joint Venture
shall undertake Operations with a view to the creation and operation of
fully integrated mining, milling and processing facilities on the
Properties subject to this Contract and without limitation, initially with
a view to delineating one or more ore deposits amenable to commercial
development by the Joint Venture, to thereafter undertake further
exploration drilling and sampling to confirm the size and extent of the
potential ore deposits and undertake development and mining and
metallurgical testwork to analyze alternative mining and milling methods,
recovery rates, grades and products related to commercial exploitation of
the ore deposits delineated and thereafter to construct and operate mines,
mills and other processing facilities as necessary to produce Products from
the Properties subject to this Contract.
<PAGE> 18
10.
3.1.2 USE OF INTERNATIONAL MINING INDUSTRY STANDARDS
The Joint Venture will undertake all Operations having due regard to sound
internationally accepted exploration, development, production and
processing standards and practices. For greater certainty, the Parties
agree that the Board of Directors may, in its sole discretion, adopt
policies and standards or make decisions regarding the Operations.
3.2 MUTUAL OBLIGATIONS OF THE PARTIES
Each of the Parties covenants, undertakes to, and agrees with the other Party
that it will:
(a) observe and perform its obligations and commitments in respect of the
Properties subject to this Contract;
(b) not engage (whether alone or in association with others) in any activity
apply for, or grant any Exploration Right or Mining License in respect of
Minerals within the Properties or the Exploration Rights except as
provided or authorized by this Contract, or as agreed in writing by the
Parties;
(c) not do, or cause, or permit to be done, any act, matter or thing
which might cause an Exploration Right or any part thereof to be
revised, canceled, forfeited, not issued, not renewed or not
extended, or which in any way may jeopardize the continued enjoyment
of an Exploration Right;
(d) subject to SECTION 4.1 and ARTICLE 10, contribute, according to the
ratio of Beneficial Interests, to the capital of the Joint Venture or
the Project Expenditures for the purposes of conducting the
Operations;
(e) be just and faithful in all of its dealings with each other Party.
4.0 COMPOSITION OF BENEFICIAL INTERESTS
4.1 INITIAL INVESTMENT
4.1.1 TOTAL INITIAL INVESTMENT OF THE JOINT VENTURE
The total initial investment and registered capital of the Joint
Venture is to be US$8,000,000.
GEC-FGEB will contribute the Exploration Rights held by it in the
Core Area and in the Area of Interest and the geologic data and
research results relating thereto, with a value of US$3,600,000,
representing 45% interest of the Joint Venture.
<PAGE> 19
11.
TEMCO shall, subject to SECTION 15.1, within five (5) years subject
to extension due to Force Majeure, from the Commencement Date, expend
on a Program by Program basis up to US$4,400,000 on Project
Expenditures (the "INITIAL INVESTMENT") to the Joint Venture,
representing 55% interest of the Joint Venture.
4.1.2 FIRST PROGRAM AND BUDGET
The Parties agree that starting from the Commencement Date the Joint
Venture shall conduct Operations initially in accordance with an
initial Program and Budget to expend no more than 15% of the Initial
Investment. Within 90 days of the Commencement Date, TEMCO will
contribute to the Joint Venture bank account US$660,000 to fund the
initial Program and Budget. The results achieved from the initial
Program and Budget will meet the requirements of SECTION 15.1.
4.1.3 VOTING INTEREST
During the Initial Investment Period, so long as TEMCO contributes
towards the Project Expenditures required for each exploration stage
in accordance with each Program and Budget in a timely fashion, TEMCO
shall have a 55% Voting Interest notwithstanding that its Beneficial
Interest will be different during this Initial Investment Period.
4.2 CHANGING BENEFICIAL INTERESTS
At all times during this Contract, both Parties' Beneficial Interest shall be
calculated in accordance with the formula set out in ARTICLE 10. For greater
certainty, it is acknowledged by the Parties that: (i) upon completion of the
Initial Investment by TEMCO, TEMCO shall have a 55% Beneficial Interest and
GEC-FGEB shall have a 45% Beneficial Interest; and (ii) thereafter, the
Beneficial Interest of each Party is subject to dilution as calculated in
accordance with the formula set out in ARTICLE 10.
4.3 CONTRIBUTION BY GEC-FGEB AND WARRANTY
4.3.1 ASSIGNMENT OF EXPLORATION RIGHTS AND RELATED INFORMATION
As its contribution to the Joint Venture, GEC-FGEB shall, on the
Commencement Date, transfer and assign, or cause to have transferred
and assigned, to the Joint Venture all of those Exploration Rights
referred to in SUB-SECTION 8.1.1 and, in relation to those
Exploration Rights, all of the drilling cores and other samples and
assays, and all maps, geological, geophysical and geochemical data
and interpretations thereof.
4.3.2 WARRANTY OF TITLE
During the term of this Contract, GEC-FGEB warrants to TEMCO that, as
at the Commencement Date, it will have full title at Chinese Law to
all of the Exploration Rights which are to be transferred as at such
date to the Joint Venture and that it will have obtained approval
from all relevant Government authorities and landholders to
<PAGE> 20
12.
allow the Joint Venture to enter into and work upon land which is the
subject of such Exploration Rights for purposes of the Operations.
4.3.3 CONTINUING OBLIGATION OF GEC-FGEB
GEC-FGEB shall provide all necessary assistance and support to the Joint
Venture requiring government or local support required to conduct the
Operations of the Joint Venture currently and in the future. The
assistance and support referenced shall include without limitation the
following:
(a) to provide all necessary assistance and support to the Joint Venture
to obtain all necessary business, exploration, mining, environmental
permits, licenses, rights or permissions, including Exploration
Rights and Mining Licenses in respect of any of the Properties,
required to conduct the operations of the Joint Venture currently
and in the future to conduct Mining Operations;
(b) to assist the Joint Venture with the supply of all necessary
services, including water, electricity and transportation;
(c) to assist the Joint Venture in recruiting Chinese management
personnel, technical personnel, workers and other personnel as
needed;
(d) to assist foreign staff and visitors in applying for entry visas,
work permits and in processing and effecting their travel
arrangements;
(e) keep confidential the technical and commercial information of both
Parties; and
(f) to handle other matters entrusted to it by the Joint Venture.
4.4 CONTINUING ASSISTANCE OF GEC-FGEB
4.4.1 IMPORTATION OR EXPORTATION OF EQUIPMENT
GEC-FGEB shall provide the Joint Venture with all assistance which he
may require from time to time in relation to the importation or
exportation of any equipment including, without limitation, any drilling
or geophysical equipment obtained for the purposes of the Operations.
4.4.2 PUBLIC RELATIONS AND MONITORING OF LEGISLATION AND REGULATION
As the Board of Directors requires from time to time, GEC-FGEB shall
also advance the interests of the Joint Venture by exercising a public
relations role in relation to relevant Government authorities.
Particularly, GEC-FGEB shall be responsible for monitoring any changes
in Government policy towards mineral resource projects and GEC-FGEB
shall assist the Joint Venture to obtain assurance from the Government
in respect of certain regulatory objectives which the Joint Venture
desires.
<PAGE> 21
13.
4.5 CONTRIBUTION BY EACH PARTY TO PROJECT EXPENDITURE
Following completion of TEMCO's Initial Investment, each Party may contribute to
Project Expenditure in proportion to their respective Beneficial Interests. All
such contributions to Project Expenditure shall be made in accordance with
ARTICLE 10, and any subsequent adjustments to the Beneficial Interests held by
any Party by virtue of a decision to support to a greater or lesser degree, any
Program and Budget for the Operations shall be made in accordance with the
formula contained in ARTICLE 10.
5.0 DURATION OF THE JOINT VENTURE
5.1 DURATION
Subject to as is provided in ARTICLE 15, and elsewhere in this Contract, the
duration of the Joint Venture will be thirty (30) years from the Commencement
Date.
5.2 DISPOSITION OF PROPERTY
Upon the expiration or termination before the expiry date of the Joint Venture,
the Joint Venture shall carry out liquidation in accordance with the relevant
law. Any property remaining after the payment of all debts of the Joint Venture
shall be distributed to the Parties in proportion to their Beneficial Interest
in the Joint Venture.
5.3 EXTENSION
The Parties agree to extend and offer whatever assistance is required to extend
the duration of the Joint Venture until the last date of Mining Operations on
any of the Properties subject to this Contract. Applications for such extensions
of the duration of the Joint Venture shall be submitted to the original
examination and approval authority, or to any other Government ministry or
department at that time responsible for administering foreign investment.
GEC-FGEB will use its best efforts to assist in obtaining such an extension.
6.0 BOARD OF DIRECTORS
6.1 COMMENCEMENT
The Board of Directors shall function with effect from the Commencement Date.
6.2 PURPOSE AND SCOPE OF AUTHORITY OF BOARD
The Board of Directors shall be formed by and on behalf of the Parties to:
(a) establish policies which will achieve the aims and objectives of the
Joint Venture as set out in SECTION 3.1.1;
<PAGE> 22
14.
(b) approve Programs and Budgets submitted for the Operations by the
Chairman;
(c) review performance reports submitted by the Chairman;
(d) make a decision, if appropriate, to implement a Feasibility Study;
(e) establish the initial Accounting Procedure and amend it from time to
time as appropriate; and
(f) consider all other matters appropriate for deliberation by the Board.
6.3 COMPOSITION
Until TEMCO has completed its Initial Investment, the Board of Directors shall
be comprised of seven (7) directors of whom four (4) shall be appointed by TEMCO
and three (3) shall be appointed by GEC-FGEB.
6.4 APPOINTMENT AND REMOVAL OF DIRECTORS
6.4.1 TERM AND ELIGIBILITY
Subject to earlier termination caused by the operation of SECTION 6.3, a
FOUR (4) year term of office shall apply to anyone appointed as
Director, Chairman or Vice Chairman of the Board. Subject to SUB-SECTION
6.4.2, any person serving as Director, Chairman or Vice Chairman shall
be eligible for reappointment to the Board for one or more further terms
of office. By the execution of this Contract, the Parties as
shareholders evidence their agreement to vote in favour of the nominees
of each of them for the office of Director as provided in SECTION 6.3.
6.4.2 METHOD OF APPOINTMENT OR REMOVAL
Each Party shall be entitled to appoint (pursuant to the occurrence of a
casual vacancy or otherwise) or remove any of the number of Directors
which it is entitled to appoint to the Board of Directors. Any such
appointment or removal of a Director shall be made by instrument in
writing signed by a person duly authorized by the relevant Party and
will by effective upon it being delivered to the registered office and
being approved by the original Government registration agency.
6.5 Casual Vacancies on Board
Any person having been appointed as a Director, Chairman or Vice Chairman shall
occupy that office at the pleasure of the Party having appointed the particular
Director. Where a casual vacancy occurs within the Board of Directors the Party
having appointed the person whose death, removal or resignation gave rise to the
casual vacancy shall be entitled to appoint the replacement Director. Persons
appointed to fill casual vacancies shall only hold office for the remainder of
the term of office which the person who was replaced would have occupied.
<PAGE> 23
15.
6.6 ALTERNATE DIRECTORS
Each Director shall have power to appoint (but not retrospectively) a suitable
and an appropriate person (including another Director) to act as an Alternate in
his place on the Board of Directors whether for a stated period or periods or
until the happening of a specified event or whenever by absence or illness or
otherwise he shall be unable to attend his duties as a Director, and the
following provisions shall apply to any such Alternate Director:
(a) he may be appointed, removed or suspended from office by notice from the
Director for whom he is acting as an Alternate;
(b) he shall be entitled to receive notice of meetings of Board of Directors
and to attend and he shall be entitled to vote thereat should the
Director by whom he was appointed not be present;
(c) he shall be entitled to exercise all the powers (except the power to
appoint an Alternate Director) and perform all the duties of a Director
insofar as the Director by whom he was appointed had not exercised or
performed them;
(d) he shall automatically vacate office if the Director by whom he was
appointed shall vacate office or die;
(e) he shall not be taken into account in determining the number of
Directors for the purposes of the required composition of the Board of
Directors as set out in SECTION 6.3;
(f) he shall, while acting as a Director, be responsible to the Joint
Venture for his own acts and defaults and shall not be deemed to be the
agent of the Director by whom he was appointed; and
(g) one person may be appointed and serve as an alternate for more than one
Director at any one time or at different points in time.
6.7 CONVENING AND PLACE OF MEETINGS
6.7.1 CONVENING AND PLACE OF MEETING
The Board of Directors shall meet at least once within any calendar
year. Meetings shall take place in Beijing, or in such other place as
shall be agreed upon from time to time by the Parties. The Chairman
shall be responsible for ensuring that each of the Directors receives
timely notice of the occurrence of scheduled meetings.
<PAGE> 24
16.
6.7.2 NOTICE PERIODS
The giving by either Party of at least sixty (60) days notice is
required for the convening of each Board of Directors meeting, including
any extraordinary meeting, although a majority of the Directors may
consent to shorter notice being given. The proposed agenda for each
Board meeting shall be circulated to all Directors at least fourteen
(14) days prior to the date appointed for the particular meeting.
6.7.3 VENUES OTHER THAN BEIJING
At the discretion of the Directors, meetings of Board of the Directors
may from time to time be conducted at venues outside of China.
6.8 QUORUM
6.3.1 QUORUM
Until TEMCO shall have competed its Initial Investment, the quorum for
meetings of the Board of Directors shall be four (4) comprising at least
two (2) Directors nominated by TEMCO and two (2) Directors nominated by
GEC-FGEB.
6.8.2 ADJOURNMENT OF MEETING IF NO QUORM
Where a meeting of the Board of Directors is called pursuant to section
6.7 but is adjourned because a quorum is not present as required
pursuant to SUB-SECTION 6.8.1, then, if a quorum is not present within
sixty (60) minutes of the time called for a meeting, the meeting shall
be adjourned to a date seven (7) days thereafter at the same time and
place and notice of the adjourned meeting shall be given to all
Directors; at such adjourned meeting, the representatives present shall
be deemed to be a quorum and shall be automatically authorized and
empowered to conduct business thereat in the normal manner.
6.9 VOTES AT MEETINGS
6.9.1 VOTING DEEMED BENEFICIAL INTEREST
At every meeting of the Board of Directors, each Party through its
Directors present or by power of attorney shall have a percentage of
votes equal to its Voting Interest provided that TEMCO has complied with
its obligations contained in CLAUSE 4.1.3. With the exception of those
matters set forth in CLAUSE 6.12, all matters at the Board's meeting
shall be decided by a simple majority of votes cast.
<PAGE> 25
17.
6.9.2 VOTING BY DIRECTOR OF NON-CONTRIBUTING PARTY
Any Directors appointed on behalf of a Non-contributing Party (as such term is
defined by SUB-SECTION 10.3.1) shall only be entitled to vote upon those matters
referred to in section 6.12.
6.10 POWERS OF ATTORNEY
Any Director may, by any duly executed power of attorney, appoint an attorney to
vote on his behalf and such power of attorney or proof thereof to the
satisfaction of the Board of Directors shall be produced for inspection at the
Registered Office of the Joint Venture or at such other location as the Board
may from time to time direct together with such evidence of the due execution
thereof as the Board may require before the attorney shall be entitled to act
thereunder. Any person (including another Director) may be appointed the
attorney of one or more Directors for these purposes.
6.11 SPECIAL RESOLUTIONS
The following resolutions made by the Board of Directors shall be passed only by
unanimous votes of all Directors:
(a) proposals that the Joint Venture should form another enterprise or
business or merge all of the business of this Joint Venture into another
enterprise or business with any third party;
(b) any decision to terminate the business of the Joint Venture;
(c) those decisions required to be passed unanimous votes of all Directors
by Chinese laws and regulations from time to time.
6.12 WRITTEN RESOLUTIONS
Except for special resolutions as provided in 6.12, a resolution in writing
under the hands of more than 50% of the Directors shall be as valid and
effectual as a resolution duly passed at a meeting of the Board of Directors
duly called and held and may consist of several documents in like form each
signed by one or more of the Directors or may be in telexed form, or other
written form of communication, indicating that the signature of the Director
concerned has been duly affixed to the original provided that confirmation that
such signature has been affixed is forwarded to the registered office of the
Joint Venture within fourteen (14) days from the date upon which the original
was signed.
6.13 DECISIONS BINDING
All lawful decisions of the Board of Directors shall be binding on the Parties.
Both Parties are responsible to implement each board decision or resolution.
<PAGE> 26
18.
6.14 SUB-COMMITTEES OF THE BOARD
The Board of Directors shall form and regulate such technical and administrative
sub-committees as it considers form time to time to be appropriate. Such
sub-committees may be made responsible to either the Board, or to the Chairman,
as the case may be.
7.0 CHAIRMAN AND GENERAL MANAGER
7.1 ROLE OF CHAIRMAN
The Joint Venture shall be managed by the Chairman who is authorized by the
Board of Directors to manage, supervise and control the Operations on behalf of
the Parties. Within the scope of SECTIONS 7.7 and 7.8 the Chairman alone shall
have the right to enter into legally binding agreements on behalf of the Joint
Venture or the Parties in connection with any and all activities contemplated by
this Contract.
7.2 ELIGIBILITY AND APPOINTMENT OF CHAIRMAN
7.2.1 ELIGIBILITY
Only persons who are suitably experienced and competent shall be
eligible to be appointed to be Chairman.
7.2.2 RIGHT TO NOMINATE
The right to nominate the Chairman depends upon the point in time during
the term of this Contract and upon the Beneficial Interest held by each
Party as set out more fully below:
(a) notwithstanding the Beneficial Interest held by either Party,
during the Initial Investment Period, TEMCO shall be entitled to
nominate the person to be the Chairman;
(b) thereafter, whichever Party holds the larger Beneficial Interest
shall be entitled to nominate the person to be the Chairman;
(c) unless only one Party holds a Beneficial Interest which is greater
than ten percent (10%), no Party shall nominate both the Chairman
and the General Manager.
7.2.3 AGREEMENT TO APPOINT
Subject to the final approval of the Board of Directors, the Board of
Directors shall duly appoint as Chairman the person who is nominated in
accordance with SECTION 7.2 and such Chairman shall report to the Board
of Directors.
<PAGE> 27
19.
7.3 ELIGIBILITY AND AUTHORITY
Only persons who are Directors shall be eligible to be appointed to the
positions of Chairman or Vice-Chairman. The authority of the Chairman
and the Vice-Chairman shall be subject to the authority of the Board of
Directors.
7.4 NO CASTING VOTE
The Chairman shall not have a casting vote.
7.5 DELEGATION OF AUTHORITY
7.5.1 CONFER WITH GENERAL MANAGER
The Chairman shall confer on a regular basis with the General Manager
with respect to the full range of the Chairman's responsibilities
pursuant to SECTION 7.7.
7.5.2 DELEGATE TO GENERAL MANAGER
The Chairman shall, in appropriate circumstances, delegate certain of
his responsibilities to the General Manager subject to the ongoing
authority and control of the Chairman.
7.5.3 NOMINATE GENERAL MANAGER AS TEMPORARY STAND-IN
If necessary, as circumstances dictate, the Chairman may nominate the
General Manager to temporarily stand-in and act for and on his behalf
for any or all of the purposes contained in SECTION 7.7. The Party
nominating same will notify the other Party of any such nomination as
soon as practicable. In making any decision as to the delegation of his
responsibilities, the Chairman shall have regard to the experience and
qualifications of all persons available to act in each capacity, with
the interests of the Joint Venture being considered of paramount
importance.
7.6 AUTHORITY OVER PROPERTY OF JOINT VENTURE
For the purposes of managing the Operations, the Chairman shall, under the
supervision and control of the Board of Directors, alone have the authority to
make decisions, or enter into legally binding agreements concerning or relating
to the property of the Joint Venture.
7.7 DUTIES OF CHAIRMAN
The Chairman shall have the power and authority to conduct the day to day
Operations of the Joint Venture and shall have all the necessary and incidental
powers required to carry out such Operations, subject to the overall direction
and control of the Board of Directors as they determine policies from time to
time.
<PAGE> 28
20.
In addition to the Chairman's obligations specified elsewhere in this
Contract, the Chairman shall undertake on behalf of the Parties the following
actions:
(a) make timely preparation and submission of Programs and Budgets as
provided by ARTICLE 9;
(b) in accordance with those general directions, instructions and
parameters for action issued from time to time by the Board, the
ability to enter into contracts for the purposes of the Operations on
behalf of the Parties;
(c) in consultation with the project exploration manager or the General
Manager and with GEC-FGEB's assistance in accordance with ARTICLE 8,
use all reasonable endeavour to procure that the Mineral Rights are
maintained, including without limitation the payments of all rentals,
taxes, royalties or other charges and in particular, use all
reasonable endeavour to procure that the Mineral Rights are renewed
or replaced by other titles or rights in substitution for them before
the current titles or rights expire;
(d) in consultation with the project exploration manager or the General
Manager and with GEC-FGEB's assistance in accordance with ARTICLE 8,
apply for such additional Mineral Rights as are required for the
purposes of Operations;
(e) duly prepare and lodge all reports required by law relating to the
Exploration Rights;
(f) make all Project Expenditure and commitments for the Operations on
behalf of the Parties in accordance with Programs and Budgets approved
by the Board of Directors;
(g) furnish to the Board of Directors as soon as practicable reports on
any matters of importance and, in particular, advise the Board of any
factual information on the Exploration Rights or other property held
by the Joint Venture (or by one Party on behalf of the other) which
comes to his attention and which might reasonably be expected to
result in material gains or losses to the Parties or to the Joint
Venture;
(h) furnish to the Board the summary of the Operations provided for in
SUB-SECTION 9.6 (a) and such other information as the Board may
reasonably be expected to require;
(i) maintain full true and accurate records and accounts as provided in
SECTION 16.1;
(j) arrange for and cooperate in the annual audit as provided in SECTION
16.3;
(k) maintain in full force and effect insurance coverage in respect of the
risks of the Operations in accordance with ARTICLE 17;
(l) if required by the Board, undertake and/or commission Pre-Feasibility
Studies and Feasibility Studies;
(m) perform Programs and comply with Budgets approved by the Board, and
<PAGE> 29
21.
(n) generally do all acts necessary or desirable for the efficient and
economic conduct of the Operations.
7.8 POWERS OF CHAIRMAN
The Chairman alone shall have the following rights and powers to enable him
to conduct his obligations for the benefit of the Joint Venture:
(a) the power to negotiate and reach agreement on matters relevant to the
Mineral Rights, the Properties or to the Operations with competent
Government authorities;
(b) the power to select, engage and dismiss workers, agents and
independent contractors necessary for the efficient conduct of the
Operations;
(c) the right to take such action as may in his judgement be necessary for
the protection of life, or reasonably necessary for the protection of
property, and all such costs reasonably incurred shall be deemed
Project Expenditure;
(d) subject to any limits imposed by the Board of Directors and herein
referred to, the power to contract and to dispose of surplus and
obsolete property of the Joint Venture; and
(e) such other rights and powers as are reasonably incidental to
conducting the Operations as may be entrusted to the Chairman by the
Board of Directors.
7.9 STANDARD OF PERFORMANCE
The Chairman shall conduct all Operations in accordance with sound
internationally accepted exploration, mining and engineering methods and
practices and within the policy determinations and general direction of the
Board of Directors.
7.10 EXCESS EXPENDITURE
7.10.1 GENERAL PERMITTED OVERRUN
The Chairman is authorized to make all expenditures and commitments
for Operations in accordance with Budgets for Project Expenditure
approved pursuant to SECTION 9.4 (for the purposes of this section
7.10 called "APPROVED BUDGETS"). The Chairman shall take all
reasonable care to avoid such expenditures or commitments in excess of
any Approved Budget without first seeking approval of the Board of
Directors PROVIDED that the Chairman shall be entitled to expend in
any budgetary period up to twenty percent (20%) in excess of any
Approved Budget without requiring any further approval, and all such
expenditure shall be deemed to be Project Expenditure. Subject to
SUB-SECTION 7.10.2, the Chairman shall not be entitled to recover from
any Party any excess over and above such permitted overrun and such
excess shall not be included as
<PAGE> 30
22.
any Party's contribution to Project Expenditure for the purpose of
this Contract unless the Board shall approve or ratify such excess
expenditure.
7.10.2 ADDITIONAL PERMITTED OVERRUN IN CASE OF ACCIDENT OR EMERGENCY
In the relevant budgetary period, as an additional permitted overrun
but only in the case of accident or any other emergency relating to
the Operations, the Chairman shall be entitled (without the need to
obtain approval pursuant to SECTION 9.4) to take such action as in his
judgement may be necessary for the protection of life or property and
to incur all reasonable costs up to an amount no greater than
forty-five percent (45%) of an Approved Budget. The said emergency
expenditure shall be treated as Project Expenditure and be outlayed on
behalf of the Parties in proportion to their respective Beneficial
Interests. The Chairman shall notify the Parties of any such emergency
expenditure as soon as practicable and in any event within seven (7)
days after it has been incurred.
7.11 ACCOUNTING PROCEDURE
7.11.1 INTERNATIONAL STANDARDS FOR RECORD KEEPING AND INFORMATION DISCLOSURE
The financial affairs of the Joint Venture shall be subject to the
supervision of the Chairman in accordance with, and governed by, the
Accounting Procedure. The books of account shall also be kept in
accordance with international accounting standards for mining joint
ventures and the Accounting Procedure will ensure that each of the
Parties to the Joint Venture has the accounting information, data and
analyses necessary to comply with their respective disclosure
requirements.
7.11.2 FILING OF INITIAL ACCOUNTING PROCEDURE
A copy of the Accounting Procedure shall be filed with the relevant
Government departments for their records.
7.11.3 AMENDMENTS TO ACCOUNTING PROCEDURE
The Accounting Procedure may be amended from time to time, subject
always to approval of any proposed amendments by the Board. Any
amendments to the Accounting Procedure shall be filed with the
relevant Government departments for their records.
7.12 GENERAL MANAGER AND DEPUTY GENERAL MANAGER
<PAGE> 31
23.
7.12.1 RIGHT TO NOMINATE
The right to nominate the General Manager and the Deputy General
Manager depends upon the point in time during the term of this
Contract and upon the Beneficial Interest held by each Party as set
out more fully below:
(a) notwithstanding the Beneficial Interest held by either Party,
during the Initial Investment Period, GEC-FGEB shall be entitled
to nominate the General Manager and TEMCO shall be entitled to
nominate the Deputy General Manager;
(b) thereafter, so long as both Parties hold a Beneficial Interest
which is greater than ten percent (10%), the Party which holds
the larger Beneficial Interest shall be entitled to nominate the
Deputy General Manager and the Party which holds the smaller
Beneficial Interest shall be entitled to nominate the General
Manager;
(c) if, at any point in time, only one Party holds a Beneficial
Interest which is greater than ten percent (10%), such Party
shall be entitled to nominate the General Manager, the Deputy
General Manager and the Chairman.
7.12.2 POWER TO APPOINT DEPUTY GENERAL MANAGER
The Party that is not entitled to appoint the General Manager pursuant
to SECTION 7.12 herein shall be entitled to nominate a suitably
experienced and qualified person for appointment as Deputy General
Manager of the Joint Venture. The Board of Directors shall duly
appoint such person be the Deputy General Manager. The Deputy General
Manager shall report to the General Manager.
7.12.3 DURATION OF APPOINTMENTS
Each of the General Manager and the Deputy General Manager shall serve
for a period of four (4) years subject, as the case may be, to the
right of TEMCO or GEC-FGEB to remove their nominees at an earlier
time. Each of TEMCO and GEC-FGEB undertake that they will pay due
regard to the interests of the Joint Venture and to the objectives of
each current Program and Budget before implementing any decision to
withdraw a nominee from the Joint Venture. Subject to approval of the
Board of Directors, any person may serve the Joint Venture for more
than one term as General Manager or Deputy General Manager as the case
may be.
7.12.4 ACT AS GENERAL MANAGER
The General Manager, or in his absence the Deputy General Manager,
shall act in accordance with the instructions and control of the
Chairman. As may be authorized by the Board of Directors or the
Chairman from time to time, the General Manager, or in his absence the
Deputy General Manager, may perform other functions of the Joint
Venture as may be appropriate.
<PAGE> 32
24.
8.0 EXPLORATION RIGHTS AND AREA OF INTEREST
8.1 EXPLORATION RIGHTS
8.1.1 EXPLORATION RIGHTS
With effect on and from the Commencement Date, GEC-FGEB shall pursuant
to SUBSECTION 4.3.2 either procure the transfer, or transfer to the
Joint Venture the Exploration Permits, and the Joint Venture shall be
entitled to become the legally registered holder of the following
Exploration Rights, namely:
Qiujiayin area, Guzigou - Duanjiayin area and Yantongshan
area of Liangjia District, Hebei. Total area 120 square
kilometres, including Core Area of 20 square kilometres and
Area of Interest of 100 square kilometers.
8.1.2 SCHEDULE A
The Exploration Rights referred to in SUB-SECTION 8.1.1 are delineated
within the map attached as SCHEDULE A.
8.1.3 SCHEDULE B
Detailed particulars, terms and conditions attaching to each of the
Exploration Rights are set forth in SCHEDULE B.
8.2 MAINTENANCE OF EXCLUSIVE RIGHTS
Subject to the Joint Venture's compliance with all terms and
conditions attached to the Exploration Rights, at the direction of the
Board of Directors, GEC-FGEB will undertake on behalf of the Joint
Venture to ensure that for the duration of each Exploration Right the
Joint Venture will be entitled to have exclusive possession of the
area the subject of each Exploration Right for all the purposes of
conducting the Operations.
8.3 GUARANTEE OF EXPLORATION RIGHTS
8.3.1 GEC-FGEB'S OBLIGATION TO OBTAIN ADDITIONAL EXPLORATION RIGHTS
The Joint Venture may apply to the relevant Government authorities for
additional Exploration Rights within the Area of Interest in addition
to those referred to in SUB-SECTION 8.1.2 (for greater certainty, to
include higher level of Exploration Rights and additional geographic
area subject to Exploration Rights) certainty, so as to explore for
further mineralization, and GEC-FGEB shall be obliged to bring all
reasonable effort to bear so as to assist the Joint Venture in making
such applications and to facilitate the grant of such additional
Exploration Rights.
<PAGE> 33
25.
8.3.2 GEC-FGEB'S OBLIGATION TO OBTAIN LAND ACCESS AND TO DEAL WITH LOCAL
LANDHOLDERS
GEC-FGEB shall be responsible on behalf of the Joint Venture for
making all applications for the additional Exploration Rights referred
to in SUB-SECTION 8.3.1 and shall guarantee all necessary land access
agreements to all Properties. Further, GEC-FGEB shall be responsible
for liaising with the government department in charge of geology and
mineral resources and all other relevant Government authorities and
with local landholders to ensure that good relations are maintained
between the Joint Venture and other persons during the conduct of
Operations.
8.3.3 GEC-FGEB'S OBLIGATION TO DEAL WITH ADVERSE TITLE DEFECTS AND CLAIMS
GEC-FGEB shall be responsible to deal with, and to cover all costs,
expenses and charges relating to, any claims or interest of third
parties in and to the Mineral Rights. If any such interest in the
Mineral Rights arises or is claimed by any third party including,
without limitation, the Government, GEC-FGEB shall, on behalf of the
Joint Venture, and at its sole expense, proceed to defend any such
claim and expunge any such interest. For greater certainty, it is
acknowledged and agreed by GEC-FGEB that if, in order to satisfy its
obligations under this SECTION 8.3.3, any such third party who
successfully claims an interest in and to the Mineral Rights requires
or is entitled to be paid some consideration, whether such
consideration is cash or a percentage interest in the Joint Venture or
otherwise, such consideration shall be paid solely by GEC-FGEB and not
by the Joint Venture.
8.3.4 REIMBURSEMENT OF GEC-FGEB'S REASONABLE COSTS
The Joint Venture shall bear all costs reasonable incurred by GEC-FGEB
in its provision of the services pursuant to SUB-SECTIONS 8.3.1, 8.3.2
AND 4.3.3.
8.4 PURPOSE FOR THE AREA OF INTEREST
The Area of Interest has been created for the following reasons:
(a) to identify those are as within which the Parties believe that
successful Operations may be conducted by the Joint Venture in order
to attain its purposes as defined in SECTION 3.1;
(b) to ensure that neither Party shall act independently of each other, or
of the Joint Venture by engaging in Operations within the Area of
Interest during the existence of the Joint Venture;
(c) to define the area within which the Joint Venture may next expand its
Operations by applying for additional Exploration Rights to the
relevant Government authorities for Mineral Rights at no cost to the
Joint Venture, other than regular maintenance costs of keeping such
Exploration Rights in good standing in addition to those that the
Joint Venture shall acquire under SECTION 8.1 in the Core Area and the
Area of Interest; and
<PAGE> 34
26.
(d) to identify the geographic area in which the Joint Venture will pay to
maintain Exploration Rights to be contributed to the Joint Venture by
GEC-FGEB.
8.5 AREAS NOT AVAILABLE FOR EXPLORATION RIGHTS
The Joint Venture shall not be entitled to apply for further Exploration
Rights where:
(a) Exploration Rights (with the exception of those referred to in
SUB-SECTION 8.1.2) or a Mining Licence has been issued to other
persons; or
(b) exploitation of mineral resources is prohibited by or pursuant to the
Mineral Resources Law.
8.6 REVISION OF SCHEDULE A AND SCHEDULE B
The map comprising SCHEDULE A and the description comprising SCHEDULE
B may be revised so as to accurately represent the current status from
time to time of the Exploration Rights (including the addition or
relinquishment of any Exploration Rights) and the Properties.
8.7 PROPERTY EXTENSIONS
Neither party, either alone or in association with others, shall
proceed for its own account, but only for the account of the Joint
Venture to obtain Minerals Rights to any natural extension of an
orebody on the Property of the Joint Venture onto new ground beyond
the boundary of a Property. Any interest obtained in contravention of
this SECTION 8.6 by either Party shall be held for the account of the
Joint Venture.
8.8 RIGHT OF FIRST REFUSAL ON JINSHAN MINE
The Joint Venture shall have a right of first refusal to match any
offer to purchase or otherwise earn an interest in whole or in part in
the Jinshan Mine more particularly described in SCHEDULE F hereto.
GEC-FGEB shall provide notice of any offer of any kind received in
respect of the Jinshan Mine forthwith to TEMCO and the Joint Venture
and no offer may be accepted by GEC-FGEB in respect of the Jinshan
Mine without receipt of a notice from TEMCO and the Joint Venture
expressing no interest or a waiver of the right of first refusal
within ninety (90) days of the initial notice of offer. If a closing
shall not have occurred on the same terms and conditions as set out in
the offer within one hundred and twenty (120) days of the receipt of
the waiver or notice expressing no interest in the Jinshan Mine, the
property shall again be subject to the right of first refusal set out
in this SECTION 8.7.
<PAGE> 35
9.0 PROGRAMS AND BUDGETS
9.1 COMPLIANCE WITH FIRST PROGRAM AND BUDGET
With effect from the Commencement Date the Chairman shall proceed to
undertake the Operations by reliance upon the First Program and Budget
referred to in SECTION 4.1.
9.2 SETTING OF PROGRAMS AND BUDGETS
9.2.1 PERIODIC SETTING OF PROGRAMS AND BUDGETS
As soon as reasonably practicable before the scheduled end of current
Program and Budget, or by such other date which the Board of Directors
may determine, the Chairman shall prepare, for approval by the Board,
a Program for Operations proposed for the next period, as appropriate
together with a Budget showing in detail the estimated Project
Expenditure and proposed scheduling of activities.
9.2.2 PERIODS FOR EXPLORATION BASED ON PROGRAM PARAMETERS
Unless the Board of Directors specifies otherwise, the Programs and
Budgets shall be prepared to cover the next logical step in the
development and analysis of the Property. Each step and proposed
Program prior to the completion of a Feasibility Study may or may not
correspond to a calendar year.
9.2.3 PERIODS FOR MINE DEVELOPMENT AND MINING
During the mine construction and mining stages, the Program and Budget
shall be based on calendar year, with each period commencing on
January 1st of each year.
9.3 SUPPLEMENTARY OR REVISED PROGRAMS AND BUDGETS
The Chairman may from time to time prepare supplementary or revised
Programs and Budgets which shall be submitted as aforesaid to the
Board of Directors at least one (1) month prior to the meeting of the
Board convened for their approval.
9.4 APPROVAL BY BOARD OF DIRECTORS
The Board of Directors shall consider and vote for approval (with or
without modification) upon Programs and Budgets as close as
practicable to but no later than thirty (30) days prior to the
proposed commencement date of such Program.
9.5 BUDGETARY APPROVAL
The Board of Directors will not refuse approval for, or confirmation
of, such portion of a Budget as is required to maintain Exploration
Rights and/or to fulfil commitments under existing contracts.
<PAGE> 36
28.
9.6 SUPPLY OF INFORMATION
The Chairman shall promptly furnish to each Party:
(a) up to the time of the delivery of a Feasibility Study, on a program by
program basis within ninety (90) days of the end of each such Program,
and thereafter yearly, a detailed summary of Operations including the
expenses thereof, the progress and available results of all
geological, geophysical, geochemical, drilling, construction, mining,
milling and other Operations and such other information as the Board
of Directors may reasonably be expected to require;
(b) up to the completion of a Feasibility Study, quarterly progress
reports of Operations including the expenses incurred during the
quarter and estimates of cash flow needs for the succeeding two
quarters as well as significant results;
(c) during construction, a quarterly report setting out expenditures to
date by cost categories identified in the Feasibility Study and to
date in the aggregate, for that quarter and against budget for the
quarter and in the aggregate;
(d) during Mining Operations, summary quarterly reports detailing mining,
milling and production throughput, grades and recovery rates and such
other information as may be prescribed by the Board of Directors from
time to time; and
(e) copies of all reports, studies, analyses and other documents relating
to the Exploration Rights and the Property.
10.0 CONTRIBUTIONS TO PROJECT EXPENDITURE AND CHANGES IN BENEFICIAL
INTERESTS AND SHARE INTERESTS
10.1 LIABILITY FOR PROJECT EXPENDITURE
10.1.1 ACCORDING TO BENEFICIAL INTERESTS
Subject to the following provisions of this ARTICLE 10, each Party
shall be liable to the Joint Venture to contribute to Project
Expenditure to the extent of its Beneficial Interest.
10.1.2 PROJECT OVERRUN CONTRIBUTIONS
Where Project Expenditure is, pursuant to a Program and Budget,
approved by the Board of Directors, subject to SUB-SECTION 10.2.1, the
liability of the Party who is not nominating the Chairman shall not
extend to Project Expenditures which exceed the approved Budget by
more than twenty percent (20%) unless:
(a) the excess shall have been approved by the Board of
Directors;
<PAGE> 37
29.
(b) the expenditure shall have been incurred in circumstances referred to
in SUB-SECTION 7.10; or
(c) such excess shall have occurred in circumstances not directly
controllable by the Chairman such as under contracts which contain
escalation provisions and/or opportunities for significant variations
in scope.
10.2 CONTRIBUTION BY EACH PARTY
10.2.1 NO CONTRIBUTION BY GEC-FGEB
Until TEMCO shall have fully discharged its obligations pursuant to
SECTION 4.1, GEC-FGEB shall not be required to make any contribution to
Project Expenditures.
10.2.2 POST INITIAL INVESTMENT CONTRIBUTIONS
When TEMCO has completed its Initial Investment pursuant to SECTION
4.1, subject to SECTIONS 10.3 AND 10.4 and to ARTICLE 15, each Party
shall pay its share of Project Expenditures determined pursuant to this
Contract (for the purposes of this ARTICLE 10 referred to as its
"CONTRIBUTION").
10.3 ELECTION TO CONTRIBUTE
10.3.1 PERMITTED ELECTION NOT TO CONTRIBUTE
At any meeting of the Board of Directors convened to consider a Program
and Budget for the next budgetary period towards which, pursuant to
SUB-SECTION 10.2.2, the Parties are invited to contribute, either
Party, subject to SECTION 6.14, may elect not to provide funds for that
purpose with effect from the first day of such next budgetary period.
The Party electing not to contribute to Project Expenditure (the
"NON-CONTRIBUTING PARTY") shall serve the other Party (the
"CONTRIBUTING PARTY") with a notice formally recording such decision
within three (3) Business Days following the relevant meeting of the
Board.
10.3.2 REQUIRED NOTICE UPON ELECTION NOT TO CONTRIBUTE
A notice given by a Non-contributing Party pursuant to SUB-SECTION
10.3.1 shall state that the Non-contributing Party does not wish to
contribute to the Program and Budget submitted by the Chairman for the
next budgetary period.
10.4 ELECTION OF CONTRIBUTING PARTY
Within a reasonable time after receipt of the notice from a
Non-contributing Party pursuant to SUB-SECTION 10.3.1 (not to exceed
six (6) months), the Contributing Party may elect among the following
options:
<PAGE> 38
30.
(a) to contribute all of the Non-contributing Party's share of Project
Expenditures and proceed with the Program and Budget as approved;
(b) to contribute only its share in accordance with then current Beneficial
Interest to the approved Program and Budget;
(c) to contribute its share in accordance with its then current Beneficial
Interest and to redesign and adopt an amended Program and Budget matching
this contribution level;
(d) to contribute its share in accordance with its then current Beneficial
Interest and some but not all of the Non-contributing Party's share of
Project Expenditures and to redesign and adopt an amended Program and
Budget matching this contribution level; or
(e) not to contribute.
10.5 CALCULATION OF BENEFICIAL INTEREST
After receipt of appropriate Government agency approval and prior to the
implementation of each Program and Budget and based on the contributions
committed by each Party to that Program and Budget, the level of Beneficial
Interests of each of the Parties shall be immediately adjusted and calculated in
accordance with the following formulae:
Up to the completion of the Initial Investment by TEMCO
I = R x 55%
---
C
Where:
"I" is the Beneficial Interest of TEMCO
"R" is the total actual contributions to Project Expenditure of TEMCO
after the Commencement Date
"C" is US$4,400,000
The Beneficial Interest of GEC-FGEB will equal 100% minus I above.
Following the completion of the Initial Investment by TEMCO
I = R x 100
-------
S
Where:
"I" is the Beneficial Interest of one of the Parties:
<PAGE> 39
31.
"R" is the total of the actual contributions to Project Expenditure of that
Party after the Commencement Date and the deemed contribution of that Party
as set out below; and
"S" is the total of the actual contributions to Project Expenditure of all the
Parties after the Commencement Date plus the deemed contribution of all the
Parties as set out below:
TEMCO: US$O
GEC-FGEB: US$3,600,000
A Party's Beneficial Interest shall be subject to dilution to a minimum level of
ten percent (10%) at which time such interest will be a carried interest. The
Accounting Procedure attached as Schedule C addresses the nature of the carried
interest and the rights and obligations attaching thereto as well as the rules
relating to recovery of costs by the Parties from the Joint Venture.
10.6 CHAIRMAN TO CALCULATE BENEFICIAL INTERESTS
If an election is made under SECTIONS 10.3 or 10.4, the Chairman shall, from
time to time, and at least at the initiation of each Program and Budget or
annually, whichever is more frequent, calculate the Parties' respective
Beneficial Interests and, when submitting each Program and Budget pursuant to
SECTION 9.2, the Chairman shall advise the Parties of their respective
Beneficial Interests as at the first day of each such Program and Budget
calculated pursuant to SECTION 10.5 and on the assumption that all contributions
to Project Expenditure which any Parry is obliged to make will be made as and
when they fall due according to this Contract.
10.7 PAYMENTS FOLLOWING COMPLETION OF TEMCO'S INITIAL INVESTMENT
10.7.1 CALL FOR CONTRIBUTIONS
Each Party shall pay to the Joint Venture at call (payable at such
frequency as the Accounting Procedure shall set out, or as the Board of
Directors may from time to time amend) as the Chairman so requests, its
Contribution. Such request shall be made on or before the last day of the
end of the month and shall be accompanied by a statement showing
expenditures now payable and expenditures to be incurred and payable in the
immediately following month. Contributions may be called sixty (60) days in
advance, all in accordance with the Accounting Procedure.
10.7.2 DUE DATE FOR CONTRIBUTIONS
Contributions so requested shall be received by the Joint Venture on or
before the 20th day following the date of the cash call (or such other date
as the Accounting Procedure shall set out or the Board of Directors may
amend from time to time). The amount of any such Contribution payable in
advance shall be calculated by the Chairman having
<PAGE> 40
32.
regard to the amount of previous Contributions and the anticipated level of
Project Expenditure in the relevant following months.
10.8 PERIODIC STATEMENTS
The Chairman shall render to each of the Parties a cost statement (summarizing
Project Expenditure paid and/or accrued by classifications set out in the
Accounting Procedure or otherwise as appropriate) for such periods as may be
determined by the Board of Directors from time to time and each Party's share of
such Project Expenditure, each Party's Contribution during such period, and the
amounts with which the Party was credited at the beginning and at the end of
such period, shall all be in accordance with the provisions of the Accounting
Procedure.
10.9 CHALLENGE TO CORRECTNESS
Payment by a Party of any Contribution requested by the Chairman shall not
prejudice such Party's right to challenge the correctness of any statement or
request for Contribution PROVIDED HOWEVER that all statements rendered to a
Party during any calendar year shall be presumed to be conclusively true and
correct after two (2) years following the end of that said year unless
challenged in writing by a Party within such period.
10.10 INTEREST PAYABLE ON OVERDUE PAYMENTS
10.10.1 INTEREST RATE ON OVERDUE PAYMENTS
All payments herein provided for shall be paid to the Joint Venture on or
before the due date and, if not so paid, the Party in arrears shall be
liable to attract interest calculated daily and compounding, being a rate
of interest equal to the London Interbank Offered Rate ("LIBOR") plus two
percent (2%) governing from time to time for the duration of the arrears.
Any Contribution in arrears and the interest due and payable thereon shall
be a debt due and payable to the Joint Venture.
10.10.2 METHOD OF CALCULATING INTEREST RATE
For the purposes of this SECTION 10.10 the LIBOR Rate applicable to the
period of default shall that rate which is on the first day of default (or
the first business day after such default) published for United States
Dollars in the Financial Times in London as the London Interbank Offered
Rate for six (6) months or, if no such rate has been so published on such
date, then the rate most recently published in the Financial Times in
London immediately preceding such date, provided that if no such rate has
been so published during the seven (7) day period immediately preceding
such date, then such term means the rate at which deposits in United States
Dollars in the amount of US$5,000,000 for a period of six (6) months are
offered by the principal London branch of Citibank, N.A. to prime banks in
the London interbank market at approximately 11:00 a.m. (London time) on
such date.
<PAGE> 41
33.
10.11 PROCEDURE FOR ADJUSTING CHANGES IN BENEFICIAL INTERESTS
10.11.1 PROVIDE ALL NECESSARY CO-OPERATION AND AUTHORITY TO TRANSFER SHARES
The Parties shall sign, execute and do all such transfers, deeds,
documents, matters and things as may be necessary to transfer or vest
sufficient of the Non-contributing Party's interest in the Joint Venture in
the other Party so as to reflect the adjustments required by SECTION 10.5,
and for such purposes each of the Parties hereby irrevocably appoints the
other Party and its officers who have signing authority jointly and
severally to be its attorney in its name and on its behalf to sign and do
all assurances, deeds, instruments, acts and things whatsoever which such
Party ought to sign and do under the provisions of this SECTION 10.11.
11.0 DEVELOPMENT AND PRODUCTION
It is agreed and acknowledged by the Parties that if a commercially viable
deposit is outlined on the Properties, the Joint Venture has the right to
proceed expeditiously to develop a mine or mines on the Property or Properties.
11.1 BOARD OF DIRECTORS TO RULE ON DEVELOPMENT
The Board of Directors is entitled to decide as to whether investment in any
Mining Operations is to occur and, if so, as to the commencement time and scope
of such Mining Operations.
11.2 OBLIGATION TO CONTRIBUTION
Should the Board of Directors decide to conduct Mining Operations, each of the
Parties shall thereafter be required to contribute towards the capital
requirements of the Joint Venture in proportion to each Party's respective
Beneficial Interest in the Joint Venture as at the date of such decision.
11.3 SOLE RISK DEVELOPMENT
If the Board of Directors does not approve of the conduct of Mining Operations,
then either Party which is willing to undertake Mining Operations shall be
permitted to do so and the Non-contributing Party shall be subject to dilution
in accordance with the terms of SECTION 10.5.
11.4 REQUIRED AUTHORIZATIONS AND PARAMETERS FOR MINING OPERATION
11.4.1 GEC-FGEB'S OBLIGATION TO OBTAIN ALL REQUIRED AUTHORIZATIONS
Before the conduct of Mining Operations, GEC-FGEB shall have the
obligation, and its efforts and expenses shall be compensated as Project
Expenditures, to obtain all necessary permits, licenses, and approvals as
may be required to conduct Mining Operations.
<PAGE> 42
34.
11.4.2 PARAMETERS OF MINING OPERATIONS
The Chairman shall insure that any proposed Program for the implementation
of Mining Operations would, depending upon the size and style of the
indicated Mineral resource and proposed scope of Mining Operations, address
the following topics:
(a) the obtaining of licenses necessary for the influx of all foreign
capital required. As circumstances dictate, such licenses may address:
(i) the basis upon which TEMCO as the sole foreign party is to invest
capital; or
(ii) it may give approval to the formation of a Sino-Foreign consortium
to undertake a large-scale development;
(b) as an adjunct to SUB-PARAGRAPH 11.4.2 (a) (ii), the approval of other
reputable financially sound parties recommended by the Board of
Directors to invest in the Joint Venture at the appropriate time. In
this latter regard, suitable consortium parties could be drawn from the
mineral resource industry, smelting and/or minerals marketing spheres,
or from within the financial sector;
(c) subject to SECTION 11.5, the obtaining of export licenses as are
permitted under Chinese law which the Joint Venture may require for
Products derived by the Mining Operations;
(d) the incorporation of a fully expounded policy relating to staff and
manpower requirements, salaries, wages and employee benefits (the
"EMPLOYMENT POLICY"), a dispute resolution process specifically to
govern employment disputes and those disputes concerning employment
matters between the Joint Venture and Government authorities, and a
mechanism to govern review of the Employment Policy in the event of
fundamentally altered economic circumstances affecting the viability of
the Joint Venture;
(e) incorporation of the most favourable Government policies available for
Sino-Foreign Co-operative Joint Ventures, including without limitation
the right of the Joint Venture to carry forward losses incurred by it
with respect to all Operations so as to reduce the taxable income of
the Joint Venture; and
(f) as the Joint Venture's business requires the choice of banks and
establishment of accounts both within and, in special circumstances,
beyond China appropriate to that business.
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35.
11.5 MARKETING OF MINERALS FROM THE JOINT VENTURE
11.5.1 MARKETING POLICY
This policy should be based in principle on the best interests of the Joint
Venture. It is agreed and acknowledged by the Parties that, especially in
respect of marketing decisions, the best interests of the Joint Venture
means the best interest of the Joint Venture as an entity as opposed to the
interests of either of the Parties individually.
11.5.2 EXPORTING RIGHTS
The Parties recognize that it is of fundamental importance to the viability
of any Mining Operations that the Joint Venture shall have the right to
sell all Products derived from the Properties to any market, international
or Chinese. With this objective in mind, GEC-FGEB shall continue to lobby
relevant Government authorities so that the Joint Venture may be granted
such export rights.
12.0 LABOUR, TRAINING OF JOINT VENTURE PERSONNEL AND TECHNOLOGY TRANSFERS
12.1 LABOUR POLICY OF THE JOINT VENTURE
12.1.1 FLEXIBLE LABOUR REQUIREMENTS
The labour requirements of the Joint Venture will fluctuate considerably
depending upon the requirements of particular Programs and Budgets proposed
for the Operations. Both the First Program and Budget and each Program and
Budget subsequently prepared by the General Manager and subsequently
approved by the Board of Directors shall pay specific attention to the
labour requirements and training component of each Program.
12.1.2 PRIORITY TO EFFICIENCY OF THE OPERATIONS
The Joint Venture, shall give priority to the efficiency of the Operations
when devising and implementing its labour policies but full weight will
also be given to the requirements of the Regulations of the PRC on Labour
Management in Joint Ventures using Chinese and Foreign Investment (for the
purposes of this ARTICLE 12, the "LABOUR REGULATIONS").
12.2 SELECTION OF LABOUR
The Chairman shall select the Joint Venture's employees and contractors,
determine the number thereof and the terms and conditions of their engagement
depending upon the requirements of Programs and Budgets scheduled for any year.
It is preferred to engage workers as contractors or consultants rather than as
employees. In selecting employees and contractors the Chairman shall, consistent
with the Labour Regulations, and principally for the efficient management of the
Joint Venture and its Operations, and subject to a fair bidding procedure open
to such numbers
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36.
of participants as is in the best interest of the Joint Venture in the sole
opinion of the Chairman, give GEC-FGEB preferred consideration, provided that
services are of similar quality and at competitive prices, for employment and
shall endeavour to employ qualified and experienced Chinese employees of
GEC-FGEB. However the Joint Venture shall be free to introduce expatriate
personnel into China as is deemed to be necessary for the efficient performance
of the Operations. For greater certainty, the primary principle shall be the
acquisition of the best services and labour to conduct the Operation of the
Joint Venture for the most reasonable cost and that a fair bidding process be
used to find those services and labour.
12.3 CONTRIBUTIONS TO STATUTORY LABOUR FUNDS
The Joint Venture shall comply with all requirements of the Labour Regulations
concerning contributions to the awards, welfare and social insurance funds of
its employees while they are in the employment of the Joint Venture.
12.4 TRAINING OF JOINT VENTURE PERSONNEL AND TRANSFER OF TECHNOLOGY
12.4.1 GUIDELINES FOR TRAINING PROGRAM
The Board of Directors shall provide guidelines if necessary to the Chairman to
develop and establish a comprehensive program for training Joint Venture
employees and contractors engaged to undertake their various functions within
the operative Joint Venture.
12.4.2 INTRODUCTION OF APPROPRIATE ADVANCED TECHNOLOGY
(a) Each of the Parties shall wherever possible introduce to the Joint Venture
appropriate advanced equipment, technology and managerial experience
necessary for efficient and productive conduct of the Operations. The
Chairman shall ensure that Joint Venture employees and contractors engaged
by the Joint Venture receive training to ensure their comprehension and
efficient deployment of such technology and management practice in the
context of Operations to be undertaken.
(b) The technology transfer envisaged by PARAGRAPH 12.4.2 (a) above shall not
require either Party capable of transferring technology to disclose or
introduce restricted proprietary know-how, patents or other commercially
confidential information to the Joint Venture. However, wherever possible a
Party which intends to transfer technology shall endeavour to have the
Joint Venture licensed to use technology appropriate to the Operations,
subject always to the prior approval of the proprietor of such technology
costs and expenses incurred by the Joint Venture in the course of its
personnel training program under SUB-SECTIONS 12.4.1 and 12.4.2 shall be
charged to Project Expenditure in a way to ensure full tax deductibility in
respect of income derived subsequent from Mining Operations.
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37.
13.0 LOCAL GOODS AND SERVICES
The Joint Venture shall use services, foodstuffs, supplies, fuels, materials,
plant and machinery ("GOODS AND SERVICES") supplied, produced or manufactured in
China whenever the same can be obtained in economically viable quantities, at a
competitive price and on competitive terms, conditions and delivery dates
provided that the Goods and Services which can be acquired in China are in all
substantive respects of a quality comparable with those produced or available
outside of China.
14.0 ASSIGNMENT AND SUCCESSION
14.1 ASSIGNMENT
Subject to SECTIONS 14.2 AND 14.4, either Party may sell, transfer, mortgage,
lease or in any manner dispose of in any other way the whole or any part of its
Beneficial Interest. For greater certainty, it is understood and agreed by the
Parties that the Property and the assets and undertaking of the Joint Venture,
including the Beneficial Interests of each Party, may be required as collateral
in any project financing and the Parties hereby agree to allow the granting of a
security interest in any of the foregoing interests of the Parties and the Joint
Venture for the purpose of securing financing for the project.
14.2 ASSUMPTION AGREEMENT
Any new entity who receives an interest in a Party's Beneficial Interest as
contemplated in SECTION 14.1 shall only be entitled to the benefits of such
interest following the execution and delivery of an assumption agreement
relating to that interest and the terms and conditions of this Contract
attaching thereto in form and substance satisfactory to the other Party to this
Contract.
14.3 RESTRICTIONS
Notwithstanding any of the preceding provisions of this ARTICLE 14, each of the
Parties covenants and undertakes that except as unanimously resolved by the
Board of Directors it shall not sell, mortgage, lease or in any manner dispose
of in any other way any of its rights under this Contract or the whole or any
part of its Beneficial Interest in a manner which would result in either Party
being prevented in practice from continuing, or prejudicing their (or its)
ability to continue the Operations.
15.0 ELECTION TO CAP CONTRIBUTIONS
15.1 ELECTION AFTER FIRST WORK PROGRAM
While it is the intention of TEMCO to proceed to spend the Initial Investment
and develop the Property as quickly as is reasonable on a technical basis to
develop the Property assuming positive results of each Program and
Budget completed, by notice writing to GEC-FGEB,
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38.
TEMCO may, at any time after the completion of the First Program and Budget,
give an election-to-cap-further-contribution notice to GEC-FGEB which shall take
effect at the end of any Program and Budget which has been approved by the Board
of Directors.
15.2 EFFECTIVE DATE OF CAP
Upon the effective date of a notice to cap contributions pursuant to SECTION
15.1 the Beneficial Interest of TEMCO shall be frozen at the level calculated at
the completion of that last Program and Budget to which TEMCO has just completed
its contribution and TEMCO shall cease to have any right to contribute to any
Program and Budget beyond that frozen level of Beneficial Interest under this
Contract.
15.3 EFFECT OF CAP
If TEMCO has sent the election notice pursuant to SECTION 15.1, it shall, on the
date upon which its election to cap becomes effective:
(a) have the voting rights attaching to its actual Beneficial Interest and no
further right to the deeming voting rights it enjoyed pursuant to
SUB-SECTION 6.10.2;
(b) have liability, in accordance with its Beneficial Interest from time to
time, to contribute to approved Programs and Budgets or suffer dilution in
accordance with the terms and provision of ARTICLE 10;
(C) continue to be bound by ARTICLE 18; and
(d) be and remain liable for payment of any amount due and owing by it at the
date of its election notice and for its proportion of Project Expenditure,
but only pursuant to an approved Program and Budget in respect of which it
was a Contributing Party as at the effective date of the election notice,
where such amount due and owing had not been invoiced by the Chairman at
the date of such election notice.
15.4 WITHDRAWAL FROM PROPERTY
At any time after the effective date of a TEMCO election-to-cap-expenditure
notice, TEMCO shall have the option to completely withdraw from any Mineral
Rights and terminate its right, title and interest in any Mineral Right held by
the Joint Venture by giving 60 days written notice of its intention to do so to
GEC-FGEB, and the Joint Venture may assign its entire right, title and interest
in said Mineral Right to GEC-FGEB without compensation therefor, except for any
applicable transfer fees, taxes, or similar levies. After any such termination
and assignment, the assigning party shall have no further obligation with
respect to the Mineral Right in question. Any such Mineral Right may be
explored, developed, mined or sold for the sole account of the party to which it
has been assigned. Notwithstanding the foregoing, however, a termination
hereunder shall not relieve the terminating party from its obligations under
previously approved Program and Budget relating to the Mineral Right in
question, including the payment of Project
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39.
Expenditures thereof, or from any of its other obligations under this Agreement,
incurred up to the date of the assignment of its interest.
16.0 ACCOUNTING, REPORTING, AUDITING AND BANK ACCOUNTS
16.1 ACCOUNTING
16.1.1 YEARLY FINANCIAL STATEMENTS USING INTERNATIONAL ACCOUNTING STANDARDS
The Chairman shall, prior to the conclusion of each fiscal year, prepare
financial accounting books and records of the Operations using both the Chinese
and English language and denominated in United States Dollars being maintained
to the extent permissible under relevant Chinese laws and regulations in
accordance with international accounting principles generally accepted in the
mining industry and in compliance with the Accounting Procedure. Original copies
of all such financial accounting books and records shall be maintained by the
Chairman for the Board of Directors.
16.1.2 TREATMENT OF FOREIGN CURRENCY EXCHANGE RATES
If any expenditures or receipts are made in a currency other than United States
Dollars, with the exception of expenditures in RMB, such expenditures and
receipts shall be converted to United States Dollars at the mean of the average
daily buying and selling rate for United States Dollars established by the Bank
of China at the time of such expenditure or receipt. Conversions of RMB of the
PRC into United States Dollars shall be made at rates of exchange quoted to the
Chairman by the Bank of China at the time of conversion or as otherwise
prescribed by relevant Chinese laws and regulations.
16.1.3 TREATMENT OF FOREIGN CURRENCY EXCHANGE GAINS OR LOSSES
At the end of each accounting period, any gains or losses in the Joint Venture's
financial books of account attributable to variations in foreign exchange, shall
to the extent permissible under relevant Chinese laws and regulations be
accounted for in accordance with internationally recognized accounting
principles generally accepted in the mining industry.
16.2 FINANCIAL ASPECTS OF OPERATIONS AND ANNUAL REPORTS
16.2.1 SUBMISSION OF FINANCIAL SUMMARY OF PRIOR BUDGETARY PERIOD
At each meeting of the Board of Directors at which the Chairman is to submit, in
accordance with ARTICLE 9, a proposed Program and Budget, the Chairman shall
also submit a summary of financial aspects of the Operations for the prior
budgetary period.
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40.
16.2.2 SUBMISSION OF ANNUAL REPORT USING INTERNATIONAL ACCOUNTING STANDARDS
The Chairman shall prepare and deliver to the Board of Directors for
consideration and approval within sixty (60) days following the end of each
fiscal year an annual report containing financial statements including a
balance sheet and profit and loss statement which shall consolidate the
information contained in the quarterly statements of Project Expenditure
furnished in respect of such year by the Chairman to the Board pursuant to
SUB-SECTION 16.2.1 and any variations made thereto. Such annual report shall
be accompanied by a verification report prepared by a Chinese certified
accountant chosen by the Board of Directors. The financial statements
included in the annual report shall be prepared in accordance with
international accounting principles generally accepted in the mining
industry and in compliance with the Accounting Procedure. Upon consideration
and approval of such financial statements by the Board, the Chairman shall
thereafter deliver within ninety (90) days of the end of each fiscal year
copies of the approved annual report to all appropriate Government
authorities.
16.3 AUDITS
An audit of the Joint Venture's financial books, reports and records shall be
conducted annually by an internationally recognized firm of auditors registered
to undertake business in China. In accordance with relevant Chinese law and
accounting practice, the Board of Directors shall make all appointments of
auditors, and accordingly, shall be entitled to remove and replace such
appointees as it considers fit.
16.4 BANK ACCOUNTS
16.4.1 The Joint Venture shall hold all Contributions in a separate interest
bearing bank account to be used solely for the payment of Project
Expenditure.
16.4.2 Under the direction of the Board, the Chairman may open, maintain and
operate such other bank accounts as are necessary or convenient in
connection with the performance of the responsibilities of the Chairman
under this Contract.
16.4.3 Any foreign currency account of the Joint Venture shall be subject to
the relevant regulations of the Government.
17.0 INSURANCE
17.1 CHAIRMAN TO DEVISE INSURANCE PROGRAM
The Chairman shall devise an insurance Program for the Operations and submit it
to the Board of Directors for review and approval prior to the commencement of
any Operations and, in any event, no later than one hundred and twenty (120)
days after the Commencement Date. The Chairman shall obtain insurance required
in accordance with such Program as approved by the Board before commencement of
the Operations.
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41.
17.2 INSURANCE COVERAGE
The insurance Programs shall include, but not be limited to, the following
insurance covering:
(a) damage incurred in relation to all aspects of Operations;
(b) damage to data packages, computer software or hardware utilized by the
Joint Venture for the Operations;
(c) liability to third parties arising by reason of the Operations;
(d) liability for injury or death to third parties or damage to property
of third parties pertaining to the use of any motor vehicle in the
service of, or the property of, the Joint Venture;
(e) expenses incurred during the transportation and storage in transit of
goods shipped to or from the Joint Venture; and
(f) such other insurance as is usual and customary in the mining industry
to cover the risks of Operations and as may be specifically mandated
by the Board of Directors from time to time.
17.3 PARTY'S PERSONAL ACCIDENT INSURANCE
In the course of the Operations, each Party shall cover separately personal
accidental death and injury insurance with respect to personnel assigned or
seconded by them to the Joint Venture respectively. The premiums in respect
thereof shall be dealt with in the following way: the premiums for accidental
death and injury insurance with respect to personnel whose costs are charged
to Project Expenditure pursuant to the provisions of the Contract shall be
charged to the Joint Venture, and those with respect to other personnel shall
be borne respectively by the Parties by which they are assigned.
17.4 REINSURANCE
Insurance companies owned by either Party may approach the People's Insurance
Company of China for reinsurance if they are interested in covering any part
of the insurance Program hereof.
17.5 PREMIUMS AS PROJECT EXPENDITURE
Any premium required for the insurances of the agreed insurance Program shall
be charged to Project Expenditure, and any recovery made from insurers shall
be credited to the Joint Venture's benefit.
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42.
18.0 CONFIDENTIALITY
18.1 DEFINITION OF CONFIDENTIAL INFORMATION
Unless otherwise agreed by each of the Parties, this Contract, the Articles of
Association of the Joint Venture Company, any offer documents or drafts of this
Contract, all agreements, all documents and all information that is not in the
public domain (other than that which has been improperly disclosed) relating to:
(a) exploration practices and techniques, and data arising from exploration and
evaluation activities conducted within the Mineral Rights and/or the
Properties;
(b) engineering, evaluation, mining and processing techniques and practices
relating to or developed in the course of the Operations and which are
property of the Joint Venture;
(c) all third party dealings related to Operations including without limitation
dealings with the Government relating to Operations; and
(d) financial and general commercial data relating to the Joint Venture;
shall be confidential to the Joint Venture and to the Parties.
18.2 PROHIBITION ON DISCLOSURE OF CONFIDENTIAL INFORMATION
18.2.1 GENERAL PROHIBITION AND SPECIFIED EXCEPTIONS
No information that is confidential under the terms of SECTION 18.1 shall be
disclosed by a Party without the prior approval of the other Party otherwise
than:
(a) to the other Party or the Chairman;
(b) to officers and employees of either of the Parties or to their affiliates,
but only to those employees and officers with a "need to know" and only
after each such person has executed a confidentiality acknowledgement
reciting the specific terms of this ARTICLE 18;
(c) (subject to SECTION 18.3) if and to the extent required pursuant to any
necessarily applicable legislation or pursuant to the rules or regulations
of a recognized stock exchange applicable to a Party or to an affiliate
thereof;
(d) to a financial institution and its technical and professional advisers in
connection with any loan or other financial accommodation sought to be
arranged by the disclosing Party for purposes directly related to the
provision of financing for the Joint Venture or the Parties and to bona
fide potential assignees of all or part of the Beneficial Interest of that
Party (but such disclosure shall only be made for the purposes of and shall
be limited to the information necessary for satisfying such institution or
potential assignee as to the
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43.
value of the Beneficial Interest and the value and commercial viability of
the Operations or contemplated Mining Operations);
(e) independent consultants, contractors and technical and professional
advisers of the Parties or the Chairman whose duties in relation to the
Joint Venture reasonably require such disclosure;
(f) to relevant government departments having direct responsibility for and
oversight of the business and objectives of the Joint Venture and,
additionally, to other government departments having statutory authority to
gather information from mineral explorers and miners PROVIDED HOWEVER that
any disclosure pursuant to SUB-SECTIONS 18.2(d) AND 18.2(e) shall only be
made subject to the institution and/or person to whom disclosure is made
covenanting and agreeing with the disclosing Party in a form enforceable by
any other Party to the Joint Venture that such information shall not be
disclosed to any other person for any purpose whatsoever or used for its or
his own benefit and provided further that a Party shall ensure that any
such information disclosed to an affiliate of it shall not be disclosed by
that affiliate except as would be permitted by this SECTION 18.2; and
(g) to securities commissions and stock exchanges and any other government
departments or agencies to whom the Parties owe disclosure obligations in
respect of the happening of a material event or fact, where material is in
relation to the Party doing the disclosing.
18.2.2 APPLICATION OF CHINESE LAW WHEN REMOVING CONFIDENTIAL INFORMATION FROM
CHINA
All relevant statutory procedures of the Chinese Government shall be complied
with when any Party wishes to remove confidential information from China.
18.3 PUBLIC ANNOUNCEMENTS
The Parties shall use their reasonable endeavours to agree in advance to the
text of all public announcements to be made in relation to the Joint Venture,
including those described in SUB-SECTION 18.2.1(d); however, given the legal
disclosure obligations of the Parties, notwithstanding anything to the contrary
contained in this Contract, a Party shall be entitled to release a public
announcement. Neither Party shall attribute any such public announcement to the
other Party or to the Joint Venture without the prior consent of that other
Party.
19.0 PROTECTION OF THE ENVIRONMENT
The Joint Venture is concerned and will be cognizant of the environment within
the area described in the Exploration Rights when conducting Operations. The
Joint Venture will have an environmental policy determined by the Board of
Directors which will be specifically developed to address the needs of the Joint
Venture. In particular, the Joint Venture shall observe standards
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44.
which are no less stringent than those set out in laws of the Chinese Government
pertaining to environmental management and control.
20.0 FORCE MAJEURE
20.1 CONSEQUENCE OF FORCE MAJEURE
Any failure on the part of either Party, or of the Joint Venture, to fulfil any
obligation proposed under this Contract including any Program and Budget shall
be excused if and to the extent that such failure arises from Force Majeure and,
if through Force Majeure the fulfilment by such Party or the Joint
<PAGE> 53
Venture of any obligations under this Contract be delayed, the period
of such delay, together with such period as may be necessary for the restoration
of any damage done during such delays and for the resumption of Operations,
shall be added to the time given in this Contract for the performance of such
obligation and for the performance of any obligation dependent thereon and to
the term of this Contract.
20.2 DEFINITION OF FORCE MAJEURE
"Force Majeure", within the meaning of CLAUSE 20.1 shall mean any order,
regulation or direction of any government or state whether promulgated in the
form of law or otherwise, or any act of the public enemy, perils of navigation,
fires, floods, storms, typhoons, earthquakes, epidemics, accidents, hostilities,
war (declared or undeclared), blockades and unpredicted embargoes or other enemy
action, strikes and other labour disturbances, insurrections, riots, or any
other cause not due to the fault or negligence of the Party claiming Force
Majeure, whether or not similar to the foregoing provided that any such cause is
beyond the control of such Party.
20.3 NOTICE REQUIREMENTS
The Party claiming Force Majeure shall give notice thereof to the other Party
without delay, stating the cause and the date of its commencement and adducing
evidence in support, and both Parties shall thereafter take all reasonable steps
within their power to remove or mitigate the effects of such cause, If the cause
is not removed within ONE (1) year and the Operations within that period have
been severely curtailed the Parties shall enter into negotiations to discuss in
good faith the continuance of this Contract. Upon an event of Force Majeure
ceasing, the Party claiming Force Majeure shall notify the other Party without
delay.
21.0 APPLICABLE LAWS
21.1 CHINESE LAW
The Law applicable to this Contract is the law of the People's Republic of
China.
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45.
21.2 TREATIES TO PREVAIL
Where international treaties or conventions to which China is a signatory are in
conflict with a pertinent Chinese law, such treaties or conventions shall
prevail with the exception of any reserved provisions made by the Chinese
Government at the time of signing such treaties or conventions.
21.3 COMMON PRACTICE IN OPERATIONS
Where there is no provision of relevance to the Joint Venture existing either in
Chinese law nor in any relevant international conventions or treaties in
existence to which China has acceded then the common practices of the mining
industry internationally shall apply to this Contract.
21.4 CHANGES IN LAW
Any changes in law shall be dealt with in accordance with the provisions of
ARTICLE 23.
22.0 SETTLEMENT OF DISPUTES
22.1 CONSULTATION
The Parties shall meet periodically to discuss the conduct of the Operations
covered by this Contract and shall make every effort to settle, amicably and in
good faith, disputes of any kind whatsoever arising out of or related to the
performance of this Contract.
22.2 EXPERT CONCILIATION
22.2.1 NOTICE OF INTENT TO SUBMIT TO EXPERT CONCILIATION
If the Parties are unable to resolve amicably through consultation any dispute
within one hundred and twenty (120) days of one Party receiving the other
Party's notice of dispute, then on or before the thirtieth day following the
expiration of such one hundred and twenty (120) day period (or such other time
as the Parties may mutually agree) either Party may give the other Party notice
of its intent to submit the matter in dispute to an independent expert (the
"EXPERT") for conciliation pursuant to this CLAUSE 22.2.
22.2.2 APPOINTMENT OF EXPERT
The Parties shall mutually agree upon the appointment of the Expert, who shall
be a person suited by reason of his qualifications, experience and expertise for
the determination of the matter in dispute. The Expert's fees shall be shared
equally by the Parties. If the Parties fail to agree upon the appointment of the
Expert within thirty (30) days of the notice to submit the dispute to the
Expert, then the dispute shall be referred to settlement by arbitration in
accordance with CLAUSE 22.3.
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46.
22.2.3 CONVENING A HEARING
No later than thirty (30) days after the Expert is appointed, the Expert
shall convene a hearing at which the Parties shall have the full
opportunity to explain their respective positions and present supporting
documentation. The hearing shall not last more than seven (7) days. The
Parties may also mutually agree to not convene a hearing and may make a
request to the Expert in writing that the Expert make a decision on the
basis of written submissions by the Parties.
22.2.4 RENDERING OF WRITTEN DECISION
No later than thirty (30) days following the conclusion of the hearing, or
the date on which the Parties together request that no hearing for the
matter should be convened, the Expert shall render a decision in writing
concerning the matter in dispute.
22.2.5 WHEN DECISION BECOMES FINAL AND BINDING
If the Expert has provided his decision concerning the matter in dispute
and no Party provides notice of its intent to submit the matter to
arbitration in accordance with CLAUSE 22.3 then on the thirtieth day after
the Expert issues his decision in accordance with SUB-CLAUSE 22.2.4 the
decision of the Expert shall become final and binding on the Parties.
22.3 ARBITRATION
22.3.1 USE OF ARBITRATION
Any dispute in respect of which:
(a) amicable settlement has not been reached within one hundred and
twenty (120) days of written notice of the dispute;
(b) neither Party requests resolution of the dispute by the Expert
within the thirty (30) day period set forth in SUB-CLAUSE 22.2.1, or
a decision by the Expert pursuant to CLAUSE 22.2 has not become
final and binding pursuant to SUB-CLAUSE 22.2.5, or
(c) pursuant to SUB-CLAUSE 22.2.2 the Parties fall to agree upon the
appointment of a Expert
shall be finally settled by arbitration in Singapore under the Statutes of
Singapore.
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47.
22.3.2 LANGUAGE OF PROCEEDINGS
The language of the arbitral proceedings shall be Chinese and English.
All materials utilized in the hearing, statements of claims or
defense, and awards and the reasons supporting them shall be in
Chinese and English.
22.3.3 RELEVANT MATTERS TO CONSIDER
In rendering its decision, the arbitrator shall comply with and pay
full regard to the terms of this Contract including principles
contained in ARTICLE 21, and this CLAUSE 22.3 and shall consider the
intention of the Parties at the time of entering into this Contract
insofar as it may be ascertained from the Contract.
22.3.4 POWERS OF ARBITRATOR REGARDING EXPERT CONCILIATION
The arbitrator shall have the full power to review and revise any
decision, recommendation or opinion of the Expert related to the
dispute. No Party shall be limited in the arbitral proceedings to
evidence or arguments submitted to the Expert pursuant to CLAUSE 22.2,
and nothing shall prevent the Expert from being called as a witness
to give evidence before the arbitrators.
22.3.5 DECISION IS FINAL, BINDING AND NON-APPEALABLE
The award of the arbitral tribunal shall be final, binding and
non-appealable upon the Parties, and any Party may seek to enforce or
execute the award in any court of competent jurisdiction.
22.3.6 POWER TO AWARD COSTS
The arbitrator shall have the authority to award costs to the winning
party and otherwise to settle matters relating to proceedings before
the arbitrator.
22.4 FAILURE TO COMPLY WITH BINDING EXPERT'S AWARD
Notwithstanding any preconditions to arbitration set forth in CLAUSE 22.3, if a
Party fails to comply with an Expert's decision that has become final and
binding pursuant to SUB-CLAUSE 22.2.5, the other Party shall have the right to
immediately refer the matter to final arbitration in accordance with CLAUSE
22.3.
22.5 VALIDITY DURING ARBITRATION
During arbitration, this Contract shall continue to be performed by the Parties
except for matters in dispute.
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48.
23.0 CHINESE LEGISLATION
23.1 REFERENCES IN THIS CONTRACT
Any references in this Contract to any law, by-law, rule, regulation, order
or act of any Government, governmental body or other regulatory body shall be
construed as a reference thereto as amended or re-enacted from time to time
or as a reference to any successor thereto.
23.2 CHANGES TO LEGISLATION
If, after the signing of this Contract, there is any change in existing laws,
regulations, rules or policies (a "CHANGE") or any new laws, regulations,
rules or policies are introduced (a "NEW PROVISION") in the PRC which is
applicable to the Joint Venture, or to the activities of any Party in
relation to matters dealt with herein, and the effect of the Change or New
Provision is either to provide for preferential treatment to or,
conversely, to have an adverse effect on the Joint Venture or any of the
Parties then:
(a) if the Change or the New Provision is more favourable to the Joint
Venture or one of the parties than the relevant laws, acts, rules or
regulations in effect on the date this Contract was signed (and the
other Parties are not materially and adversely affected thereby),
the Joint Venture and the Party concerned shall promptly apply to
receive the benefits of such Change or New Provision. All of the
Parties shall use their best efforts to cause such application to be
approved by the relevant Government authorities; and
(b) if, because of the Change or New Provision, the economic benefits to
any Party or the Joint Venture existing or to arise under this
Contract are materially and adversely affected, directly or
indirectly, then, in accordance with the provisions of Article 40 of
the Law of the People's Republic of China on Foreign Economic
Contracts, this Contract shall continue to be implemented in
accordance with its original terms. If, for any reason the provision
in the preceding sentence cannot be implemented, upon notice by the
affected Party to the other Parties, the Parties shall consult
promptly and make all such amendments to this Contract and any other
related documentation as are required to maintain or preserve the
economic benefits of the affected Party or the Joint Venture
hereunder, provided, however, that the Parties other than the
affected Party are not materially and adversely affected thereby.
24.0 MISCELLANEOUS
24.1 AMENDMENT OF CONTRACT
24.1.1 The mutual written consent of the Parties shall be required to
annul, amend, modify or supplement the provisions of this Contract;
and all amendments, modifications or supplements to the Contract
(hereinafter collectively called the "Amendments"), if any, shall be
expressed in writing and signed by the Parties or their authorized
representatives.
<PAGE> 58
49.
24.1.2 All proposed Amendments shall be subject to approval by the original
Government examination and approval authority or such other
Government department at that time responsible for administering
foreign investment.
24.1.3 No Amendments shall be contrary to the terms of Chinese Law and
Regulations.
24.2 INUREMENT
Subject to the provisions of ARTICLE 14, this Contract shall be binding upon,
and inure to the benefit of, the Parties and their successors and respective
assignees.
24.3 NOTICES
24.3.1 ADDRESS FOR DELIVERY OR SERVICE
Any and all notices and other types of communication ("Notices")
required by or given pursuant to this Contract by either Party to
the other shall be written in Chinese and English, and shall be
validly served when delivered personally, or sent by recognized
courier service, telex or facsimile communication ("facsimile") to
the following address:
if to GEC-FGEB:
FIRST GEOEXPLORATION BUREAU
MINISTRY OF METALLURGICAL INDUSTRY
YANJAO ON EASTERN OF BEIJING
PEOPLE'S REPUBLIC OF CHINA
101601
ATTENTION: Mr. Lei Zimin
TELEPHONE: 011-86-10-954-8455 Ext. 371
FACSIMILE: 011-86-10-954-6876
if to TEMCO:
TRIPLE EIGHT MINERAL CORPORATION
C/O SMITH, LYONS, TORRANCE, STEVENSON & MAYER
SUITE 6200
SCOTIA PLAZA
40 KING STREET WEST
TORONTO, ONTARIO M5H 3Z7
CANADA
ATTENTION: Ms. Sharon E. Dowdall
TELEPHONE: 416-369-7241
FACSIMILE: 416-369-7250
<PAGE> 59
50.
WITH A COPY TO:
TRIPLE EIGHT MINERAL CORPORATION
c/o PACIFIC CANADA RESOURCES INC.
350 BAY STREET, 7TH FLOOR
TORONTO, ONTARIO M4H 2S6
Canada
ATTENTION: Mr. Ken Cai
TELEPHONE: 905-607-9290
FACSIMILE: 905-607-9449
24.3.2 EFFECTIVE DATE OF SERVICE
The effective date of service of a Notice shall be the date upon which
it is received at the address of the Party to which it is addressed as
evidenced, in the case of hand/courier delivery, by a signed receipt,
and in the case of telex or facsimile, by telex or facsimile
acknowledgment.
24.3.3 CHANGE OF ADDRESS
Any Party hereto may change or add parties to whom Notices to it shall
be addressed by giving ten (10) days' written notice thereof to the
other Party. Change of address of any Party may be made by giving ten
(10) days' written notice to the other Party.
24.4 LANGUAGE OF TEXT
This Contract is written in duplicate in both Chinese and English, with both
texts being equally authentic.
24.5 PREFERENTIAL TREATMENT
The Parties agree that at all times everything will be done to ensure most
favoured treatment from the Government to the Joint Venture and to the Parties.
24.6 APPROVAL OF CONTRACT AMENDMENTS
All Contract Amendments proposed pursuant to CLAUSE 24.1 shall be submitted for
approval by the relevant Government authorities.
24.7 ADDITIONAL DOCUMENTS
The Parties shall sign such further and other documents, cause such meetings to
be held, resolutions passed and by-laws enacted, exercise their vote and
influence, do and perform and cause to be done and performed such further and
other acts and things as may be necessary or desirable in order to give full
effect to this Contract and every part thereof.
<PAGE> 60
51.
24.8 TIME OF THE ESSENCE
Time shall be of the essence of this Contract and of every part hereof and no
extension or variation of this Contract shall operate as a waiver of this
provision.
24.9 WAIVERS AND REMEDIES
No delay or omission by any Party in exercising any right or remedy hereunder
shall operate as a waiver thereof, or of any other right or remedy, and no
single or partial exercise thereof shall preclude either the further exercise
thereof, or the exercise of any other right or remedy. All rights and remedies
granted or recognized herein by any Party are cumulative and may be exercised at
any time and from time to time independently or in combination.
24.10 COUNTERPARTS
This Contract may be executed in several counterparts, each of which so executed
shall be deemed to be an original and such counterparts together shall be but
one and the same instrument.
24.11 TRANSMISSION BY FACSIMILE
The Parties agree that this Contract may be transmitted by facsimile or such
similar device and that the reproduction of signatures by facsimile or such
similar device will be treated as binding as if originals and each Party
undertakes to provide each and every other Party with a copy of the Contract
bearing original signatures forthwith upon demand.
<PAGE> 61
IN WITNESS WHEREOF the Parties have duly executed this Contract as evidenced by
the signatures set out below.
GEOEXPLORATION CORPORATION OF TRIPLE EIGHT MINERAL
THE FIRST GEOEXPLORATION BUREAU CORPORATION
By: [SIGNATURE By: /s/ Robin Dow
------------------------------ --------------------------
Title: NEEDS TO BE Title: Director
------------------------------ --------------------------
Date: TRANSLATED] By: /s/ Ken Z. Cai
------------------------------ --------------------------
Title: Director
--------------------------
Date: December 25, 1995
--------------------------
<PAGE> 1
Exhibit 3f
COOPERATION AGREEMENT
FOR MINERAL EXPLORATION AND DEVELOPMENT
BETWEEN:
SICHUAN BUREAU OF GEOLOGY AND MINERAL RESOURCES
a provincial bureau of the Ministry of Geology and Mineral Resources
of China (referred to herein as "MGMR-SICHUAN")
Address: No. 25 Renmining Rd. North, Chengdu, Sichuan, China
AND:
MINCO MINING & METALS CORPORATION
a corporation incorporated under the laws of British Columbia
(referred to herein as "MINCO")
Address: 1870-401 W. Georgia St., Vancouver, BC Canada V6B 5A1
WHEREAS:
1. MGMR-SICHUAN and MINCO (the "PARTIES") have had friendly discussions and
negotiations concerning a joint venture for the exploration and exploitation
of the Chapuzi low grade gold deposit (the "PROJECT") located in the Mianning
County, Sichuan province.
2. The Parties are willing to enter into this Cooperation Agreement on the basis
of the premises set out above and on the terms set out below.
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below, the Parties have agreed and do hereby agree as follows:
1.0- ESTABLISHMENT OF THE JOINT VENTURE
1.1 The Parties agree to form a co-operative joint venture (the "JOINT
VENTURE") constituted as a separate legal person. The objectives of the Joint
Venture are to jointly explore, develop and exploit mineral resources
(excluding those mineral commodities on which the foreign participation is
prohibited by the Chinese laws) within the territory of Sichuan province using
an integrated mining company model which combines exploration, development,
and production.
1.2 The business scope of the Joint Venture include mineral exploration,
development, exploitation, processing and marketing of mineral products.
1
<PAGE> 2
1.3 Both Parties agree that the term of the Joint Venture is twenty-five (25)
years such period to be extendible upon mutual agreement between the Parties if
the circumstances so warrant.
2.0- AREA FOR THE JOINT VENTURE
The Parties agree tat the property (the "PROPERTY") for the Joint Venture is
the area defined in Schedule A.
3.0- CONTRIBUTION TO THE JOINT VENTURE
3.1 MGMR-SICHUAN
In consideration for its equity participation, MGMR-SICHUAN shall contribute to
the Joint Venture the following assets: (1) the Property; (2) mineral rights on
the Property (including the discovery right, exploration permits, and privilege
mining rights); (3) the data and results which has been collected or created to
date on the Property; and (4) some capital.
3.2 MINCO
In consideration for its equity participation, MINCO shall contribute to the
Joint Venture the following assets: (1) certain advanced equipment; and
(2) capital.
4.0- EQUITY INTERESTS, EARN-IN-PERIOD, AND EARN-IN-AMOUNT
4.1 After the establishment of the Joint Venture, MGMR-SICHUAN will transfer
the Property, the mineral rights on the Property, and all the results and data
(collectively referred to herein as the "MGMR-SICHUAN'S CONTRIBUTIONS") which
MGMR-SICHUAN possesses to the Joint Venture as its contribution to the Joint
Venture. The Parties agree that the value of MGMR-SICHUAN's Contribution is
$4,800,000 (Cdn.).
4.2 For a period of five (5) years from the execution of this Cooperation
Agreement (the "MINCO'S EARN-IN PERIOD"), MINCO has right to contribute
phase-by-phase and stage-by-stage a total capital of $5,000,000 (Cdn.) to
explore the Property to earn fifty-one percent (51%) equity interest in the
Joint Venture. During MINCO's Earn-In Period, MINCO's equity interest will be
calculated based on its contributions to the Joint Venture using international
standard earn-in formula.
4.3 Thereafter, MINCO has right to contribute all the development capital
expenditures required to construct mining facilities on the Property in
accordance with a feasibility study conducted for the Property. MINCO's equity
interest in the Joint Venture will increase with its contribution to the
development capital expenditures. At the beginning of the commercial
2
<PAGE> 3
production on the Property, MINCO shall earn up to seventy-five (75) percent
equity interest in the Joint Venture.
4.4 During the development phase, MGMR-SICHUAN will not make any contribution
to the Joint Venture. At the beginning of the commercial production on the
Property, MGMR-SICHUAN's equity interest in the Joint Venture shall not be less
than twenty-five (25) percent.
5.0- OPERATION AND MANAGEMENT OF THE JOINT VENTURE
5.1 The Joint Venture shall be managed and operated in accordance with the
Law of the PRC on Sino-Foreign Co-operative Joint Venture Enterprises and other
relevant Chinese laws and regulations as well as sound internationally accepted
policies, standards and practices.
5.2 The Joint Venture will be managed by the board of directors which will
possess the highest authority over the operation and management of the Joint
Venture. The board of directors of the Joint Venture shall be comprised of
seven (7) directors, three (3) of which shall be appointed by MGMR-SICHUAN and
three (3) of which shall be appointed by MINCO.
6.0- NET PROFIT DISTRIBUTION
After each of the Parties recovers its respective investment to the
Joint Venture, the net profit of the Joint Venture shall be distributed to the
Parties in proportion to their respective relative beneficial interest in the
Joint Venture.
7.0- TECHNICAL OPERATION AND MANAGEMENT OF THE PROJECT
7.1. The board of the directors of the Joint Venture shall undertake mineral
exploration, development, exploitation, and processing on the Property in
accordance with Chinese laws and regulations as well as sound internationally
accepted standards and practices. The Project will be carried out phase by
phase and stage by stage in comply with the program and budget approved by the
board of directors from time to time.
7.2 The Joint Venture shall has right to develop any commercial deposit
discovered on the Property through the exploration carried out by the Joint
Venture.
8.0- COOPERATION PROCEDURE
In order to conduct the Project as soon as possible, the Parties agree to
undertake the activities as set out below:
3
<PAGE> 4
1. After executing this Agreement, MGMR-SICHUAN shall obtain approval from the
appropriate Chinese government authorities to allow the Parties to enter the
Joint Venture Contract and to form the Joint Venture (the "GOVERNMENT
APPROVAL"). MGMR-SICHUAN shall exercise its best efforts to seek the
Government Approval as soon as possible. MINCO shall provide to MGMR-SICHUAN
all reasonable assistance.
2. After executing this Agreement, the Parties shall negotiate a full and final
joint venture contract (the "JOINT VENTURE CONTRACT") in good faith to set
up all the details for the Joint Venture.
3. In order to speed up the Project, the Parties agree to conduct some
preliminary field works in a timely fashion on the Property phase by phase.
4. Upon establishment of the Joint Venture, the Parties shall conduct the
Project pursuant to the terms of the Joint Venture Contract.
9.0 - EXCLUSIVE NEGOTIATION AND INVESTMENT RIGHT
9.1 Upon execution of this Agreement, MGMR-SICHUAN grants and guarantees
MINCO exclusive rights to negotiate and invest in the Property as defined in
Schedule A. If, after further exploration work, MINCO decides not to
participate further with respect to one or more areas of the Property, MINCO
shall notify MGMR-SICHUAN in writing of such decision and MGMR-SICHUAN can
then enter into a joint venture agreement with any third party with respect to
any such area of the Property thereby released upon receiving such notice.
9.2 During the term of the Joint Venture, the Parties can explore jointly
other properties (the "OTHER PROPERTIES") which MGMR-SICHUAN has and will have
within the territory of Sichuan province. Under equal conditions, MINCO shall
have the rights of first refusal on the Other Properties.
10.0 - CONFIDENTIALITY OBLIGATIONS
10.1 This Agreement and all the documents signed by the Parties in the future
are the assets of the Parties and shall not be disclosed to any third party
except the government and regulatory authorities.
10.2 MINCO agrees to preserve the confidentiality of all information provided
by MGMR-SICHUAN. MINCO can disclose such information to regulatory authorities
including, without limitation, Canadian government bodies, securities
commissions and stock exchanges, to meet the disclosure requirement of such
regulatory authorities. However, such disclosure shall not hurt the interests
of MGMR-SICHUAN.
4
<PAGE> 5
11.0 - GENERAL
11.1 Before using the information provided by MGMR-SICHUAN, MINCO agrees to
preserve the confidentiality of such information. If the Joint Venture is not
successful, MINCO shall return all such information to MGMR-SICHUAN.
11.2 This Agreement is written in duplicate in both Chinese and English, with
both texts having equal authority.
11.3 This Agreement, and any notices or other documents permitted or required
by it, may be executed in counterparts, including copies which have been
executed and then delivered by facsimile transmission. A copy which has been
executed in counterparts and transmitted by facsimile transmission shall have
equal authority as an originally executed copy.
11.4 If one of the Parties wishes to terminate this Agreement, it must inform
the other Party in writing. This Cooperation Agreement can only be terminated
upon mutual agreement.
11.5 If the contents of this Agreement have any conflict with the any
agreement previously signed between the Parties, the terms of this Agreement
shall prevail.
IN WITNESS WHEREOF the Parties have duly executed this Agreement on this 27th
day of July 1996 in Chengdu, China, as evidenced by each signature below.
SICHUAN BUREAU OF GEOLOGY AND MINERAL RESOURCES
Representative:
---------------------------------
Zhang Yanying
Title: Director
MINCO MINING & METALS CORPORATION
Representative: /s/ Peter Tsaparas
--------------------------------
Peter Tsaparas
Title: Chairman of the Board
5
<PAGE> 6
SCHEDULE A
This schedule is attached to and forms part of the Cooperation Agreement for
Mineral Exploration and Development between SICHUAN BUREAU OF GEOLOGY AND
MINERAL RESOURCES and MINCO MINING & METALS CORPORATION executed on
July 27, 1996.
The Property is the Chapuzi low grade gold deposit located in the Mianning
County, Sichuan Province, China. The area of the Property is about 100 square
km defined as follows:
A. 101 degrees 46 minutes 50 seconds / 28 degrees 21 minutes 30 seconds
B. 101 degrees 46 minutes 45 seconds / 28 degrees 10 minutes 30 seconds
C. 101 degrees 50 minutes 35 seconds / 28 degrees 21 minutes 25 seconds
D. 101 degrees 50 minutes 30 seconds / 28 degrees 10 minutes 25 seconds
6
<PAGE> 1
Exhibit 3g
CO-OPERATION AGREEMENT
FOR MINERAL EXPLORATION AND DEVELOPMENT
THIS AGREEMENT is executed and effective as of the 27th day of May, 1996
BETWEEN:
BUREAU OF GEOLOGY AND MINERAL RESOURCES
OF XINJIANG UYGUR AUTONOMOUS REGION
a provincial bureau of Ministry of Geology and Mineral Resources of
China (referred to herein as "MGMR-XINJIANG")
Address: No. 2 Kramay Road West, Urumqi, Xinjiang, China
AND:
MINCO MINING & METALS CORPORATION
a corporation incorporated under the laws of British Columbia
(referred to herein as "MINCO")
Address: 1870-401 W. Georgia St., Vancouver, BC
Canada V6B 5A1
WHEREAS:
1. MGMR-XINJIANG has various kinds and degrees of interests in certain
mineral properties in Xinjiang Uygur Autonomous Region, the People's
Republic of China;
2. MGMR-XINJIANG and MINCO (the "Parties") wish to enter into negotiations
regarding a possible joint venture agreement (a "JOINT VENTURE
CONTRACT") under which both MGMR-XINJIANG and MINCO would operate a
co-operative joint venture enterprise (the "JOINT VENTURE") to explore,
develop and produce such properties;
3. Pursuant to the appropriate laws and regulations of the People's
Republic of China, after extensive discussions and negotiations on the
basis of equality and mutual benefit, the Parties to this co-operation
agreement (the "CO-OPERATION AGREEMENT") agree to form a co-operative
joint venture under which the parties will each use their respective
advantages including mineral resources, capital, and technology, to
explore, develop, and produce certain mineral properties (as such
properties are defined below);
4. MGMR-XINJIANG and MINCO are willing to enter into this Co-operation
Agreement on the basis of the premises set out above and on the
terms set out below.
<PAGE> 2
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below, the Parties have agreed and do hereby agree as
follows:
1.0 OBJECTIVES OF THE JOINT VENTURE
The Parties agree to form a co-operative joint venture constituted as a
separate legal person in accordance with the Law of the PRC on
Sino-Foreign Co-operative Joint Venture Enterprises and other relevant
laws and regulations. The objectives of the Joint Venture are to jointly
explore, develop and produce mineral resources using an integrated
mining company model which combines exploration, development, and
production. The Parties will each use their respective advantages
including mineral resources, capital, and technology, to explore,
develop, and produce certain mineral properties.
2.0 PROPERTIES FOR THE JOINT VENTURE
The Parties agree that the properties (the "Properties") for the joint
Venture are the areas defined in Schedule A.
3.0 CONTRIBUTION TO THE JOINT VENTURE
3.1 MGMR-XINJIANG
In consideration for its equity participation, MGMR-XINJIANG shall
contribute to the Joint Venture the following assets: (1) the
Properties; (2) the exploration permits of the Properties; (3) the data
and results which has been collected or created to date on the
Properties.
3.2 MINCO
In consideration for its equity participation, MINCO shall contribute to
the joint Venture the following assets: (1) certain advanced equipment
and technology for mineral exploration development and production; and
(2) capital.
4.0 EQUITY INTERESTS
After the establishment of the Joint Venture and the assessment of the
contribution made by MGMR-XINJIANG in terms of existing exploration
results, data, and the Properties, MINCO will provide all funds for the
risky exploration activities on the Properties until the completion of a
feasibility study (the "Feasibility Study") on one commercial mineral
deposit on the Properties (the "MINCO's Earn-In Period"). During MINCO's
Earn-In Period, MGMR-XINJIANG would not make capital
2
<PAGE> 3
contributions to the Joint Venture and MINCO's equity interest will be
calculated based on its contributions to the Joint Venture using
international standard earn-in formula, and MINCO can earn a maximum of
76 percent equity interests in the joint Venture, while MGMR-XINJIANG's
equity interest in the Joint Venture will not be less than 24 percent.
After taking the rights and interests of each Party into consideration,
all the capital required during development and production phases after
the Feasibility Study will be contributed 19 percent by MGMR-XINJIANG
and 81 percent by MINCO in order to maintain the equity interests of 76
percent for MINCO and 24 percent for MGMR-XINJIANG in the Joint Venture.
The net profits of the Joint Venture will be shared in accordance with
the respective equity interests of each of the Parties after both
Parties recover their investments in the Joint Venture.
5.0 OPERATION AND MANAGEMENT OF THE JOINT VENTURE
The Joint Venture will be managed and operated in accordance with the
Law of the PRC on Sino-Foreign Co-operative Joint Venture enterprises
and other relevant Chinese laws and regulations as well as sound
internationally accepted policies, standards and practices.
The Joint Venture will be managed by a board of directors which will
possess the highest authority over the operation and management of the
Joint Venture. Each Party will appoint a number of directors and MINCO
will has a majority position on the board of directors of the Joint
Venture.
6.0 FORM AND DURATION OF THE JOINT VENTURE
6.1 FORM
The Parties agree that the form of the Joint Venture is a Co-operative
joint venture constituted as a separate legal person.
6.2 TERM
The term of the Joint Venture shall commence on the date on which the
Joint Venture is established and shall continue for a period of thirty
(30) years such period to be extendible upon mutual agreement between
the Parties.
3
<PAGE> 4
7.0 - UNDERTAKINGS LEADING TOWARDS A JOINT VENTURE CONTRACT
In order to complete the Joint Venture Contract as soon as possible, the
Parties agree to undertake the following activities as set out below:
1. After the execution of this Co-operation Agreement, MGMR-XINJIANG will
provide the Joint Venture and MINCO with all available data (the
"Data") on the Properties. A list of the Data is attached as Schedule
B to this Co-operation Agreement.
2. Upon receiving the Data set out above, MINCO will assess the
exploration and investment potential of the Properties in a timely
fashion and will then confirm to MGMR-XINJIANG the level of their
interest in the Properties.
3. MINCO will conduct site visits to the Properties in a timely fashion
to finalize the areas for co-operation. MGMR-XINJIANG will provide to
MINCO all reasonable and necessary assistance.
4. As soon as possible after executing this Co-operation Agreement,
MGMR-XINJIANG will obtain approval from the appropriate Chinese
government authorities to allow MGMR-XINJIANG and MINCO to enter the
Joint Venture Contract and to form the Joint Venture (the "Government
Approval"). MGMR-XINJIANG will exercise its best efforts to seek the
Government Approval. MINCO will provide to MGMR-XINJIANG all
reasonable assistance.
5. Upon receiving the Government Approval in respect of the Properties,
the Parties will appoint an independent evaluator to assess the
contributions made by each of the Parties to the proposed Joint
Venture, including particularly, but not limited to, the exploration
permits, the previous exploration work, and data collected and created
by MGMR-XINJIANG.
6. After completing the assessment of the contributions as set out above,
the Parties will negotiate a full and final Joint Venture Contract in
good faith to set up all the details for the Joint Venture.
7. Upon entering into the Joint Venture Contract in respect of the
Properties, the Parties will conduct an exploration, development, and
production program.
8.0 - EXCLUSIVE NEGOTIATION AND INVESTMENT RIGHT
Upon execution of this Co-operation Agreement, MGMR-XINJIANG grants and
guarantees MINCO an exclusive right to negotiate and enter into a Joint
Venture Contract and to invest in the Properties defined in Schedule A. If,
after further exploration work, MINCO decides not to participate further
with respect to one or more of such Properties, MINCO shall notify
MGMR-XINJIANG in writing of such decision and MGMR-XINJIANG can then enter
into a joint venture agreement with any
4
<PAGE> 5
third party with respect to any such Properties thereby released upon
receiving such notice.
9.0 - CONFIDENTIALITY OBLIGATIONS
9.1 MGMR-XINJIANG
MGMR-XINJIANG agrees to preserve the confidentiality of all information
obtained pursuant to this Co-operation Agreement (including, without
limitation, any documents evidencing agreements between the Parties) and
not to disclose such information other than in accordance with the terms of
this Co-operation Agreement excluding those Chinese government bodies which
have a rights to know.
9.2 MINCO
MINCO agrees to preserve the confidentiality of all information obtained
pursuant to this Co-operation Agreement (including, without limitation, any
documents evidencing agreements between the Parties) and not to disclose
such information other than in accordance with the terms of this
Co-operation Agreement. However, MINCO can disclose such information to
regulatory authorities including, without limitation, Canadian government
bodies, securities commissions and stock exchanges, to meet the disclosure
requirement of such regulatory authorities.
10.0 ASSIGNMENT
MGMR-XINJIANG agrees that MINCO can assign this Co-operation Agreement to
its associated companies, for example, subsidiaries and parent companies.
In addition, MINCO will have rights to invite other non-Chinese companies
to invest in the Properties. MINCO will form one single legal entity with
its non-Chinese joint venture partners to enter the Joint Venture with
MGMR-XINJIANG. Similarly, MGMR-XINJIANG will have the right to invite other
Chinese companies (but, for greater certainty, not any non-Chinese
companies) to invest in the Properties. MGMR-XINJIANG will form one single
legal entity with its Chinese joint venture partners to enter the Joint
Venture with MINCO.
11.0 GENERAL
11.1 GUARANTEE DEPOSIT
MINCO agrees to pay MGMR-XINJIANG US$50,000.00 as a guarantee deposit (the
"Guarantee Deposit") for the Data provided by MGMR-XINJIANG on the
Properties before MINCO can use the Data. The Guarantee Deposit will be
fully refunded to MINCO ounce exploration work is carried out on one of the
Properties. If no exploration work is carried out on any of the Properties,
the Guarantee Deposit will be non-refundable.
5
<PAGE> 6
11.2 LANGUAGE
This Co-operation Agreement is written in duplicate in both Chinese and
English, with both texts having equal authority.
11.3 COUNTERPARTS
This Co-operation Agreement, and any notices or other documents permitted
or required by it, may be executed in counterparts, including copies which
have been executed and then delivered by facsimile transmission.
IN WITNESS WHEREOF the Parties have duly executed this Co-operation Agreement
as of the date and year first above written.
BUREAU OF GEOLOGY AND MINERAL RESOURCES
OF XINJIANG UYGUR AUTONOMOUS REGION
Per: __________________
Tian Jianrong
Title: Vice Director
MINCO MINING & METALS CORPORATION
Per: _________________
Ken Z. Cai
Title: President & Chief Executive Officer
6
<PAGE> 7
SCHEDULE B
LIST OF THE DATA
8
<PAGE> 8
Re: Amendments to Appendix A of the Agreement between Minco Canada and Xinjiang
Bureau of Geology and Mineral Resources on May 27.
Following the initial study of the geological information, engineers from
Minco Canada have made some revisions to the selected areas of exploration in
Appendix A of the Agreement on May 27.
Kushitai Region (N O 3)
(I) N: 42 degrees 19 feet 00 inches (J) N: 42 degrees 26 feet 00 inches
E: 81 degrees 05 feet 00 inches E: 82 degrees 00 feet 00 inches
(K) N: 42 degrees 36 feet 00 inches (L) N: 42 degrees 41 feet 00 inches
E: 82 degrees 00 feet 00 inches E: 82 degrees 45 feet 00 inches
(M) N: 43 degrees 13 feet 00 inches (N) N: 42 degrees 45 feet 00 inches
E: 82 degrees 45 feet 00 inches E: 81 degrees 05 feet 00 inches
Aikendaban Region (N O 4)
(O) N: 43 degrees 47 feet 00 inches (P) N: 43 degrees 00 feet 00 inches
E: 84 degrees 00 feet 00 inches E: 86 degrees 00 feet 00 inches
(Q) N: 43 degrees 00 feet 00 inches (R) N: 43 degrees 20 feet 00 inches
E: 84 degrees 00 feet 00 inches E: 86 degrees 00 feet 00 inches
Vulansayi Region (N O 5)
(S) N: 42 degrees 00 feet 00 inches (T) N: 42 degrees 00 feet 00 inches
E: 84 degrees 45 feet 00 inches E: 86 degrees 00 feet 00 inches
(U) N: 42 degrees 37 feet 00 inches (V) N: 42 degrees 57 feet 00 inches
E: 86 degrees 00 feet 00 inches E: 84 degrees 41 feet 00 inches
(W) N: 42 degrees 37 feet 00 inches (X) N: 42 degrees 25 feet 00 inches
E: 84 degrees 00 feet 00 inches E: 84 degrees 45 feet 00 inches
Saluntai Region (Additional)
(1) N: 43 degrees 00 feet 00 inches (2) N: 43 degrees 00 feet 00 inches
E: 86 degrees 00 feet 00 inches E: 86 degrees 30 feet 00 inches
(3) N: 42 degrees 40 feet 00 inches (4) N: 42 degrees 40 feet 00 inches
E: 86 degrees 00 feet 00 inches E: 86 degrees 30 feet 00 inches
Unrevised parts will be executed according to the Appendix of the original
Agreement.
/s/
Xinjiang Bureau of Geology &
Mineral Resources Minco Canada
<PAGE> 1
Exhibit 3h
LETTER OF INTENT REGARDING THE DEVELOPMENT
OF THE LIJIAGOU LARGE Pb-Zn DEPOSIT
AMONG:
PACIFIC CANADA RESOURCES INC.
a corporation incorporated under the laws of Ontario (referred to herein
as "PCR")
Address: 3220 Colonial Drive, Mississauga, Ontario, Canada L5L 5K8
Phone: (905) 607 - 9290; Fax: (905) 607 - 9449
AND:
TECK EXPLORATION LTD.
a corporation incorporated under the laws of Ontario (referred to herein
as "TECK")
Address: 200 Burrard St., Vancouver, B. C., V6C 3L9
Phone: (604) 607 - 6100; Fax: (604) 687 - 1117
AND:
BAIYIN NON-FERROUS METALS COMPANY
a subsidiary of China National Non-Ferrous Metals Industry Corporation
(refer-red to herein as "CNNC")
a corporation incorporated under the laws of the People's Republic of
China (referred to herein as "BAIYIN")
Address: Baiyin City, Gansu Province, China
Phone: (09430) 223 - 449; Fax: (09430) 223 - 165
WHEREAS:
1. BAIYIN has been authorized and approved by CNNC to develop the Lijiagou
<PAGE> 2
large Pb-Zn deposit (the "Project"). BAIYIN has been authorized by CNNC
to seek various sources of capital for the Project, including foreign
investments.
2. BAIYIN faxed PCR the joint venture and site visit invitation for the
Project in August, 1994 and April, 1995, respectively.
3. After receiving the joint venture invitation and geological summary of the
Project, PCR and TECK expressed their interest in the Project to BAIYIN
and accepted the site visit invitation.
4. Representatives from PCR and TECK visited BAIYIN and the Lijiagou Deposit
during the May 9-14 period. BAIYIN gave detailed technical presentations
about mineral resources in the Changba-Lijiagou region as well as the
facilities of BAIYIN. A site visit followed, including the copper smelter,
Pb-Zn smelters, Changba open pit mine and associated facilities, Lijiagou
deposit, and Tianshui Transfer Station.
5. After the above said site visit, BAIYIN, PCR, and TECK carried out
discussions about the possible cooperation between the three parties. The
discussions were in a very warm and friendly atmosphere.
6. BAIYIN, PCR and TECK are willing to enter into this Letter of Intent on
the basis of the above discussions and on the terms set out below. All the
three parties wish to work on the Project in a timely fashion.
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below BAIYIN, PCR, and TECK agree as follows:
1.0 - INTERPRETATION
1.1 DEFINITION OF "PROPERTY"
"PROPERTY" shall mean the Lijiagou Pb-Zn deposit which is located within
the boundaries of Chen Xian, Gansu Province, in the People's Republic of
China.
2
<PAGE> 3
1.2 DEFINITION OF "THE PARTIES"
"the Parties" shall mean BAIYIN, PCR and TECK.
1.2 LANGUAGE
The parties agree that the English and Chinese language versions of this
Letter of Intent are of equal validity and effect. There are three copies
of both English and the Chinese versions. Each of the Parties holds an
English and Chinese versions of this Letter of Intent.
3.0 CO-OPERATION PROCEDURE
In order to assess the Project in a timely fashion, after friendly
discussions, all the three parties agreed to use the following procedure:
1. After the execution of this Letter of Intent, BAIYIN will provide
PCR and TECK with technical information of the Project as soon as
possible. PCR and TECK wishes BAIYIN to provide the following data
(the "Data"). BAIYIN promised to provide the Data to PCR and TECK
within the permissions of the regulations set up by the Chinese
authorities.
The Data includes:
a) Location Map showing Nanzhou, Baiyin, Tianshui, Chen Xian, and
Changba district.
b) Regional Geological Map (Changba-Lijiagou district).
c) Property Geological Map (Changba-Lijiagou district).
d) Typical Cross-Section Maps.
e) Typical Level Maps.
f) Technical Reports of Changba-Lijiagou deposits.
3
<PAGE> 4
g) Overlay Map of the Changba-Lijiagou deposits and existing
facilities.
2. Upon receiving the Data set out above, PCR and TECK will conduct a
preliminary assessment (the "Preliminary Assessment") in a timely
fashion, and then confirm to BAIYIN the level of their interest in
the Project.
3. If PCR and TECK have positive conclusion about the investment in
the Project after the Preliminary Assessment, then PCR and TECK will
send an expert team to conduct a detail site visit (the "Detailed
Site Visit") to BAIYIN and the Changba-Lijiagou district in a timely
fashion. BAIYIN will arrange and co-operate the Detailed Site Visit
and provide all the local support and services required for the
Detailed Site Visit.
4. After the Detailed Site Visit, PCR and TECK will conduct a detailed
assessment or pre-feasibility study (the "Detailed Assessment") in a
timely fashion. On the basis of the Detailed Assessment, PCR and
TECK will make their investment decisions to the Project.
5. After the Detailed Assessment, if PCR and TECK wish to set up a
joint venture with BAIYIN (the "Joint Venture") to develop the
Project jointly, the Parties will negotiate a final and final joint
venture contract (the "Joint Venture Contract") in good faith.
6. If PCR and TECK wish to set up the joint venture with BAIYIN on the
Project after the Detailed Assessment, BAIYIN will seek approval
from the appropriate government authorities, including, but not
limited to, the application and approval of the Project, application
and registration of joint venture enterprise (the "Joint Venture
Enterprise"). PCR and TECK will provide to BAIYIN all reasonable
assistance.
7 After the Joint Venture Contract has been executed and the Joint
Venture Enterprise has been formally approved by the various Chinese
authorities, the three parties will jointly conduct a feasibility
study (the "Feasibility Study") of the Project, including Chinese
feasibility study, preliminary mine design, and construction
design. The costs of the
4
<PAGE> 5
Feasibility Study will be shared by all the Parties corresponding to
their respective equity interest in the Joint Venture. If the Joint
Venture is implemented, the feasibility costs incurred by the three
parties will be credited as capital contribution of the Joint
Venture.
8. If the Feasibility Study concludes that the Project meets the
investment criteria and is economically and socially attractive,
then the Joint Venture would be implemented pursuant to the terms
set out in the Joint Venture Contract.
4.0 - FIRST RIGHT OF REFUSAL AND EXCLUSIVE RIGHT
Upon execution of this Letter of Intent and before the Detailed
Assessment, PCR and TECK wish to have first right of refusal (the "First
Right of Refusal") which is only applied to non-Chinese investors. After
the Detailed Assessment is initialized, PCR and TECK wish to have time
limited exclusive investment and negotiation right ( the "Exclusive
Right") to enter the Joint Venture Contract with BAIYIN with respect to
the Project.
BAIYIN agreed to grant PCR and TECK the above First Right of Refusal and
Exclusive Right. The Exclusivity period will be determined through
discussions in good faith after the Detailed Assessment starts.
5.0 - CONFIDENTIALITY OBLIGATIONS
5.1 BAIYIN
BAIYIN agreed to preserve the confidentiality of all information obtained
pursuant to this Letter of Intent (including, without limitation, any
documents evidencing agreements between the parties) and not to disclose
such information other than in accordance with the terms of this Letter of
Intent excluding those Chinese government bodies which have right to know.
If the business relationship is terminated among the parties, BAIYIN will
return all the information provided by PCR and TECK to PCR and TECK.
5.2 PCR AND TECK
PCR and TECK agreed to preserve the confidentiality of all information
5
<PAGE> 6
obtained pursuant to this Letter of Intent (including, without limitation,
any documents evidencing agreements between the parties) and not to
disclose such information other than in accordance with the terms of this
Letter of Intent excluding those Canadian authorities which have a right
to know.
If the business relationship is terminated among the parties, PCR and TECK
will return all the information provided by BAIYIN to BAIYIN.
5.3 OTHER JOINT VENTURE PARTNERS
All parties agreed that each party can disclose all information obtained
pursuant to this Letter of Intent to its respective joint venture partner.
6.0 - THE POTENTIAL JOINT VENTURE
6.1 CONTRIBUTIONS TO THE JOINT VENTURE
6.1.1 BAIYIN
In consideration for its equity participation, BAIYIN shall contribute to
the Joint Venture the following assets: (1) the mineral resources of
Lijiagou; (2) existing facilities and assets, (3) capital.
6.1.2 PCR AND TECK
In consideration for their equity participation, PCR and TECK shall
contribute to the Joint Venture the following assets: (1) certain advanced
equipment and technology, and (2) capital.
6.1.3 EVALUATION OF CONTRIBUTION
The contributions from the Parties shall be evaluated by an independent
evaluator according to common international practice.
6.2 EQUITY INTERESTS
PCR and TECK wish to acquire a controlling interest (greater than 50%).
BAIYIN agreed to discuss with the various government authorities to
6
<PAGE> 7
determine this issue as soon as possible under the permission of the
Chinese government policies.
6.3 JOINT VENTURE FORMS
The parties agreed that the Joint Venture could be one of the following
three forms:
1) contractual joint venture to develop the Lijiagou deposit only;
2) equity joint venture to form a foreign joint venture enterprise (the
"Joint Venture Enterprise") for the Project and more importantly, for
long-term cooperation among the parties in a wider area. In order to
attract international investors, the Joint Venture Enterprise shall be
listed on a public stock exchange, e.g., Toronto Stock Exchange.
3) equity joint venture to form an integrated mining company (mining,
milling and refinery). BAIYIN will contribute Changba open pit mine and
associated facilities, the mill plant, Lijiagou Pb-Zn deposit, and the
Northwest Pb-Zn smelter and associated facilities.
BAIYIN prefers the third joint venture form. However, the final form of
joint venture will be determined through future negotiation in good faith.
6.4 CAPACITY AND MINING SCHEME
The optimum capacity, development scheme, and step by step approach will
be determined through future negotiation in good faith among the Parties
after the Detailed Assessment by PCR and TECK.
6.5 EQUIPMENT, TECHNOLOGY, AND MANAGEMENT
The Parties agreed that the Project shall employ advanced equipment,
technology, and modern management.
6.6 PRODUCT SCHEMES
The parties agreed that if the Joint Venture is in the first or second
form as set up in section 6.3., then the product scheme would be producing
concentrates
7
<PAGE> 8
for sale or producing metals for sale through custom smelting. The final
product scheme would be determined through future negotiation. PCR and
TECK could grant BAIYIN exclusive concentrate purchasing rights or custom
smelting rights as long as the concentrate purchasing prices or custom
smelting charges are determined by the Chinese and international
standards.
6.7 EXPENSE INCURRED UP TO THE JOINT VENTURE CONTACT
Before the execution of the Joint Venture Contract, each of the Parties
shall be responsible for its own expenses incurred related to the
Project. If the Joint Venture is conducted, then expenses incurred by each
of the Parties shall be credited as part of the capital contribution to
the Joint Venture. If the co-operation is terminated without signing the
Joint Venture Contract, the expenses incurred by each of the Parties shall
be treated as risk investment and the other parties shall not be
responsible for the lose.
7.0 - GENERAL
7.1 ASSIGNMENT
BAIYIN, PCR and TECK agreed that each party can assign this Letter of
Intent to a third party provided that a written consent is given by the
other parties in advance.
7.2 ADDITIONAL INVESTORS
The parties further agreed:
1) PCR and TECK may invite other companies to invest in the Joint
Venture provided that such companies are non-Chinese.
2) BAIYIN may invite other companies to invest in the Joint Venture
provided that such companies are Chinese.
8
<PAGE> 9
7.3 COUNTERPARTS
This Letter of Intent, and any notices or other documents permitted or
required by it, may be executed in counterparts, including copies which
have been executed and then delivered by facsimile transmission.
IN WITNESS WHEREOF the parties have duly executed the English version of this
Letter of Intent as of the date indicated beneath each signature below.
BAIYIN NON-FERROUS METALS COMPANY
By: /s/ Ren Shichang
Ren Shichang
Title: Deputy General Manager
Date:
PACIFIC CANADA RESOURCES INC.
By: /s/ Ken Z. Cai
Ken Z. Cai
Title: Managing Director
Date: May 26 '95
TECK EXPLORATION LTD.
By: /s/ T. W. Spilsbury
T. Wayne Spilsbury
Title: Vice President and General Manager (Asia)
Date: May 26, 95
9
<PAGE> 1
Exhibit 3i
INVESTMENT AND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 20th day of February, 1996
AMONG:
MINCO MINING AND METALS CORPORATION, a body corporate
incorporated under the laws of British Columbia, with an
office at 1870 - 401 West Georgia Street, Vancouver, B.C.,
V6B 5A1
("Minco")
AND:
TECK CORPORATION, a body corporate incorporated under the laws
of Canada, with an office at 700 - 200 Burrard Street,
Vancouver, British Columbia, V6C 3L-9
("Teck")
AND:
COMINCO LTD., a body corporate incorporated under the laws of
Canada, with an office at 500 - 200 Burrard Street, Vancouver,
British Columbia, V6C 3L7
("Cominco")
WHEREAS:
(A) Pacific Canada Resources Inc. ("PCR") has entered into an investment and
participation agreement dated as of February 19, 1996 (the "Teck-Cominco-PCR
Agreement") with Teck and Cominco under which PCR has granted certain rights to
Teck and Cominco in exchange for them making a private placement in a specified
company which the parties have agreed will be Minco, subject to the Closing of
this Agreement.
(B) PCR has entered into an investment and participation agreement dated as of
February 19, 1996 (the "Minco-PCR Agreement") with Minco which provides, amongst
other things, that for a period of time commencing on the date of this Agreement
and expiring on March 1, 2000, extendable upon agreement of the Parties thereto,
Minco shall have the exclusive right to acquire from PCR, at cost and in the
manner therein
<PAGE> 2
2
described, all right, title and interest in and to any new base or precious
metal Property which PCR identifies and in respect to which PCR has acquired an
NCI or in respect to which PCR has a reasonable expectation of acquiring an NCI.
(C) Under Chinese law a foreigner may acquire an interest in a joint venture or
other recognized Chinese vehicle which in turn holds a mineral property in
China;
(D) Minco intends to acquire indirect interests in mineral properties in China
and the right to exploit mineral properties in China;
(E) This Agreement provides for the manner in which Cominco and Teck may acquire
part of Minco's interest in any NCI or Property (both as defined herein) or any
mineral property that is acquired;
(F) At the same time Minco will require working capital, Teck and Cominco wish
to invest, and Minco has agreed to grant certain rights to Teck and Cominco in
consideration of such investments;
(G) Minco also intends to raise capital by public financing to generate the
funds necessary to advance one or more Properties to the stage of a preliminary
feasibility report;
(H) The parties have agreed that the interest to be acquired by Teck and Cominco
in Minco's interest in an NCI or a Property may be increased in through a good
faith negotiation outside the terms of this Agreement at some future time; and
(I) The parties wish to record their respective rights and obligations.
THEREFORE the Parties agree as follows:
PART 1
CONSTRUCTION
DEFINITIONS
1.1 In this Agreement, except as otherwise expressly provided or as the context
otherwise requires:
ACQUIRED PROPERTY means a Property in respect of which
(i) Minco has entered into a formal joint venture agreement
(as such term is understood in China) with a Chinese entity
pursuant to which
<PAGE> 3
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Minco has the right to acquire an NCI, and the Chinese entity
has applied for approval of the appropriate Chinese
Governmental Authority pursuant to a request by Minco to
negotiate a joint venture contract with Minco; or
(ii) Minco receives a New Property Notice as contemplated in
Section 6.3 of the Minco-PCR Agreement.
AFFILIATE of a Party has the meaning ascribed to it in the Securities Act
(British Columbia).
BUSINESS DAY means a day that is not a Saturday, Sunday or a statutory holiday
in British Columbia.
CLOSING means the closing of the purchase and sale of the Purchased Securities.
CLOSING DATE means the fifth Business Day following the date upon which Minco
receives written notification from the Vancouver Stock Exchange that this
Agreement and the Minco-PCR Agreement have been accepted for filing or such
other date as the Parties may agree upon.
COMMITMENT NOTICE means a notice delivered to Minco by the Investors pursuant to
Section 6.13 or 6.17 that they intend to proceed with programs contemplated in a
Final Feasibility Report and they have commitments from lenders for the debt
portion of the project financing, as evidenced by certified copies of the
lenders' commitment letters to the Investors delivered with the notice.
COMMON SHARE means a common share, as constituted as at the date of this
Agreement, in the capital of Minco.
COSTS means cash outlays, expenses, obligations and liabilities of whatever kind
or nature, but without duplication.
DESIGNATED INVESTOR means, in the case of a base metal Property, Cominco, and in
all other cases, Teck.
DEVELOPMENT PROPERTY means an Acquired Property that the Investors determine,
pursuant to Section 6.1, should be governed by this Agreement and categorize as
a Development Property pursuant to Section 6.4.
EARN-IN PERIOD means the period of time beginning on the date hereof and ending
on the date the Earn-In Rights terminate in accordance with Section 6.6.
EARN-IN RIGHTS means those rights to earn an Interest in an NCI in respect of an
Acquired Property, more particularly set out in Section 6.8 and 6.14.
<PAGE> 4
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ENCUMBRANCE means a security interest, mortgage, pledge, hypothecation, lien,
easement, right-of-way, encroachment, covenant, condition, right of re-entry,
lease, licence, assignment, option, claim or other title defect, encumbrance or
charge whatsoever, whether or not registered or registrable.
EXERCISE NOTICE means, with respect to an Acquired Property, a written notice
delivered by an Investor that it intends to proceed with the preparation of a
Final Feasibility Report under Part 6.
EXPENDITURES means all Costs spent or incurred or deemed incurred hereunder by a
Party in connection with a Property including:
(i) monies expended in maintaining the Property in good standing,
including any monies expended in doing and filing assessment work and
any required vendor's or royalty payments;
(ii) monies expended in exploring the Property, including doing
geophysical, geochemical and geological surveys, drilling, assaying and
metallurgical testing;
(iii) monies expended in acquiring assets for use on or in connection
with the Property;
(iv) monies expended in paying the fees, wages, salaries and travelling
expenses of all employees of a Party or associated entities engaged in
work with respect to and for the benefit of the Property, together with
an amount for fringe benefits usually paid by such Party;
(v) monies expended in paying for the food, lodging and other
reasonable needs of the persons referred to in clause (iv) hereof;
(vi) a charge equal to
(A) 10% before the date of a Commitment Notice, and
(B) 3% thereafter,
for unallocable overhead and head office expenses and all other
expenses relating to supervision and management of all work done with
respect to and for the benefit of the Property of all Expenditures,
other than the charge referred to in this clause (vi);
(vii) monies expended or set aside for environmental remediation and
reclamation;
<PAGE> 5
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(viii) all Costs related to the preparation of programs and reporting
as to the results thereof;
(ix) all Costs related to the preparation of a Final or Preliminary
Feasibility Report and a production program;
(x) all Costs related to construction and development programs up to
commercial production; and
(xi) all Costs related to operations after the date of commencement of
commercial production.
EXPLORATION PROPERTY means an Acquired Property that the Investors determine,
pursuant to Section 6.1, should be governed by this Agreement and which has been
categorized as an Exploration Property pursuant to Section 6.4.
FINAL FEASIBILITY REPORT means a detailed report showing the feasibility of
placing a Property or part thereof into commercial production and including at
least the following information:
(i) a description of that part of the Property to be covered by the
proposed mine;
(ii) the estimated recoverable reserves of minerals and the estimated
composition and content thereof;
(iii) the proposed procedure for development, mining and production;
(iv) results of ore amenability tests (if any);
(v) the nature and extent of the facilities proposed to be acquired or
constructed and, if the size, extent and location of the ore body makes
mill facilities feasible, a preliminary design for such mill
facilities;
(vi) the total costs, including capital budget, reasonably required to
purchase, construct and install all structures, machinery and equipment
required for the proposed mine, including a schedule of timing of such
cost requirements;
(vii) environmental impact studies and costs thereof;
(viii) the period in which it is proposed the Property shall be brought
to commercial production;
<PAGE> 6
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(ix) such other data and information as are reasonably necessary to
substantiate the existence of a mineral deposit of sufficient size and
grade to justify development of a mine, taking into account all
relevant business, tax and other economic considerations; and
(x) working capital requirements for the initial four months of
operation of the Property as a mine or such longer period as may be
reasonably justified in the circumstances.
FIRST RECOVERY DATE means the date on which the first of either Minco or an
Investor recovers its Prior Costs from Net Proceeds.
GOVERNMENTAL AUTHORITY means a federal, state, provincial, regional, municipal
or local government or subdivision thereof including an entity or person
exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government or subdivision.
INTEREST means an undivided interest in and to an NCI in respect of an Acquired
Property held by Minco or an Investor, as the case may be.
INVESTORS means Teck and Cominco and INVESTOR means any one of them.
JOINT VENTURE AGREEMENT means the agreement to be entered into among the Parties
pursuant to Section 6.22 defining the respective rights and obligations with
respect to the joint ownership (directly or indirectly) of, and operation of
activities on, an Exploration Property or Development Property, as the case may
be, once an Investor has earned an Interest.
MINIMUM PERCENTAGE means with respect to the Investors, 50% of that percentage
of the issued common shares of Minco issued to both Investors pursuant to
Section 3.1 as compared to the total issued common shares of Minco at the
Closing Date.
NCI, with respect to a Property, means a direct or indirect interest therein
that is available for a non-Chinese entity or foreigner to acquire under Chinese
law and is held by or available to Minco, including shares, or a contractual
right to acquire shares, in a Chinese company that owns or holds a direct or
indirect interest in the Property.
NET PROCEEDS means that amount which remains after the initial cash flows
available or attributable to the Parties' Interest from sales of product from
the mine have been used to pay operating, marketing and distribution costs;
taxes (other than income taxes) and royalties; any advances which a Party has
made to cover sustaining capital requirements or operating losses during the
"cost recovery" period contemplated in Section 6.23 or Section 6.24; and the
administrative charge
<PAGE> 7
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contemplated in Section (vi)(B) of the Expenditures definition on costs incurred
from the date of commencement of commercial production.
PARTIES means two or more of Minco, Teck and Cominco and PARTY means any one of
them.
PERSON means an individual, corporation, partnership, joint venture,
association, trust or unincorporated organization or any trustee, executor,
administrator or other legal representative, or government official or ministry.
PRELIMINARY FEASIBILITY REPORT means an intermediate level report, prepared in
accordance with Canadian industry standards, having as its objective a
determination whether a project justifies a detailed analysis and cost of a
Final Feasibility Report, and identifying aspects of the project that are
critical to its viability and that necessitate in-depth investigations through
functional or support studies and will be expected to include evaluation of
estimated reserves, preliminary mining methods and equipment selections,
preliminary metallurgical analysis, workable flow sheet for a process plant,
support services and facilities, manpower sources and costs, project
implementation schemes, market evaluation, environmental and cultural issues,
and a preliminary financial analysis based on investment costs, production
costs, and market potential.
PRIME RATE means, at any particular time, the annual rate of interest announced
from time to time by Bank of Montreal, main branch, Vancouver, British Columbia
as a reference rate then quoted as being in effect on Canadian dollar loans made
in Canada to its most creditworthy commercial customers and as to which from
time to time a certificate of an officer of such Bank shall be conclusive.
PRIOR COSTS with respect to a Property means the Expenditures incurred by Minco
or Investor at the time incurred but before the date of commencement of
commercial production, all stated in United States dollars.
PROPERTY means a mineral property in China by whatever instrument it may be held
and any interest, contractual right or other right to acquire an interest
therein and includes an Acquired Property, an Exploration Property and a
Development Property.
PURCHASED SECURITIES means the Units, comprised of common shares and warrants,
to be issued to the Investors pursuant to Section 3.1 hereof.
REQUISITE APPROVALS means the approvals of stock exchanges and other regulatory
authorities having jurisdiction to review and grant approval of the transactions
contemplated by this Agreement.
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SECOND RECOVERY DATE means the date on which the last of Minco and the
Investors recovers its Prior Costs from Net Proceeds.
UNDERLYING AGREEMENT means any agreement in existence at the date
hereof, or that comes into existence after the date hereof, entitling
Minco to acquire an NCI in respect of an Acquired Property.
UNIT means one unissued common share of Minco together with one fifth
(1/5) of a share purchase warrant, one full warrant entitling the
holder thereof to purchase one additional common share of Minco
pursuant to the terms of the Subscription Agreement attached hereto as
Schedule I.
INTERPRETATION
1.2 For all purposes of this Agreement, except as otherwise expressly provided
or as the context otherwise requires:
(a) "THIS AGREEMENT" means this agreement as from time to time
supplemented or amended by one or more agreements entered into pursuant
to the applicable provisions of this Agreement together with all
schedules and other attachments to it;
(b) the headings are for convenience only and shall not be used to
interpret this Agreement;
(c) the word "INCLUDING", when following any general term or statement,
is not to be construed as limiting the general term or statement to the
specific items or matters set forth or to similar items or matters, but
rather as permitting the general term or statement to refer to all
other items or matters that could reasonably fall within the broadest
possible scope of the general term or statement;
(d) an accounting term not otherwise defined herein has the meaning
assigned to it, and every calculation to be made hereunder is to be
made, in accordance with generally accepted accounting principles in
Canada;
(e) except where otherwise stated, all references to currency mean
United States currency;
(f) a reference to a statute includes all regulations made thereunder,
all amendments to the statute or regulations in force from time to time
and any statute or regulation that supplements or supersedes such
statute or regulations;
(g) a reference to a Part means a Part of this Agreement and the symbol
"Section " followed by a number or some combination of numbers and
letters refers to the
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provision of this Agreement so designated and the symbol "Section"
followed by a letter within a provision refers to a clause within such
provision;
(h) a reference to a person includes a successor to that person;
(i) words importing the masculine gender include the feminine or
neuter, words in the singular include the plural, words importing a
corporate entity include individuals and vice versa;
(j) a reference to "APPROVAL", "AUTHORIZATION" or "CONSENT" means
written approval, authorization or consent; and
(k) references to payments to be made by certified cheque will be
deemed to contemplate payment by certified cheque drawn on, or bank
draft issued by, a Canadian chartered bank, payable at par in
Vancouver, British Columbia and payable to the party entitled to
receive payment or its counsel, in trust.
SCHEDULES
1.3 The following schedules are incorporated into this Agreement
by reference:
<TABLE>
<CAPTION>
Schedule Description Reference
- -------- ----------- ---------
<S> <C> <C>
A Capital of Minco and Rights to Acquire Securities Section 2.3(f)
B Right to Acquire Interests in NCI's or Properties of Minco Section 2.3(f)
C Minco's Financial Statements Section 2.3(n)
D List and Description of Underlying Agreements Section 2.3(m)
E Form of Consent and Waiver Section 2.4(c)(ii)
F Minco's Material Liabilities
G Terms of Joint Venture Section 6.20
H Net Smelter Return Royalty Section 6.22
I Purchased Securities Subscription Agreement Section 3.1
</TABLE>
GOVERNING LAW
1.4 This Agreement shall be construed and governed by the laws in force in the
Province of British Columbia and the courts of said Province shall have
exclusive jurisdiction to hear and determine all disputes arising hereunder.
Each Party irrevocably attorns to the jurisdiction of said courts and consents
to the commencement of proceedings in such courts. This paragraph shall not be
construed to affect the rights of a Party to enforce a judgment or award outside
the said Province, including the right to record or enforce a judgment or award
in any jurisdiction in which the Property is situated.
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SEVERABILITY
1.5 If any provision of this Agreement is or shall become illegal, invalid or
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be and remain valid and subsisting and the said remaining provisions shall be
construed as if this Agreement had been executed without the illegal, invalid or
unenforceable portion.
PART 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
REPRESENTATIONS AND WARRANTIES OF TECK
2.1 Teck represents and warrants to Minco, as representations and warranties on
which Minco has relied in entering into this Agreement and which will survive
the execution hereof, that:
(a) Teck is a body corporate duly incorporated, organized and validly
subsisting under the laws of its incorporating jurisdiction and has
full power and authority to carry on its business and to enter into
this Agreement and any agreement or instrument referred to or
contemplated by this Agreement;
(b) neither the execution and delivery of this Agreement nor any of the
agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby or thereby contemplated,
violate or result in the breach of its constating documents;
(c) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Teck enforceable
against it in accordance with its terms; and
(d) Teck is acquiring the Purchased Securities as principal.
REPRESENTATIONS AND WARRANTIES OF COMINCO
2.2 Cominco represents and warrants to Minco, as representations and warranties
on which Minco has relied in entering into this Agreement and which will survive
the execution hereof, that:
(a) Cominco is a body corporate duly incorporated, organized and
validly subsisting under the laws of its incorporating jurisdiction and
has full power and authority to carry on its business and to enter into
this Agreement and any agreement or instrument referred to or
contemplated by this Agreement;
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(b) neither the execution and delivery of this Agreement nor any of the
agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby or thereby contemplated,
violate or result in the breach of its constating documents;
(c) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Cominco
enforceable against it in accordance with its terms; and
(d) Cominco is acquiring the Purchased Securities as principal.
REPRESENTATIONS AND WARRANTIES OF MINCO
2.3 Minco represents and warrants to each of Teck and Cominco, as
representations and warranties upon which Teck and Cominco have relied in
entering into this Agreement, which will be true at the Closing of the purchase
of the Purchased Securities and which will survive the execution hereof, that:
(a) it is a corporation duly organized and validly subsisting under the
laws of British Columbia and has full power and authority to carry on
its business and to enter into this Agreement and any agreement or
instrument referred to in or contemplated by, this Agreement;
(b) neither the execution and delivery of this Agreement nor any of the
agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby or thereby contemplated, (i)
violate or result in the breach of its constating documents or (ii)
conflict with, result in the breach of or accelerate the performance
required by any agreement to which it is a party;
(c) no proceedings are pending for and Minco is unaware of any basis
for the institution of any proceedings leading to the dissolution or
winding-up of Minco or the placing of it into bankruptcy or subject to
any other laws governing the affairs of insolvent persons;
(d) Schedule A accurately sets out the authorized and issued capital of
Minco;
(e) this Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of Minco enforceable
against it in accordance with its terms;
(f) no person, other than the Investors or as set out in Schedules A
and B, has any right, agreement or option, present or future,
contingent or absolute or any right capable of becoming a right,
agreement or option
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(i) to require Minco to issue any further or other shares in
its capital or any security or other instrument convertible or
exchangeable into shares in its capital, or to convert or
exchange any security or other instrument into, with or for
shares in its capital,
(ii) for the issue or allotment of any of the authorized but
unissued shares in its capital,
(iii) to require Minco to create any additional shares in its
capital,
(iv) to require Minco to purchase, redeem or otherwise acquire
any of the issued and outstanding shares in its capital,
(v) to require Minco to distribute any or all of its assets,
or to declare any dividends,
(vi) for the purchase of any assets or the acquisition of any
interest in a Property or an NCI, or
(vii) to purchase or otherwise acquire any securities of
Minco;
(g) no finder's fees, commission or financial services fees of any type
whatsoever are payable by Minco in connection with the transactions
contemplated by this Agreement except as will be disclosed to and
agreed by the Investors prior to the Closing Date, such agreement not
to be unreasonably withheld, and not to exceed the regulatory maximum
permitted;
(h) the financial statements of Minco as at and for the financial year
ended December 31, 1995 attached as Schedule C present fairly, in all
material respects, the financial position of Minco as at December 31,
1995 and the results of operations and the changes in financial
position for the year then ended in accordance with Canadian generally
accepted accounting principles applied on a consistent basis and do not
omit to state any material fact that is required by generally accepted
accounting principles or by applicable law to be stated or reflected
therein or which is necessary to make the statements contained therein
not misleading and there has been no material adverse change in the
financial affairs of Minco;
(i) since the end of its most recently completed fiscal year, Minco has
carried on its business in the ordinary and normal course of the
routine daily affairs of such business. Since such date, there has been
no material change in the business, operations, affairs or conditions
of Minco, financial or otherwise, including any change arising as a
result of any legislative or regulatory change, modification,
revocation or suspension of any material license or right to do
business, fire, explosion, accident, casualty, labour trouble, flood,
drought, riot,
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storm, expropriation, condemnation, act of God or otherwise, except
changes occurring in the ordinary course of the routine daily affairs
of business, which changes have not materially adversely affected the
organization, business, properties, prospects or financial condition of
Minco;
(j) no order prohibiting the issue and sale or resale of securities by
Minco has been issued and no proceedings for this purpose have been
instituted, are pending, or, to the knowledge of Minco contemplated or
threatened;
(k) this Agreement and any statement furnished to Teck and Cominco by
or on behalf of Minco do not contain and will not contain any untrue
statement of material fact or omit or will omit to state a material
fact necessary to make the statements contained herein or therein not
misleading;
(l) all taxes, assessments, levies and other amounts, the non-payment
of which could affect Minco's ownership interest or title to an NCI or
Acquired Property, will have been duly paid, withheld or collected
before the Closing Date; provided, however, that none of the foregoing
need be paid while the same is being contested in good faith by
appropriate proceedings diligently conducted;
(m) Schedule D contains a complete list of all Underlying Agreements at
the date hereof;
(n) Minco owns, at the date hereof, the NCI's or has rights to acquire
an NCI in Properties as set out in the Underlying Agreements on
Schedule D and has the right to acquire NCI's in China;
(o) there are no material liabilities, contingent or otherwise, of
Minco which are not disclosed in Schedule "F" attached hereto and Minco
has not guaranteed, or agreed to guarantee, any debt, liability or
other obligation of any person, firm or corporation other than as
described in Schedule "F";
(p) no person, other than PCR, or as set out in Schedule "A", has any
right, agreement, or option, present or future, contingent or absolute,
or any right capable of becoming a right, agreement or option:
(i) to require Minco to issue any further or other shares in
its capital or any security or other instrument convertible or
exchangeable into shares in its capital, or to convert or
exchange any security or other instrument into, with or for
shares in its capital;
(ii) for the issue or allotment of any of the authorized but
unissued shares in its capital;
(iii) to require Minco to create any additional shares in its
capital;
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(iv) to require Minco to purchase, redeem, or otherwise
acquire any of the issued and outstanding shares in its
capital;
(v) to require Minco to distribute any or all of its assets,
or to declare any dividends;
(vi) for the purchase of any assets or the acquisition or any
interest in a Property, or an NCI; or
(vii) to purchase or otherwise acquire any securities or
Minco;
(q) the Purchased Securities to be issued to the Investors pursuant to
the provisions of paragraph 3, when issued, will be validly issued as
fully paid and non-assessable and will be free of all resale
restrictions other than the one-year hold period imposed by the Act;
(r) Minco is not indebted to any affiliate or director or officer of
Minco other than is set out in the financial statements attached hereto
as Schedule "C";
(s) no dividends or other distribution of any shares in the capital of
Minco have been made, declared or authorized;
(t) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the
knowledge of Minco threatened against or affecting Minco at law or in
equity or before or by any governmental agency or authority having
jurisdiction; and
(u) the performance of this Agreement will not be in violation of the
constating documents of Minco or of any agreement to which Minco is a
party and will not give any person or company any right to terminate or
cancel any agreement or any right enjoyed by Minco and will not result
in the creation or imposition of any lien, encumbrance or restriction
of any nature whatsoever in favour of a third party upon or against the
assets of Minco.
COVENANTS OF MINCO
2.4 Minco covenants with Teck and Cominco that:
(a) until the Closing, each Investor and its counsel and other advisors
and representatives will be entitled to have full access during normal
business hours to all records relating to Minco, all Affiliates of
Minco and their businesses and Minco will furnish or cause to be
furnished to each Investor and its representatives all data and
information concerning the business, finances, operations and
properties of and all Affiliates of Minco that may reasonably be
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requested and will provide on a timely basis such written consents as
may be requested by Teck or Cominco for the purpose of due diligence
searches;
(b) all representations, warranties, covenants and agreements of Minco
set forth in this Agreement and in any written statements delivered
under this Agreement will be true and correct as at the Closing Date as
if made on that date and all representations and warranties will
survive the Closing and the transactions contemplated hereby and any
investigations made at any time with respect thereto without
limitation;
(c) during the Earn-In Period
(i) Minco will promptly provide each Investor with a copy of
each Underlying Agreement negotiated or entered into after the
date hereof,
(ii) Minco will use its best efforts to cause each optionor,
joint venturer or co-owner under an Underlying Agreement or
co-ownership agreement to which Minco is or may become party
to execute the form of consent and waiver attached hereto as
Schedule E and will keep each Investor informed of its
progress in obtaining such consents and waivers,
(iii) Minco will not, without the Designated Investor's prior
written consent (such consent not to be unreasonably
withheld), agree to amend any Underlying Agreement in a manner
that may materially adversely affect the Investors, and
(iv) Minco will use its best efforts to secure, as part of
any Underlying Agreement entered into, the right for Minco to
provide management and direction of, and to operate, programs
of work on the subject Acquired Property, and
(v) Minco will consult with the Investors with respect to work
programs for each Acquired Property and budgets for each
Acquired Property and will provide the Designated Investor
with such information concerning each Acquired Property and
the activities on or in respect thereof and the results of
such activities as the Investors may from time to time
reasonably request; and
(d) following the Earn-In Period, Minco will not, with respect to the
Properties on which the Investors have exercised their Earn-In Rights,
without the Designated Investor's prior written consent (such consent
not to be unreasonably withheld), agree to amend any Underlying
Agreement in a manner that may materially adversely affect the
Investors.
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COVENANTS OF TECK
2.5 Teck covenants with Minco that:
(a) all representations, warranties, covenants and agreements of Teck
set forth in this Agreement and in any written statement delivered by
Teck under this Agreement will be true and correct as at the Closing
Date as if made on that date and all representations and warranties
will survive the Closing and the transactions contemplated hereby and
any investigations made at any time with respect thereto without
limitation;
(b) it will at all times and from time to time cooperate with each
other Party in order to give full effect to this Agreement and in order
to assist and expedite the performance by each Party of all or any of
the provisions herein contained and, in particular, execute under its
corporate seal or otherwise and deliver all such instruments, deeds,
mortgages, assignments and other documents and cause all such corporate
acts to be duly, expeditiously and validly done as the Parties may
reasonably require in accordance with the provisions hereof;
(c) subject to Section 2.8, it will use all reasonable efforts to
ensure that the Investors do not collectively own more than 20% of the
issued and outstanding common shares of Minco; and
(d) Teck will give notice to Minco immediately following each sale of
Purchased Securities and upon becoming aware that the Investors
shareholding has fallen below the Minimum Percentage.
COVENANTS OF COMINCO
2.6 Cominco covenants with Minco that:
(a) all representations, warranties, covenants and agreements of
Cominco set forth in this Agreement and in any written statement
delivered by Cominco under this Agreement will be true and correct as
at the Closing Date as if made on that date and all representations and
warranties will survive the Closing and the transactions contemplated
hereby and any investigations made at any time with respect thereto
without limitation;
(b) it will at all times and from time to time cooperate with each
other Party in order to give full effect to this Agreement and in order
to assist and expedite the performance by each party of all or any of
the provisions herein contained and, in particular, execute under its
corporate seal or otherwise and deliver all such instruments, deeds,
mortgages, assignments and other documents and cause all such corporate
acts to be duly, expeditiously and validly done as the Parties may
reasonably require in accordance with the provisions hereof;
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(c) subject to Section 2.8, it will use all reasonable efforts to
ensure that the Investors do not collectively own more than 20% of the
issued and outstanding common shares of Minco; and
(d) Cominco will give notice to Minco immediately following each sale
of Purchased Securities and upon becoming aware that the Investors
shareholding has fallen below the Minimum Percentage.
SURVIVAL
2.7 The representations, warranties, covenants, agreements and conditions
hereinbefore set out are conditions on which the Parties have relied in entering
into this Agreement, shall survive the acquisition by an Investor of any
interest in a Property and related assets hereunder and shall be unaffected by
any due diligence undertaken by and Investor in respect of this Agreement and
each Party will indemnify and save the other harmless from all loss, damage,
costs, actions and suits arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition made bv them and
contained in this Agreement (including lawyer's fees and disbursements).
LIMITATION
2.8 The restriction as to investment level set out in Sections 2.5(c) and 2.6(c)
ceases to apply on the earliest to occur of the following events:
(a) a significant change of control of Minco, of which Minco hereby
agrees to give the Investors immediate notice upon becoming aware of
the occurrence of the change, provided that Minco shall give the
Investors at least five clear trading days prior notice of its
intention to sell any common shares or securities convertible into
Common Shares which would or are likely to result in a change of
control of Minco, as the case may be;
(b) except where such reduction occurs as a result of dispositions by
an Investor, the combined interests of the Investors and Ken Cai
(whether directly or indirectly through PCR and whether by ownership,
control of or direction over) in Common Shares falling below 25%;
(c) any reconstitution of management of Minco that results in Ken Cai
not being part of management;
(d) a Person (by itself or together with its Affiliates) or two or more
Persons acting jointly and in concert with each other acquiring more
than 10% of the outstanding shares of Minco;
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(e) a takeover bid of which Minco is the offeree; provided that if a
takeover bid or any competing takeover bid is not successful according
to its terms, the restriction set out in Section 2.5(c) and
Section 2.6(c) shall continue to apply; and
(f) Minco offering more than 5% of any particular share offering to a
Person who is engaged in the business of mineral exploration, mining,
smelting or refining.
PART 3
INVESTMENT IN PCR AND GRANT OF RIGHTS
ISSUE OF SHARES AND GRANT OF RIGHTS
3.1 Relying upon the representations contained herein, in consideration of the
investment by the Investors, and subject to the terms and conditions hereof,
Minco hereby:
(a) agrees to issue and deliver to each Investor, upon receipt of
$500,000 Canadian from such Investor, 625,000 Units pursuant to the
terms of the Subscription Agreement attached hereto as Schedule I; and
(b) grants to each Investor, until such time, if any, as the Investors
first cease to collectively own the Minimum Percentage:
(i) the joint right to nominate one individual for election as
a director of Minco,
(ii) the Earn-in Rights and preferential purchase rights more
particularly described in Parts 6 and 7 and the rights
contemplated in Section 2.4(c), and
(iii) the right to participate in future financings of Minco,
as set forth in Part 5,
provided that, if the grant to the Investors under this Section 3.1(b)
terminates, the Investors rights under Parts 6 and 7 shall not be
affected as they relate to Properties in respect of which the Investors
have exercised their Earn-In Rights; however, the Investors' rights
under Parts 6 and 7 shall continue as to any unexercised Earn-In Rights
until March 1, 2004 regardless of whether the Acquired Properties are
held by Minco. In determining whether the Investors have ceased to hold
the Minimum Percentage, there shall be excluded from the determination
any shares issued as consideration for the acquisition of Properties
after the date on which the Investors first acquire Common Shares and
any shares issued as performance shares, the result of the exercise of
directors' stock or other
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options or any other shares which are issued in a manner in which the
Investors are unable to exercise their rights under Part 5.
3.2 Cominco and Teck each agree to execute and deliver to Minco a Subscription
Agreement for the Purchased Securities in the form attached hereto as Schedule I
concurrently with execution of this Agreement. Cominco and Teck furthermore
acknowledge that they may be required to execute and deliver such other
documents as may reasonably be requested by Minco in order to obtain necessary
regulatory approval of the transactions herein contemplated and Cominco and Teck
hereby agree to execute and deliver any and all such documents forthwith at such
request of Minco.
3.3 Subject to Section 5.1 herein, following the execution of this Agreement by
both parties, Minco will submit this Agreement to the Exchange and request the
acceptance for filing hereof. Thereafter, the parties will diligently pursue
obtaining such acceptance for filing and regulatory approval and comply with all
reasonable requests of the Exchange in connection therewith, but neither party
will, in any event, be liable for failure to obtain such acceptance or approval.
Each party will cooperate with the other as reasonably necessary to secure such
acceptance for filing and other required approvals.
3.4 Each of Cominco and Teck acknowledges that the Purchased Securities are to
be allotted and issued to it hereunder pursuant to exemptions from the
registration and prospectus requirements of the Act, and acknowledges, confirms
to and covenants with Minco that:
(a) it will comply with all requirements of applicable securities
legislation in connection with the issuance to it of the Shares and the
resale of the Shares including, without limitation, entering into the
Escrow Agreement if required; and
(b) it is not entering into this Agreement as result of any material
information about the affairs of Minco that, to its knowledge, has not
been publicly disclosed.
PART 4
CLOSING
TIME AND PLACE OF CLOSING
4.1 The Closing will take place at 11:00 a.m. (Vancouver time) on the Closing
Date at Teck's offices in Vancouver, British Columbia or such other place and
time as the Parties may agree.
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DELIVERIES BY THE INVESTORS
4.2 At the Closing each Investor will, subject to Part 8, deliver to Minco:
(a) a cheque or bank draft for $500,000 Canadian (being the purchase
price for that Investor's Purchased Securities);
(b) an opinion of counsel, acceptable to Minco, as to the matters set
out in Section 4.5;
(c) a certificate of an officer as to the truth and accuracy of the
representations, warranties and covenants of the Investor as at the
Closing; and
(d) such other instruments and documents as are required to be
delivered at Closing by the Investor to Minco pursuant to the
provisions of this Agreement or as are reasonably required to evidence
compliance with the representations, warranties and covenants of the
Investor contained herein.
DELIVERIES BY MINCO AT CLOSING
4.3 At the Closing Minco will, subject to Part 8, deliver to each Investor:
(a) a certificate representing the Purchased Securities registered in
the name of the Investor;
(b) an opinion of counsel acceptable to the Investors as to the matters
set out in Section 4.4;
(c) a certificate of an officer as to the truth and accuracy of the
representations, warranties and covenants of Minco as at the Closing;
and
(d) such other instruments and documents as are required to be
delivered at Closing by Minco pursuant to the provisions of this
Agreement or as are reasonably required to evidence compliance with the
representations, warranties and covenants of Minco contained herein.
OPINIONS
4.4 Minco shall deliver at the Closing an opinion of counsel, addressed to each
Investor and in a form reasonably satisfactory to the Investor, as to:
(a) the matters set out in Section 2.3(a), (d), and (e) and, limited as
set out in Section 4.6, Section 2.3(b) and (f);
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(b) the valid allotment and issuance of the Purchased Securities to the
Investor as fully paid and non-assessable; and
(c) such other matters as the Investor shall reasonably request.
4.5 Each Investor shall deliver at the Closing an opinion of counsel, addressed
to PCR and in a form reasonably satisfactory to Minco, as to:
(a) in the case of Teck, the matters set out in Section 2.1(a) and (b);
(b) in the case of Cominco, the matters set out in Section 2.2(a)
and (b); and
(c) such other matters as Minco shall reasonably request.
4.6 In giving the opinion regarding matters set out in Section 2.3(b)(ii) and
2.3(f) counsel may state that such counsel has no actual knowledge of any such
agreement or right.
PART 5
GRANT OF SUBSCRIPTION RIGHTS TO INVESTORS
RIGHT TO SUBSCRIBE
5.1 Minco hereby grants to each Investor the right to purchase equity securities
of Minco or securities convertible into equity securities of Minco (such equity
securities and securities convertible into equity securities being referred to
as "Securities") from time to time, in the circumstances and manner set out
below.
5.2 If Minco intends to allot any Securities (for any purpose including raising
working capital generally or to cover its share of program costs in respect of a
Property), it shall first offer to sell, free of fees, brokerage or commissions,
such number of the Securities to the Investors to ensure that the Investors'
aggregate percentage ownership of issued and outstanding Securities of Minco
will remain unchanged after giving effect to the allotment.
5.3 The offer shall be made in writing and shall specify any conditions to the
offer; the price per offered Security; and that if an Investor does not, within
the time stipulated (which shall not be less than 10 days nor more than 30
days), elect in writing to exercise the option hereunder with respect to the
offered Securities (in whole or in part), that Investor will be deemed to have
elected not to exercise the option as to the offered Securities.
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5.4 The purchase of Securities hereunder by the Investors shall be completed
contemporaneously with the purchase of Securities by all other persons. The
Investors may determine, as between themselves, to acquire all or part of the
offered Securities. Unless otherwise indicated by the Investors, if both accept
the offer they shall be deemed to be purchasing the offered Securities in equal
proportions.
5.5 After the expiry of the time stipulated in the offer, or on receipt of
written confirmation from both Investors that they elect not to exercise the
option with respect thereto, Minco may for 180 days thereafter offer the
remaining Securities to the persons and in the manner it thinks most beneficial,
but the offer to those persons shall not be at a price less than, or on terms
less favourable to Minco than the offer to the Investors.
5.6 At such time, if any, as the Investors' first cease to collectively own the
Minimum Percentage, the right to purchase securities as set out in this Part 5
will immediately terminate.
PART 6
MATTERS AFFECTING PROPERTIES
PROPERTIES TO BE GOVERNED HEREBY
6.1 If, prior to March 1, 2004, Minco identifies an Acquired Property of merit
in respect of which Minco has acquired or may acquire an NCI which it believes
may be of interest to the Investors, Minco, and all persons acting on its
behalf, shall deliver a notice to the Investors, providing reasonable details
regarding the Property, the NCI and the Underlying Agreement and requesting the
Investors to determine whether such Acquired Property is one that should be
governed by this Agreement. The Investors shall notify Minco in writing within
15 days after receipt of Minco's notice of their determination. The Investors
Earn-In Rights under this Part 6 shall not be limited as to time but may only be
exercised on those Acquired Properties which are held subject to this Agreement
on or prior to March 1, 2004.
6.2 If the Investors determine that such Acquired Property is not one that
should be governed by this Agreement, Minco will be free to deal with that
Acquired Property as it sees fit and that Acquired Property shall thereafter not
be subject to this Agreement. Failure by the Investors to notify Minco of their
determination within the time limit in Section 6.1 will be deemed to be a
determination that the Acquired Property should not be governed by this
Agreement.
6.3 If the Investors determine that the Acquired Property is to be governed by
this Agreement, they shall either sign a separate confidentiality agreement
relating to the particular Property or shall add the Property to the schedule of
properties governed by the current Confidentiality Agreements. Thereafter Minco
will make all data in its
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possession or control available to the Investors and will, if requested to do so
by the Investors and subject to limits imposed by the relevant Governmental
Authority, arrange for site visits at the earliest reasonable time and within
such time periods that will allow the Investors adequate time for evaluating the
Property. The Investors shall be responsible for their own costs in connection
with such site visits and such other costs as may have been agreed by the
Investors in advance of the site visit.
CATEGORIZATION OF EXPLORATION OR DEVELOPMENT PROPERTY
6.4 On the earlier of 15 days after receipt of Minco's notice under Section 6.1,
if the Investors have already completed a site visit, or within 30 days of
completion of a site visit as contemplated in Section 6.3, the Investors shall
deliver a notice to Minco indicating whether the Acquired Property should be
categorized as:
(a) an Exploration Property, in which case Section 6.5 to Section 6.13
will govern; or
(b) a Development Property, in which case Section 6.14 to Section 6.21
will govern.
Failure by the Investors to notify Minco of their election within the above time
limit will be deemed to be an election to categorize the Acquired Property as an
Exploration Property.
THIRD PARTY DEALINGS PRIOR TO EARN-IN
6.5 All dealings by Minco with respect to an Acquired Property before the
Investors have exercised their Earn-In Rights on two Properties shall be subject
to the Investors' Earn-In Rights and any Person who acquires an Interest in an
Acquired Property prior thereto shall hold that Interest subject to the
Investors' Earn-In Rights and, following such acquisition, this Agreement shall
apply mutatis mutandis to that Person and the Interest which it has acquired so
that the Person and Minco shall enjoy the rights and benefits flowing from the
Investors and shall be subject to the same duties and obligations to the
Investors pro rata their respective Interests.
EARN-IN RIGHTS GENERALLY
6.6 Under the Teck-Cominco-PCR Agreement, the Investors have the right to earn
an Interest in an aggregate of two NCIs held by PCR or Minco. The Investors'
right to earn an Interest (the "Earn-In Rights") regarding NCI's held by Minco
are exercisable in the manner set out either in Section 6.8 or Section 6.14.
Promptly upon the Investors exercising an earn-in right under the
Teck-Cominco-PCR Agreement, the Investors shall give notice to Minco. After the
Investors have exercised their earn-in rights under the Teck-Cominco-PCR
Agreement or their Earn-in Rights under this Agreement as to an aggregate of two
Acquired Properties, the Earn-In Rights will terminate and the provisions of
Section 6.1 through Section 6.21 will cease to apply to the Parties.
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EXPLORATION PROPERTIES GENERALLY
6.7 An Acquired Property that has been categorized by the Investors as an
Exploration Property will form part of the general assets of Minco, but will
remain subject to the terms of this Agreement, and in particular:
(a) all dealings with such Property by Minco before the production of a
Preliminary Feasibility Report relating thereto will be subject to the
Earn-in Rights of the Investors set out more particularly in
Section 6.8.
(b) Minco may, but is not obligated to, per-form additional work on the
Property;
(c) all Preliminary Feasibility Reports shall be presented and
delivered to the Investors, forthwith upon completion or receipt by
Minco, at a meeting to be held at a mutually convenient time and place
and called by Minco on at least 30 days notice to the Investors;
(d) if less than $1,000,000 in Expenditures have been incurred by
Minco in connection with the Exploration Property, Minco may elect to
abandon the Property or allow contractual rights to expire without the
consent of the Investors but will provide notice of such event to the
Investors; and
(e) if Minco has incurred Expenditures of $1,000,000 or more and wishes
to abandon the Exploration Property or allow contractual fights to
expire, it shall first give 30 days notice to the Investors of such
intent and if the Investors request Minco not to abandon the Property
or to allow the contractual rights to expire, the Investors shall,
subject to the applicable Underlying Agreement and approval of the
relevant Governmental Authority, assume the obligations of Minco with
respect to such contractual rights.
EARN-IN RIGHT ON EXPLORATION PROPERTIES
6.8 Subject to existing requirements under any applicable Underlying Agreement,
the Investors will have a right to earn a 51% Interest in respect of an
Exploration Property and will have the further joint right to become the
operator of programs on such Exploration Property, by
(a) completing, at their sole cost as between the Parties, a Final
Feasibility Report with respect to the Exploration Property, and
(b) arranging for, and giving notice as contemplated in Section 6.12
of, funding (by equity, debt or a combination thereof) of all costs
which are required to be provided by the Parties in respect of the NCI
to bring the Property into commercial production as contemplated in a
Final Feasibility Report.
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6.9 The Earn-In Rights are exercisable with respect to an Exploration Property
in respect of which the Investors give Minco an Exercise Notice prior to the
30th day after the date of the meeting contemplated in Section 6.7(c). Failing
delivery of an Exercise Notice within the 30 days aforesaid, the Investors shall
be deemed to have elected that the Exploration Property be released from their
Earn-In Rights and that Property shall thereafter not be subject to this
Agreement.
EARNING AN INTEREST - EXPLORATION PROPERTY
6.10 Where the Investors have delivered an Exercise Notice as contemplated in
Section 6.9, the Investors will thereafter have the right to design and
implement such programs of work to be conducted on the Exploration Property as,
in their sole discretion, they consider necessary to complete a Final
Feasibility Report with respect thereto and will earn the Interest in accordance
with the following provisions.
6.11 The Investors shall complete the Final Feasibility Report contemplated in
Section 6.10 without undue delay and within such time limits as are imposed by
the applicable Underlying Agreement. The Investors shall present and deliver to
Minco a copy of the Final Feasibility Report, forthwith upon completion or
receipt by the Investors, at a meeting to be held at a mutually convenient time
and place and called by the Investors on at least 30 days notice to Minco. At
the meeting or by separate notice the Investors will indicate by notice whether:
(a) they consider the Final Feasibility Report to be positive and
bankable and they intend to seek funding necessary to bring the mine
into commercial production as contemplated in the Final Feasibility
Report, in which case Section 6.12 shall apply;
(b) they consider the Final Feasibility Report to be otherwise positive
and bankable, but that it is not prudent to proceed at that time for
reasons or as a result of conditions which they shall itemize at that
time; in which case Section 6.13 shall apply; or
(c) they no longer wish to retain their Earn-In Rights with respect to
that Exploration Property, in which case that Property shall cease to
be subject to this Agreement.
Notwithstanding the foregoing, the Investors may, at any time prior to
completion of a Final Feasibility Report, give notice to Minco that they are
abandoning the completion of the Final Feasibility Report and that they no
longer wish to retain their Earn-In Rights with respect to that Exploration
Property, in which case that Property shall cease to be subject to this
Agreement. The Investors will, promptly following the abandonment, provide
Minco, on a without-warranty basis, with copies of all factual information and
data held or developed by the Investors as part of their Final Feasibility
<PAGE> 26
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Report work which the Investors are not precluded from providing as a result of
confidentiality obligations to third parties.
6.12 If the Investors give notice under Section 6.11(a), the Investors shall
have 180 days from the date of delivery of the notice to Minco under Section
6.11(a) to obtain (by equity and commitments from a bank or other third party
for financing) 100% of the funds necessary for the program contemplated by the
Final Feasibility Report which are required to be provided by the Parties in
respect of the NCI. Upon the delivery of a Commitment Notice by the Investors to
Minco that the required funds are available:
(a) the Investors shall have earned an undivided 51% Interest provided
always that if the applicable Underlying Agreement provides that Minco
must complete the programs before an Interest is earned, the Investors
shall earn their Interest at the same time as Minco; and
(b) upon the Interest having been earned, the Investors shall have
exercised an Earn-In Right.
6.13 If the Investors give notice of deferral under Section 6.11(b), the
Investors may, where possible in accordance with the Underlying Agreement, defer
delivery of a Commitment Notice from time to time until, in their view, the
subject Property could be placed into commercial production and such deferral
shall not prejudice the rights of the Investors hereunder. If the Investors
elect to defer commencement of programs contemplated in the Final Feasibility
Report under such circumstances, they shall update the Final Feasibility Report
annually and deliver the results of such update to Minco together with an
indication whether they are continuing to defer a decision to commence with the
programs.
EARN-IN RIGHT ON DEVELOPMENT PROPERTIES
6.14 Subject to existing requirements under any applicable Underlying Agreement,
the Investors will have a right to earn a 70% Interest in respect of a
Development Property and will have the further joint right to become the
operator of programs on such Development Property, by
(a) completing, at their sole cost as between the Investors, such
exploration work or other activities as may be necessary after its
categorization as a Development Property under Section 6.4 and a Final
Feasibility Report with respect to the Development Property, and
(b) arranging for, and giving notice as contemplated in Section 6.17
of, funding (by equity, debt or a combination thereof) 70% of the costs
which are required to be provided by the Parties in respect of the NCI
to bring the mine into commercial production as contemplated in a Final
Feasibility Report (or 70% of such funds as are required for the
programs contemplated under the Final Feasibility Report
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where such programs relate to the expansion of an existing or currently
operating mine).
EARNING AN INTEREST - DEVELOPMENT PROPERTY
6.15 Where under Section 6.4(b) the Investors have categorized the Acquired
Property as a Development Property, the Investors will thereafter have the right
to design and implement such programs of work to be conducted on the Property
as, in their sole discretion, they consider necessary to complete a Final
Feasibility Report with respect thereto and will earn their Interest in
accordance with the following provisions.
6.16 The Investors shall complete the Final Feasibility Report contemplated in
Section 6.15 without undue delay and within such time limits as are imposed by
the applicable Underlying Agreement. The Investors shall present and deliver to
Minco a copy of the Final Feasibility Report, forthwith upon completion or
receipt by the Investors, at a meeting to be held at a mutually convenient time
and place and called by the Investors on at least 30 days notice to Minco. At
the meeting or by separate notice the Investors will indicate by notice whether:
(a) they consider the Final Feasibility Report to be positive and
bankable and they intend to seek funding necessary to bring the mine
into commercial production as contemplated in the Final Feasibility
Report, in which case Section 6.17 shall apply;
(b) they consider the Final Feasibility Report to be otherwise positive
and bankable, but that it is not prudent to proceed at that time for
reasons or as a result of conditions which they shall itemize at that
time; in which case Section 6.18 shall apply; or
(c) they no longer wish to retain their Earn-In Rights with respect to
that Property, in which case that Property shall cease to be subject to
this Agreement.
Notwithstanding the foregoing, the Investors may, at any time prior to
completion of a Final Feasibility Report, give notice to Minco that they are
abandoning the completion of the Final Feasibility Report and that they no
longer wish to retain their Earn-In Rights with respect to that Property, in
which case that Property shall cease to be subject to this Agreement. The
Investors will, promptly following the abandonment, provide Minco, on a
without-warranty basis, with copies of all factual information and data held or
developed by the Investors as part of their Final Feasibility Report work which
the Investors are not precluded from providing as a result of confidentiality
obligations to third parties.
6.17 If the Investors give notice under Section 6.16(a) or Section 6.18, the
Investors shall have 180 days from the date of delivery of the notice to Minco
under Section 6.16(a) or Section 6.18 to obtain (by equity and commitments from
a bank or other third party for financing)
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70% of the funds necessary for the program contemplated by the Final Feasibility
Report which are required to be provided by the Parties in respect of the NCI.
Upon delivery of a Commitment Notice by the Investors to Minco that the required
funds are available:
(a) the Investors shall have earned an undivided 70% Interest, provided
always that if the applicable Underlying Agreement provides that Minco
must complete the programs before an Interest is earned, the Investors
shall earn their Interest at the same time as Minco; and
(b) upon the Interest having been earned, the Investors will have
exercised an Earn-In Right.
6.18 If the Investors give notice of deferral under Section 6.16(b), the
Investors may, where possible in accordance with the Underlying Agreement, defer
delivery of a Commitment Notice from time to time until, in their view, the
subject Property could be placed into commercial production and such deferral
shall not prejudice the rights of the Investors hereunder. If the Investors
elect to defer commencement of programs contemplated in the Final Feasibility
Report under such circumstances, they shall update the Final Feasibility Report
annually and deliver the results of such update to Minco together with an
indication whether they are continuing to defer a decision to commence with the
programs. The Investors may, at any time during the deferral, give notice to
Minco that conditions upon which the deferral has been based have been overcome
and they consider the Final Feasibility Report to be positive and bankable and
they intend to seek funding necessary to bring the mine into commercial
production as contemplated in the Final Feasibility Report, in which case
Section 6.17 shall apply to the Investors and Section 6.19 to Section 6.21 will
apply to Minco.
6.19 The Investors will be entitled to include in the terms of any bank or third
party commitment for financing a condition precedent that Minco will provide the
remaining 30% of the funds necessary for the programs of work which are required
to be provided by the Parties in respect of the NCI.
6.20 If Minco is unable, during the 180-day period referred to in Section 6.17,
to deliver a Commitment Notice for its 30% of the required funds the Investors
can either:
(a) notify Minco that the production programs will be postponed; or
(b) elect to arrange for or provide such remaining funds as are
necessary for the programs contemplated by the Final Feasibility
Report, in which case Minco's Interest will be diluted in accordance
with the dilution formula set out in the Terms of Joint Venture annexed
as Schedule F hereto.
6.21 If the Investors elect under Section 6.20 to postpone the production
programs, Minco and Investor shall maintain their respective interests in the
Property. The Investors shall update the Final Feasibility Report annually and
may, at any time, elect
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to proceed with the production program contained therein. In such case, the
Investors will give notice in writing to Minco and Minco will thereafter have
180 days within which to arrange for financing of its share of funds required
for the production programs. If after the expiry of such time Minco cannot
deliver a Financing Notice for its share of funds, the Investors will be
entitled to provide the balance of such funds for the production programs and
the interest of Minco will be diluted in accordance with the dilution formula
set out in the Terms of Joint Venture annexed as Schedule F hereto.
JOINT VENTURE
6.22 As promptly as practicable after the Closing Date, the Parties shall settle
the form of Joint Venture Agreement relating to Properties, which Joint Venture
Agreement shall include at least the terms set out on Schedule G, including a
provision that if Minco's Interest is diluted to 10% its Interest will be
converted to a 1% Net Smelter Return Royalty, as defined in Schedule H, from
that share of production from a mine on the Property which is taken in kind or
attributable to the Interests held by the Parties. Notwithstanding actual
Expenditures of Minco, Minco's initial contribution for a Development Property
for the purposes of calculating dilution shall be deemed to be such amount that
is equal to 3/7 of Investors' Costs (see Schedule F) at the time of Commitment
Notice. Each Property for which the Investors have exercised an Earn-In Right
will be governed by its own separate Joint Venture Agreement.
COST RECOVERY - DEVELOPMENT PROPERTY
6.23 With respect to a Development Property, Net Proceeds shall be distributed
as follows:
(a) firstly 100% to repay any third party project financing;
(b) secondly, 100% to repay any project financing contributed by the
Parties as between the Parties in proportion to their percentage
contribution level to the project financing;
(c) thirdly, to repay any Prior Costs, excluding deemed costs, prior to
the date of the Investors' Commitment Notice; and
(d) finally, to the Parties in proportion to their respective
Interests.
COST RECOVERY - EXPLORATION PROPERTY
6.24 With respect to an Exploration Property, Net Proceeds shall be distributed
as follows:
(a) firstly 100% to repay any third party project financing;
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(b) secondly, until the First Recovery Date, 75% to the Investors in
respect of their Prior Costs, excluding deemed costs (in proportion to
their respective Interests as between them) and 25% to Minco in respect
of its Prior Costs, excluding deemed costs, plus interest at Prime Rate
plus 2%, calculated in each case from the date on which the said Prior
Costs were paid;
(c) thirdly, until the Second Recovery Date, 100% to the Party that has
not yet recovered its Prior Costs, excluding deemed costs, plus
interest at the Prime Rate plus 2%, calculated from the date on which
such said Prior Costs were paid; and
(d) finally, to the Parties in proportion to their respective
Interests.
MINCO CONSULTING SERVICES
6.25 Where Minco can demonstrate that its current employees have the required
expertise and provided that the contract price is within the standard range in
the industry for arms length engagements, such Party shall be entitled to offer
its consulting services to any other Party hereto. The Investors may require
Minco to render consulting services, so long as the renumeration for such
services is within the standard range in the industry.
PART 7
ASSIGNMENTS AND PREFERENTIAL RIGHTS OF PURCHASE
ASSIGNMENTS
7.1 No Party may assign any right, benefit or interest in this Agreement or an
NCI in respect of which the Investors have exercised their rights under Part 6
without the prior written consent of the other Parties and any purported
assignment without such compliance will be void except:
(a) such assignment is permitted if it occurs in accordance with Part
6;
(b) an Investor may, at any time, assign all or any part of its
interest to an Affiliate so long as such Affiliate agrees to be bound
by the terms of this Agreement and to retransfer the interest prior to
ceasing to be an Affiliate of such Investor;
(c) Minco may assign all or any part of its interest to a wholly-owned
subsidiary of Minco so long as such entity agrees to be bound by the
terms of this Agreement and to retransfer the interest prior to ceasing
to be a wholly-owned subsidiary;
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(d) Minco may assign all or any part of its Interest to the Investors
or to PCR;
(e) the Investors may freely assign Interests as between them; and
(f) such assignment is permitted if it occurs in accordance with
Section 7.2 through 7.6.
7.2 Subject to Section 7.7 and to existing requirements under any
applicable Underlying Agreement, after the Earn-In Rights contained in Section
6.6 and 6.7 have been exercised (by either or both Investors) with respect to an
aggregate of two Properties, if:
(a) Minco wishes to dispose of all or a portion of its Interest in a
Property; or
(b) Minco wishes to accept a legally binding and enforceable offer from
a third party to purchase, earn or acquire an Interest;
it shall first offer to the Investors the same opportunity in the manner
hereinafter set out.
7.3 Minco shall deliver an offer ("Minco's Offer") to the Investors
which shall include at least the following information or documents:
(a) a written notice specifying in reasonable detail the Property which
is the subject of Minco's Offer, and the NCI in relation thereto;
(b) all information in Minco's possession or control relating to the
Acquired Property;
(c) such preliminary feasibility report (if any and without obligating
Minco to produce one) relating to the Acquired Property in the
possession or control of Minco;
(d) the terms and conditions of Minco's Offer, or a copy of any third
party offer contemplated in Section 7.2(b), including the time period
for acceptance; and
(e) all other information, analysis and data in Minco's possession or
control that the Investors may reasonably request or which might
reasonably be expected to be useful to them in deciding whether to
accept Minco's Offer;
and in all cases if the Investors have not previously executed a confidentiality
agreement governing the subject Property, upon request of Minco before delivery
of the information, they shall do so.
7.4 The Investors shall have 30 days after receipt of Minco's Offer
to accept Minco's Offer. Either or both of the Investors may elect in writing to
accept such offer
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and where both Investors elect to accept, they shall participate in purchasing,
earning or acquiring the Interest in equal proportions unless otherwise agreed
between them. Completion of the transaction shall occur on a date agreed among
the Parties but not earlier than 60 days after delivery of the acceptance
notice.
7.5 If neither Investor accepts Minco's Offer within the time
period provided for acceptance, the Investors shall be deemed to have declined
the offer and Minco may, for a period of 180 days thereafter, sell or dispose of
the Interest to a third party (and where Minco's Offer relates to a specific
third party offer to that third party) on the same, or financially equivalent,
terms and conditions as set out in Minco's Offer; provided that, with respect to
the Properties in which the Investors have exercised their Earn-In Rights, the
third party agrees to be bound by this Agreement. If Minco does not complete the
acquisition or transaction within the said 180 days, the preferential right of
purchase enjoyed by the Investors shall again apply to any proposed disposition.
7.6 If after making an election or earning an Interest under Part 6
an Investor wishes to transfer all of the Interest to a third party other than
an Affiliate, it must first offer the Interest to Minco in accordance with the
provisions of Section 7.2 to Section 7.5 and for these purposes "Minco" shall be
read to mean the particular Investor and "Investors" shall be read to mean
Minco.
7.7 This Part 7 shall cease to apply to Properties, other than the
two in respect of which the Investors have exercised their Earn-In Rights, on
the earlier of March 1, 2004 and the third anniversary of the date the Investors
have exercised their Earn-In Rights on two Properties.
PART 8
CONDITIONS
CONDITIONS TO THE OBLIGATIONS OF TECK AND COMINCO
8.1 Except as otherwise specifically set forth herein, all
obligations of Teck and Cominco under this Agreement are subject to the
fulfilment, before or on the Closing Date, of each of the following conditions
for the exclusive joint benefit of the Investors, each of which may be waived in
whole or in part by the Investors, on or before the Closing Date:
(a) all representations and warranties of Minco contained in this
Agreement or in any written statement delivered to Teck or Cominco
under this Agreement, are true and correct, when made and will be true
and correct at the Closing Date; and
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(b) each of the covenants and agreements of, conditions imposed upon
and the deliveries set out herein to be made by Minco to be performed,
satisfied or complied with on or before the Closing Date has been duly
performed, satisfied and complied with in all respects on or before the
Closing Date.
CONDITIONS TO THE OBLIGATIONS OF MINCO
8.2 Except as otherwise specifically set forth herein, all
obligations of Minco under this Agreement are subject to the fulfilment, before
or on the Closing Date, of each of the following conditions for the exclusive
benefit of Minco and each of which may be waived in whole or in part by Minco on
or before the Closing Date:
(a) receipt of any Requisite Approvals for the transactions
contemplated in this Agreement;
(b) all representations and warranties of Teck and Cominco contained in
this Agreement, or in any written statement delivered to Minco by Teck
or Cominco under this Agreement, are true and correct, when made and
will be true and correct on the Closing Date; and
(c) each of the covenants, agreements and conditions of Teck and
Cominco to be performed, satisfied or complied with on or before the
Closing Date pursuant to the terms hereof has been duly performed,
satisfied and complied with in all respects on or before the Closing
Date.
PART 9
FORCE MAJEURE
FORCE MAJEURE
9.1 Notwithstanding any other provision of this Agreement, a
Party's rights and privileges shall not be affected and no liabilities hereunder
shall result to that Party, except for monies then due, for any delay in
performance or non-performance caused by circumstances beyond the control of the
party affected, including but not limited to acts of God, earthquake, fire,
flood or the elements, perils of the sea, including any action or threatened
action of any nation endangering transport, malicious mischief, riots, strikes,
lockouts, boycotts, picketing, labour disturbances, war, compliance with any
directive, order or regulation of any governmental authority or representatives
thereof acting under claim or colour of authority, accidents, equipment or
operational breakdown, shortage or inability to obtain fuel, electric power, raw
materials or manufactured products, equipment, containers or transportation,
unfavourable economic or political considerations beyond the control of that
Party such as, but not limited to foreign exchange controls restricting foreign
investment or the return of foreign investment, or
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the currency in which it is payable and restrictions on the export of production
or due to any cause beyond that Party's reasonable control whether or not
similar to the foregoing.
NOTICE
9.2 Upon the occurrence of an event of force majeure, the affected
Party shall notify the other Parties immediately upon such occurrence and the
Parties shall exercise all reasonable efforts and due diligence to eliminate or
remedy any event of force majeure or interrupting proponents hereunder (provided
that nothing herein contained shall be construed as requiring any party to
accede to any demands of workers which it considers unreasonable or to test
constitutionality of any law).
EXTENSION OF TIME
9.3 If an event of force majeure occurs, the time periods during
which a Party must satisfy its obligations hereunder will be extended for the
same length of time as the event of force majeure continues.
PART 10
GENERAL PROVISIONS
ENTIRE AGREEMENT
10.1 This Agreement constitutes the entire agreement among the
Parties and supersedes every previous agreement, communication, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the Parties with respect to the
subject matter of this Agreement other than agreements executed by each of the
Parties on or after the date of this Agreement.
NO OTHER REPRESENTATIONS
10.2 No director, officer, employee or agent of any Party has any
authority to make any representation or warranty not contained in this
Agreement, and each Party agrees that it has executed this Agreement without
reliance upon any such representation or warranty.
WAIVER AND CONSENT
10.3 No consent or waiver, express or implied, by either Party to
or of any breach or default by the other of any or all of its obligations under
this Agreement will
(a) be valid unless it is in writing and stated to be a consent or
waiver pursuant to this Section 10.3;
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(b) be relied on as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver
pursuant to this Section 10.3 in any other or subsequent instance.
AMENDMENTS
10.4 This Agreement may not be amended except by written document
signed by all Parties to this Agreement.
PRESS RELEASES
10.5 Each Party shall consult with the others prior to issuing any
press release or other public statement regarding a Property or the activities
of the Parties with respect thereto:
(a) during the Earn-In Period in respect of all Acquired Properties;
and
(b) thereafter in respect of Acquired Properties for which the
Investors have exercised the Earn-In Rights.
At all times each Party shall obtain prior approval from the other before
issuing any press release or public statement using the others' names or the
name of any of the others' associated companies or of any of the officers,
directors or employees of the others or their associated companies.
BINDING EFFECT
10.6 This Agreement will enure to the benefit of and be binding
upon the respective legal representatives, successors and permitted assigns of
the Parties.
TIME OF ESSENCE
10.7 Time is of the essence in the performance of each obligation
under this Agreement.
FURTHER ASSURANCES
10.8 Each Party will at all times and from time to time cooperate
with each other Party in order to give full effect to this Agreement and in
order to assist and expedite the performance by each Party of all or any of the
provisions herein contained and, in particular, do all acts and things and
execute under its corporate seal or
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otherwise and deliver all such instruments, deeds, mortgages, assignments and
other documents and cause all such corporate acts to be duly, expeditiously and
validly done as the Parties may reasonably require in accordance with the
provisions hereof.
NOTICE
10.9 Every notice, request, demand or direction (each, for the
purposes of this Section 10.9, a "notice") to be given pursuant to this
Agreement by any Party to another will be in writing and will be delivered or
sent by telecopier or other similar form of instantaneous written communication
on tangible medium, in each case, addressed as applicable as follows:
If to Minco:
1870 - 401 West Georgia Street
Vancouver, British Columbia
V6B 5A1
Fax: (604) 688-8030
Attention: Chairman
If to Teck at:
600 - 200 Burrard Street
Vancouver, British Columbia
V6C 3L9
Fax: (604) 687-6100
Attention: Secretary
If to Cominco at:
500 - 200 Burrard Street
Vancouver, British Columbia
V6C 3L7
Fax: (604) 844-2516
Attention: General Manager, Exploration, International
or to such other address as is specified by the particular Party by notice to
the other.
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DEEMED RECEIPT
10.10 Any notice delivered or sent in accordance with Section 10.9
will be deemed to have been given and received:
(a) if delivered, on the first Business Day after the day of delivery;
and
(b) if sent by telecopier or other similar form of instantaneous
written communication, on the first Business Day after the day of
transmittal.
TERMINATION
10.11 This Agreement will terminate:
(a) upon mutual agreement of the Parties; and
(b) at the option of the Investors if any of the events set out in
2.8(b) occurs.
COUNTERPARTS
10.12 This Agreement may be signed by facsimile and in any number
of counterparts and all such counterparts will be taken to comprise a single
agreement.
CONDITIONS PRECEDENT
10.13 This Agreement and the obligations of the Parties are subject
to:
(a) the execution of a subscription agreement between Minco, Teck and
Cominco relating to the Teck-Cominco private placement; and
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(b) acceptance for filing of this Agreement by the Vancouver Stock
Exchange on or before March 31, 1996.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the day and
year first above written.
The Common Seal of )
MINCO MINING AND METALS )
CORPORATION )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
The Corporate Seal of )
TECK CORPORATION )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
The Corporate Seal of )
COMINCO LTD. )
was affixed in the presence of: )
) C/S
/s/illegible )
________________________________ )
Authorized Signatory )
)
/s/illegible )
________________________________ )
Authorized Signatory )
<PAGE> 39
Schedule A-1
This is SCHEDULE A to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
ISSUED CAPITAL
As at March 25, 1996 there were 3,309,882 common shares outstanding in the
capital of the Company.
RIGHTS TO ACQUIRE SECURITIES IN MINCO
1. incentive stock options for an aggregate of 10,000 common shares
exercisable until June 2, 2000 at a price of $1.00 per share;
2. an aggregate 60,241 additional performance escrow shares to be issued
to certain principals of Minco pursuant to the policies of the
Exchange, the issuance of which remains subject to the approval of the
Exchange;
3. 200,000 finders fee shares to be issued to December Inc. pursuant to a
Finders Fee Agreement dated as of December 11, 1995 made between
December Inc. and Minco, the issuance of which remains subject to the
approval of the Exchange;
4. 100,000 finder's fee special warrants to be issued to Canaccord Capital
Corporation pursuant to a Finder's Fee Agreement dates as of February
29, 1996 made between Canaccord Capital Corporation and Minco, the
issuance of which remains subject to the approval of the Exchange; and
5. incentive stock options for an aggregate of 1,050,000 common shares
exercisable until March 5, 2001 at a price of $1.85 per share, subject
to the approval of the Exchange.
<PAGE> 40
Schedule B - 1
This is SCHEDULE B to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
RIGHTS TO ACQUIRE INTERESTS
IN ACQUIRED PROPERTIES HELD BY PCR
Notes:
There is only one agreement (the "TEMCO OPTION AGREEMENT") dated March 3, 1995
between PCR and Orient Gold Mines Ltd, under which a third party has a right to
acquire an interest in an Acquired Property for purposes of the Agreement.
A copy of the above agreement has been made available to the Parties.
<PAGE> 41
Schedule D - 1
This is SCHEDULE D to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
LIST AND DESCRIPTION OF UNDERLYING AGREEMENTS
NOTES:
1. THERE IS ONLY ONE AGREEMENT (THE "EMPEROR'S DELIGHT JOINT VENTURE
CONTRACT") DATED DECEMBER 25, 1995 BETWEEN AND THE FIRST:
GEOEXPLORATION BUREAU ("FGEB") OF THE MINISTRY OF METALLURGICAL
INDUSTRY AND TRIPLE EIGHT MINERAL CORPORATION WHICH IS AN UNDERLYING
AGREEMENT FOR PURPOSES OF THE AGREEMENT.
2. There are three other agreements which are not Underlying Agreements
FOR PURPOSES OF THE AGREEMENT BUT WHICH HAVE THE POTENTIAL TO BECOME
UNDERLYING AGREEMENTS.
(a) THE FIRST SUCH AGREEMENT (THE "FGEB CO-OPERATION AGREEMENT") WAS AMONG
FGEB, PATRICIAN GOLD MINES LTD., AND PCR AND WAS DATED OCTOBER 4, 1994
(WITH OCTOBER 4, 1994 BEING THE EFFECTIVE DATE AND THE DATE ON WHICH
THE CHINESE VERSION WAS SIGNED BUT WITH NOVEMBER 17. 1994 BEING THE
DATE ON WHICH THE ENGLISH VERSION WAS SIGNED).
(b) THE SECOND SUCH AGREEMENT THE (THE "CB-LG AGREEMENT') DATED JUNE 6,
1995 AMONG TECK EXPLORATION LTD., PCR AND BAIYIN NON-FERROUS METALS
COMPANY.
(c) The third such agreement dated July 7, 1995 as amended by undated
supplementary agreement between Minco Mining & Metals Corporation and
Sichuan Bureau of Geology and Mineral Resources.
A COPY OF THE ABOVE AGREEMENTS HAS BEEN MADE AVAILABLE TO THE PARTIES.
<PAGE> 42
Schedule C-1
This is SCHEDULE C to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
- --------------------------------------------------------------------------------
Audited Financial Statements of Minco Mining and Metals Corporation
dated December 31, 1995
MINCO MINING AND METALS CORPORATION
Final Statements
December 31, 1995
Index
Auditors' Report
Balance Sheet
Statement of Loss and Deficit
Statement of Changes in Financial Position
Notes to Financial Statements
<PAGE> 43
C-2
ELLIS FOSTER
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, B.C., Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 734-1502
- --------------------------------------------------------------------------------
AUDITORS' REPORT
To the Shareholders of
MINCO MINING AND METALS CORPORATION
We have audited the balance sheets of MINCO MINING and METALS CORPORATION as at
December 31, 1995 and 1994 and the statements of loss and deficit and changes
in financial position for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1995 and
1994 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
Vancouver, Canada /s/ Ellis Foster
February 12, 1996 ---------------------
Chartered Accountants
- --------------------------------------------------------------------------------
E A partnership of incorporated professionals
F An independently owned and operated member of Moore Stephens North America,
Inc., a member of Moore Stephens International Limited-members in
principal cities throughout the world
<PAGE> 44
C-3
MINCO MINING AND METALS CORPORATION
<TABLE>
<CAPTION>
Balance Sheet
December 31, 1995
================================================================================
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash $ 229,304 $ 137,437
Marketable securities - 600
Refundable tax credits 2,680 1,989
- --------------------------------------------------------------------------------
231,984 140,026
Resource interests (Note 2) 100 -
Capital assets (Note 3) 25,102 -
- --------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 27,908 $ 10,550
Management fees payable 12,000 48,000
Due to a director 60,000 -
- --------------------------------------------------------------------------------
99,908 58,550
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 3,026,474 2,526,474
Deficit (2,869,196) (2,444,998)
- --------------------------------------------------------------------------------
157,278 81,476
- --------------------------------------------------------------------------------
$ 257,186 $ 140,026
================================================================================
Approved by the Directors: [illegible] [illegible]
----------------------------- ------------
Director Director
</TABLE>
<PAGE> 45
C-4
MINCO MINING AND METALS CORPORATION
Statement of Loss and Deficit
Year Ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenue
Interest income $ 8,754 $ 2,795
Gain on sale of marketable securities 535 -
----------- -----------
9,289 2,795
Expenses
Accounting and audit 21,830 11,958
Amortization 3,587 -
Bank charges 852 230
Filing fees 7,840 4,171
Investor relations 19,863 3,683
Legal 18,409 4,746
Management and consulting fees 45,684 24,000
Office 19,625 1,075
Property investigation 143,078 51,287
Rent 38,443 -
Salaries and benefits 57,621 -
Telephone 15,678 -
Transportation 11,200 -
Transfer agent 4,092 4,119
Travel and conference 25,385 -
----------- -----------
433,487 105,269
Net loss for the year (424,198) (102,474)
Deficit, beginning of year (2,444,998) (2,342,524)
----------- -----------
Deficit, end of year $(2,869,196) $(2,444,998)
=========== ===========
Loss per share $(0.17) $(0.04)
=========== ===========
</TABLE>
<PAGE> 46
MINCO MINING AND METALS CORPORATION C-5
Statement of Changes in Financial Position
Year Ended December 31, 1995
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Cash provided by (used for) operating activites
Net loss for the year $ (424,198) $(102,474)
Item not involving cash:
- amortization 3,587 -
---------- ---------
(420,611) (102,474)
Net change in non-cash working capital 41,267 91,705
---------- ---------
(379,344) (10,769)
---------- ---------
Cash provided by financing activities
Proceeds from issuance of shares 500,000 110,000
---------- ---------
Cash used for investing activities
Acquisition of capital assets (28,689) -
Acquisition of resource interests (100) -
---------- ---------
(28,789) -
---------- ---------
Increase in cash position 91,867 99,231
Cash position, beginning of year 137,437 38,206
---------- ---------
Cash position, end of year $ 229,304 $ 137,437
========= =========
</TABLE>
<PAGE> 47
C-6
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
1. Significant Accounting Policies
a) Capital Assets
Amortization is provided on a declining-balance basis as
follows:
Computer equipment 30% per annum
Office equipment and furniture 20% per annum
b) Resource Interests
The Company follows the policy of deferring all acquisition,
exploration and development costs relating to the resource
interests. These costs will be amortized against revenue from
future production or written off if the interest is abandoned
or sold. At the present time, management has determined each
project to be a cost centre.
Depletion of cost capitalized on projects put into commercial
production will be recorded using the unit-of-production method
when estimated proven reserves are determined.
The amounts shown for resource interests represent acquisition
and exploration costs incurred to date, less recoveries, and
do not necessarily reflect present or future values.
The Company does not accrue the estimated costs of maintaining
its resource interests in good standing.
c) Option Agreements
From time to time, the Company may acquire or dispose of
properties pursuant to the terms of option agreements. Due to
the fact that options are exercisable entirely at the discretion
of the optionee, the amounts payable or receivable are not
recorded. Option payments are recorded as resource property
costs or recoveries when the payments are made or received.
<PAGE> 48
C-7
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
2. RESOURCE INTEREST
The Company has entered into a joint venture agreement with the Sichuan
Bureau of Geology and Mineral Resources ("SBGMR"). SBGMR is the holder
of exploration rights to the Chapuzi Gold Deposit in Sichuan Province,
China.
Pursuant to the agreement, the Company shall have the right to earn a
51% interest by spending CDN$5 million on exploration and development.
To date the Company has incurred $135,201 in connection with the
investigation and signing of the joint venture agreement. These costs
have been expensed together with other property investigation.
The resource interest is carried at a minimal amount of $100.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
1995 1994
--------------------------------------- --------
Accumulated Net book Net book
Cost amortization value value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $14,358 $2,154 $12,204 $ -
Office equipment and
furniture 14,331 1,433 12,898 -
- --------------------------------------------------------------------------------
$28,689 $3,587 $25,102 $ -
================================================================================
</TABLE>
4. SHARE CAPITAL
a) Authorized: 20,000,000 common shares without par value.
b) Issued:
<TABLE>
<CAPTION>
Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1993 1,785,873 $2,416,474
Issued pursuant to exercise of
warrants at $0.22 per share 500,000 110,000
- --------------------------------------------------------------------------------
Balance, December 31, 1994 2,285,873 2,526,474
Issued pursuant to a private placement 500,000 500,000
- --------------------------------------------------------------------------------
Balance, December 31, 1995 2,785,873 $3,026,474
================================================================================
</TABLE>
<PAGE> 49
C-8
MINCO MINING AND METALS CORPORATION
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
4. SHARE CAPITAL (continued)
c) 125,000 of the shares are held in escrow, the release of which
is subject to the direction of the regulatory authorities.
d) The Company has granted incentive stock options to directors and
employees for 156,750 shares exercisable at $1.00 per share,
expiring June 2, 2000.
e) The Company has agreed to issue 437,000 additional escrow shares
to its directors at $0.01 per share. These shares were issued
subsequent to the year-end.
f) The Company has agreed to issue, subject to regulatory approval,
200,000 shares as finder's fees in connection with the
joint venture as described in Note 2.
5. REMUNERATION OF DIRECTORS AND SENIOR OFFICERS
During the year, the Company paid or accrued the following expenses to
its directors:
Accounting - $10,400
Management and consulting fees - $45,684
Salaries - $33,000
<PAGE> 50
Schedule D-1
This is SCHEDULE D to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
- --------------------------------------------------------------------------------
LIST AND DESCRIPTION OF UNDERLYING AGREEMENTS
Notes:
1. There is only one agreement (the "Emperor's Delight Joint Venture
Contract") dated December 25, 1995 between and The First Geoexploration
Bureau ("FGEB") of the Ministry of Metallurgical Industry and Triple
Eight Mineral Corporation which is an Underlying Agreement for purposes
of the Agreement.
2. There are three other agreements which are not Underlying Agreements for
purposes of the Agreement but which have the potential to become
Underlying Agreements.
(a) The first such agreement (the "FGEB Co-operation Agreement") was among
FGEB, Patrician Gold Mines Ltd., and PCR and was dated October 4, 1994
(with October 4, 1994 being the effective date and the date on which the
Chinese version was signed but with November 17, 1994 being the date on
which the English version was signed).
(b) The second such agreement the (the "CB-LG Agreement") dated June 6, 1995
among Teck Exploration Ltd., PCR and Baiyin Non-Ferrous Metals Company.
(c) The third such agreement dated July 7, 1995 as amended by undated
supplementary agreement between Minco Mining & Metals Corporation and
Sichuan Bureau of Geology and Mineral Resources.
A copy of the above agreements has been made available to the Parties.
<PAGE> 51
Schedule E-1
This is SCHEDULE E to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
CONSENT AND WAIVER
TO: Teck Corporation
AND TO: Cominco Ltd.
AND TO: Minco Mining and Metals Corporation
Reference is made to that certain investment and participation agreement (the
"Agreement") dated the 20th day of February, 1996 among Teck Corporation
("Teck"), Cominco Ltd. ("Cominco") and Minco Mining and Metals Corporation.
Unless the context of this Consent and Waiver otherwise requires, capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Agreement.
The undersigned, a party to any or all of the Underlying Agreement(s),
hereby irrevocably and for valuable consideration:
(a) consents to the terms of the Agreement and the performance by the
Owner of all of its agreements and obligations thereunder; and
(b) waives any and all provisions of the Underlying Agreement(s) and of
any joint venture agreement which may be entered into pursuant to the
terms of the Underlying Agreement(s) which, in whole or in part,
conflict with or could in the future preclude the grant by the Owner to
Teck and Cominco (or either of them), or the exercise by Teck or
Cominco (or either of them) of, the rights set out in Parts 6 and 7 of
the Agreement.
DATED this _____________________ day of ________________________, 199____.
The Corporate Seal of )
)
was affixed in the presence of: )
)
) C/S
)
)
__________________________________ )
Authorized Signatory )
)
)
__________________________________ )
Authorized Signatory )
<PAGE> 52
Schedule F-1
This is SCHEDULE F to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
Minco's Material Liabilities
None other than as disclosed in Minco's financial statements for the year ended
December 31, 1995 which are attached to this Agreement as Schedule "C".
<PAGE> 53
Schedule I-1
This is SCHEDULE I to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made as of the ___ day of ________________, 1996.
BETWEEN:
MINCO MINING AND METALS CORPORATION, a body corporate duly
incorporated under the laws of the Province of British
Columbia and having its head office located at Suite 1870-401
West Georgia Street, Vancouver, British Columbia
(the "Issuer")
OF THE FIRST PART
AND:
____________________________________, a body corporate duly
incorporated under the laws of Canada and having an office
at_______________ __________________________, Vancouver,
British Columbia, ________
(the "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Issuer's common shares are listed on the Vancouver Stock Exchange (the
"Exchange") and the Issuer is subject to the regulatory jurisdiction of the
Exchange and of the Executive Director of the British Columbia Securities
Commission (together, the "Commission").
B. The Issuer has entered into an Investment and Participation Agreement with
the Purchaser and * (" * ") (the "Investment and Participation Agreement"),
under which Minco has granted certain rights to * and the Purchaser in exchange
for them subscribing for securities of the Issuer.
1. SUBSCRIPTION
1.1 Minco hereby sells and agrees to issue to the Purchaser and the Purchaser
hereby subscribes for 625,000 units (the "Units"), at a price of $0.80 per Unit,
each Unit consisting of
<PAGE> 54
I-2
- 2 -
one common share in the capital of the Issuer as constituted on the date hereof
(a "Common Share") and one fifth of one non-transferable share purchase warrant
(a "Warrant").
1.2 Payment for the Units shall be made in accordance with Article 3 on the
Closing Date (as hereinafter defined), failing which the Issuer shall, in
addition to any other rights it may have, have the right to rescind this
Subscription Agreement.
1.3 The Warrants forming part of the Units will be non-transferable, and one
full Warrant will entitle the Purchaser to purchase one additional Common Share
at a price of $1.20 per share at any time up to the close of business on the
first anniversary of the Closing Date and at a price of $1.38 per share at any
time thereafter up to the close of business on the second anniversary of the
Closing Date.
1.4 The terms and conditions which govern the Warrants will be referred to on
the certificates representing the Warrants and will contain, among other things,
provisions for the appropriate adjustment in the class, number and price of the
shares to be issued on the exercise of the Warrants upon the occurrence of
certain events including any subdivision, consolidation or reclassification of
the shares or amalgamation of the Issuer or the payment of stock dividends.
1.5 The issue of the Warrants will not restrict or prevent the Issuer from
obtaining any other financing, nor from issuing additional securities or rights
during the period within which the Warrants are exercisable.
2. ACKNOWLEDGEMENTS, REPRESENTATIONS AND WARRANTIES
2.1 The Purchaser acknowledges as at the date given above and as at the Closing,
that:
(a) the Purchaser is purchasing the Units under the
exemption from prospectus requirements available
under section 55(2)(4) of the Act and the Purchaser
is not a syndicate, partnership or other form of
unincorporated entity or organization created solely
to permit the purchase of the Units (or other similar
purchases) by a group of individuals whose individual
share of the aggregate acquisition cost of the Units
is less than $97,000 (Cdn.);
(b) the offer made by this subscription requires
acceptance by the Issuer and the approval of the
Exchange;
(c) no person has made to the Purchaser any written or
oral representation:
(i) that any person will resell or repurchase
any of the Securities;
(ii) that any person will refund the purchase
price of any of the Securities;
<PAGE> 55
I-3
- 3 -
(iii) as to the future price or value of any of
the Securities; or
(iv) that any of the Securities will be listed
and posted for trading on a stock exchange
or that application has been made to list
and post any of the Securities for trading
on a stock exchange other than the Exchange;
(d) the purchase of the Units has been privately
negotiated and arranged and the Purchaser or his
agent has been invited and afforded the opportunity
to conduct a review of all of the Issuer's affairs
and records in order that the Purchaser may be
properly and fully aware of all of the facts relevant
to the Issuer's affairs;
(e) the Purchaser is duly incorporated and validly
subsisting under the laws of its jurisdiction of
incorporation and all necessary approvals by its
directors, shareholders and others have been given to
authorize execution of this Subscription Agreement on
behalf of the Purchaser;
(f) the entering into of this Subscription Agreement and
the transactions contemplated hereby will not result
in the violation of any of the terms and provisions
of any law applicable to or the constating documents
of the Purchaser or of any agreement, written or
oral, to which the Purchaser may be a party or by
which the Purchaser is or may be bound; and
(g) this Subscription Agreement has been duly executed
and delivered by the Purchaser and constitutes a
valid obligation of the Purchaser legally binding
upon the Purchaser and enforceable against the
Purchaser in accordance with its terms.
2.2 The Purchaser represents and warrants, as at the date given above and as of
the Closing Date, that:
(a) no prospectus has been delivered by the Issuer to the
Purchaser in connection with the distribution of the
Units. The Purchaser has been advised that the
issuance of the Units is exempted from the prospectus
requirements of the Securities Act (British Columbia)
(the "Act") and as a result the Purchaser may not
received information that would otherwise be required
to be provided to the Purchaser under the Act or
securities rules thereunder;
(b) the Purchaser is purchasing the Units as principal
and no other person, corporation, firm or other
organization will have a beneficial interest in the
Units;
(c) the Units were not offered to the Purchaser through
an advertisement in printed media of general and
regular paid circulation, radio or television;
<PAGE> 56
I-4
- 4 -
(d) the Purchaser doe not beneficially own any Common
Shares of the Issuer and does not intend to act in
concert with any other person so as to render the
Purchaser a "control person" as defined in the Act.
(e) the Purchaser has no knowledge of a "material fact"
or "material change" (as those terms are defined in
the Act) in the affairs of the Issuer that has not
been generally disclosed to the public, save
knowledge of this particular transaction; and
(f) the Purchaser has sought and obtained independent
legal advice regarding the purchase and re-sale of
the Securities under the Act and the Rules.
2.3 The Issuer represents and warrants as at the date given above and as at the
Closing, that:
(a) the Issuer and its subsidiaries, if any, are valid
and subsisting corporations duly incorporated and in
good standing under the laws of the Province of
British Columbia;
(b) the Issuer will reserve or set aside sufficient
shares in the treasury of the Issuer to issue the
Securities;
(c) the Issuer is an "exchange issuer" as defined in the
Act, which is recognized as such by the Commission
and the Exchange, and is not on the List of
Defaulting Issuers maintained by the Commission;
(d) the Issuer shall use its best efforts to diligently
seek and obtain the acceptance for filing of this
Subscription Agreement and the Investment and
Participation Agreement by the Exchange and will make
all filings necessary to obtain the exemptions from
registration and prospectus requirements available
under sections 31(2) and 55(2) of the Act
respectively in respect of the transaction
contemplated hereby;
(e) the issuance and sale of the Securities by the Issuer
does not and will not conflict with and does not and
will not result in a breach of any of the terms,
conditions or provisions of its constating documents
or any agreement or instrument to which the Issuer is
a party or by which it is bound;
(f) this Subscription Agreement has been duly authorized
by all necessary corporate action on the part of the
Issuer and has been duly executed and delivered by
the Issuer and constitutes a valid obligation of the
Issuer legally binding upon it and enforceable in
accordance with its terms; and
(g) the authorized capital of the Issuer consists of
20,000,000 common shares of which 3,163,132 are
validly issued, fully-paid and non-assessable.
<PAGE> 57
I-5
- 5 -
3. CLOSING
3.1 The closing of the transaction contemplated by this Subscription Agreement
(the "Closing") will take place on a date to be agreed between the parties (the
"Closing Date") within five business days of the receipt by the Issuer of final
acceptance for filing by the Exchange of this Subscription Agreement and the
Investment and Participation Agreement.
3.2 On the Closing Date, the Purchaser shall deliver to the Issuer a certified
cheque or banker's draft for the total purchase price of the Units.
3.3 At the Closing, the Issuer will, against payment for the Units, deliver to
the Purchaser the certificates representing the Shares and the Warrants
registered in the name of the Purchaser or the Purchaser's nominee.
3.4 At the Closing, the Issuer will deliver to the Purchaser such copies of
approvals and a legal opinion of the Issuer's counsel or other documents as the
Purchaser may reasonably request.
3.5 The acknowledgements, representations and warranties of the Purchaser and
the Issuer herein shall survive the Closing.
4. CONDITIONS TO OBLIGATIONS OF PURCHASER
4.1 The obligations of the Purchaser under this Agreement are subject to the
fulfilment, before or on the Closing, of each of the conditions contained in
Part 8 of the Investment and Participation Agreement, each of which may be
waived in whole or in part by the Purchaser on or before the Closing Date.
5. HOLD PERIOD
5.1 The Purchaser acknowledges that the Securities may not be traded in British
Columbia for a period of one year from the Closing except as permitted by the
Act and Rules. The certificates representing the Securities will contain a
legend denoting the restrictions on transfer imposed by the Act and the
Exchange. The Purchaser agrees to sell, assign or transfer the Securities only
in accordance with the requirements of the Act, the Rules and the Exchange.
6. MISCELLANEOUS
6.1 Upon acceptance of the subscription contained herein by the Issuer, this
Subscription Agreement shall constitute a valid and binding agreement between
the parties, subject only to the approval thereof by the Exchange.
6.2 The Purchaser will execute and deliver to the Issuer for filing with the
Exchange, in duplicate, the Private Placement Questionnaire and Undertaking
substantially in the form attached hereto as Appendix I, and the parties to this
Subscription Agreement will execute and deliver all such further and other
deeds, documents and assurances, and will perform all such further and other
acts as may, in the opinion of counsel for the Issuer, be necessary for the
<PAGE> 58
I-6
- 6 -
purposes of giving effect to or perfecting the transaction contemplated by this
Subscription Agreement.
6.3 This Subscription Agreement and the Investment and Participation Agreement
constitutes the entire agreement between the parties and there are no
representations, warranties or collateral agreements, express or implied, other
than as expressly set forth herein or in the Investment and Participation
Agreement.
6.4 The parties to this Subscription Agreement may amend this Subscription
Agreement only in writing.
6.5 Time is of the essence of this Subscription Agreement and will be calculated
in accordance with the provisions of the Interpretation Act (British Columbia).
6.6 This Subscription Agreement will be governed by and construed in accordance
with the laws of British Columbia and the parties hereby irrevocably attorn to
the jurisdiction of the Courts of such Province.
6.7 A party to this Subscription Agreement will give all notices to or other
written communications with the other party to this Subscription Agreement
concerning this Subscription Agreement by hand or by registered mail addressed
to the address given above.
6.8 This Subscription Agreement shall enure to the benefit of and is binding
upon the parties to this Subscription Agreement and their successors and
permitted assigned.
DATED as of the 20th day of February, 1996.
THE CORPORATE SEAL OF * was hereunto )
affixed in the presence of: )
)
_____________________________________ )
Authorized Signatory ) C/S
)
)
_____________________________________ )
Authorized Signatory )
)
ACCEPTED BY MINCO MINING AND METALS CORPORATION this _____ day of ____________,
1996.
By: ___________________________________
Authorized Signatory
<PAGE> 59
I-8
APPENDIX I
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
A. DESCRIPTION OF TRANSACTION
(i) Name of issuer of the securities:
Minco Mining and Metals Corporation
(ii) Number and description of securities to be purchased:
625,000 Units (the "Units"), each Unit consisting of one (1)
common share and one-fifth (1/5) non-transferable share
purchase warrant (the "Warrants"), one full Warrant entitling
the holder to purchase one additional common share of the
Issuer at $1.20 per share during the first year, and $1.38 per
share during the second year.
(iii) Purchase price:
(a) $0.80 per Unit.
B. DETAILS OF PURCHASER
(i) Name of Purchaser:____________________________________________
(ii) Address:______________________________________________________
(iii) If the purchaser is a corporation, state the jurisdiction of
incorporation:
______________________________________________________________
(iv) Names and addresses of persons having a greater than 10%
beneficial interest in the purchaser, if a corporation or
trust:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
<PAGE> 60
I-9
- 2 -
C. RELATIONSHIP TO LISTED COMPANY
(i) State if purchaser will become a control person with over 20%
of the Company's issued share capital as a result of the
purchase in section A above:
The purchaser will not become a control person as a result of
the purchase.
______________________________________________________________
(ii) Does the purchaser own any securities of the Issuer at the
date hereof? If so, give particulars. State the number of
securities of the listed company held by the purchaser not
including the purchase in section A above:
______________________________________________________________
______________________________________________________________
D. PAYMENT DATE:
(i) State the date the purchaser has advanced full payment:
______________________________________________________________
(ii) If the purchase funds are held in trust pending receipt of
final regulatory approval, identify the trustee and give
particulars of the condition(s) required for release of the
funds:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
E. UNDERTAKING
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in section A of this Private Placement Questionnaire and
Undertaking. (The purchase funds may be deposited in trust with advancement to
the Company subject only to receipt of all necessary regulatory approvals).
<PAGE> 61
I-10
- 3 -
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
twelve months from the payment day, without the prior consent of the Vancouver
Stock Exchange and any other regulatory body having jurisdiction. The
undersigned acknowledges that all certificates representing the said securities
will bear a legend to the effect that the certificates are subject to a hold
period for a period of twelve months.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's affairs
that has not been publicly disclosed. The undersigned acknowledges that it is
aware that the removal from the securities of any resale restriction after
twelve months that is imposed solely as a requirement of the Vancouver Stock
Exchange will not entitle it to sell the securities if such sale would
contravene any other applicable securities legislation or regulation.
F. ADDITIONAL UNDERTAKING - PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that since it is deemed to
be purchasing securities as principal under the Securities Act (British
Columbia) (the "Act") it is bound by the provisions of the Act as though it were
the sole beneficial owner of the said securities, and the undersigned undertakes
to comply with all provisions of the act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to section 93 of the Act.
DATED at _________________________, ) __________________________________
) (Name of Purchaser - please print)
__________________________________, this )
)
________ day of _______________, 1996. ) __________________________________
) (Authorized Signature)
)
)
) __________________________________
) (Official Capacity - please print)
)
)
)
) __________________________________
) (Please print name of individual
) whose signature appears above, if
) different from name of purchaser
) printed above)
<PAGE> 62
Schedule G - 1
This is SCHEDULE G to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
TERMS SUMMARY OF JOINT VENTURE
1. INITIAL INTERESTS
1.1 The joint venture will be formed as of the date the Investors
exercise an Earn-In Right on a Property under either
Section 6.12 or Section 6.17 of the Agreement. Each of the
Parties shall own the Property held and bear the Costs and
liabilities incurred by the joint venture in proportion to
their respective Interests. In the case of an Exploration
Property, the Interests will be: the Investors, as to 51% and
Minco as to 49%. In the case of a Development Property, the
Interest will be: the Investors as to 70% and Minco as to 30%.
2. MANAGEMENT COMMITTEE
2.1 Forthwith upon the Investors having exercised their Earn-In
Rights on a Property, a management committee will be formed.
The management committee is comprised of two representatives
and two alternate representatives of each party. Each party's
representatives are collectively entitled to a vote which is
proportionate to its party's interest. Management committee
decisions are to be made by simple majority, except for the
following matters, which shall require approval by at least
75% of the Interests voted at a duly convened meeting:
(a) any major deviations in mine construction from the
program contemplated by the Final Feasibility Report;
(b) following completion of mine construction, any
significant expansion of the milling capacity of a
mill or any mine if not provided for in an approved
operating plan;
<PAGE> 63
Schedule G - 2
(c) any purchase or disposal of an asset which is not
contemplated in an operating plan where the Cost of
that asset is in excess of US$3,000,000;
(d) any proposed reduction in excess of 30% of the
anticipated monthly mining or milling rates from
those established in an operating plan, other than
for reasons other than an event of force majeure or
as a result of the performance of the assets or mine,
or the quality or quantity of ore reserves actually
available being less than projected or anticipated;
and
(e) any temporary suspension or any termination of mining
operations for reasons other than a permanent
termination based upon the operator's bona fide
conclusion that economic reserves at the mine have
been exhausted and the Property has insufficient
potential to add sufficient new reserves to support
Mining Operations.
3. OPERATOR
3.1 That Investor which is jointly nominated by the Investors will
be the initial Operator and, generally speaking, will remain
operator so long as it maintains at least the largest single
interest. The operator is responsible for the daily direction
of programs on the Property which it carries out on behalf of
the joint venture.
4. OBLIGATIONS OF OPERATOR
4.1 The operator shall have the exclusive right to manage all work
on the Property and to incur the costs required for that
purpose. In so doing the operator shall, unless it obtains the
approval of the management committee:
(a) comply with all instruments of title under which
mineral properties in the Property are held;
<PAGE> 64
Schedule G - 3
(b) pay all Costs properly incurred promptly as and when
due;
(c) keep the Property and assets relating to the Property
free of all liens and encumbrances;
(d) do all such other things as may be necessary to
maintain the Property in good standing;
(e) maintain accounts in accordance with accounting
principles generally accepted in the mining industry;
(f) perform its duties and obligations in a sound and
workmanlike manner, in accordance with sound mining
and engineering practices, and in compliance with all
applicable laws and this Agreement;
(g) permit authorized representatives of each Party, at
its and their sole risk and expense and at reasonable
times, to have access to the Property and to all
technical records and other factual engineering data
relating to the Property which is in the possession
of the operator; and
(h) furnish each of the Parties with regular progress
reports during periods of active exploration and with
an annual summary of the work performed and the
results obtained.
5. CONSTRUCTION
5.1 The Operator shall forthwith proceed with the program
necessary to implement the Final Feasibility Report forthwith
after Commitment Notices have been received under the
Agreement and any Chinese entities which hold assessable
interests in the Property have elected to contribute their
share of Costs so that the Costs of implementation are fully
funded. Construction shall be substantially in accordance with
the Final Feasibility Study subject to such variations as are
approved by the Management Committee.
<PAGE> 65
Schedule G - 4
6. OPERATING PLANS
6.1 A mine shall be operated on the basis of annual operating
plans approved by the management committee; provided that the
management committee may temporarily suspend or permanently
terminate operations pursuant to a suspension or closure plan
approved by it.
7. PAYMENT OF COSTS
7.1 As between the Parties who are contributing to the costs
necessary for the program contemplated by the Final
Feasibility Report, the operator may invoice for costs
incurred or to cash call reasonably in advance of
requirements. If a party does not pay the amount invoiced
within 30 days, the operator may demand payment. If payment is
not made within 30 days of demand the other party may elect to
advance the amount of the defaulted payment. The operator may
thereupon cause the defaulting party's Interest to be sold
privately or at public auction, apply the proceeds of sale to
the amount in default plus interest at the Prime Rate plus 2%
and the reasonable costs of sale and pay the balance to the
defaulting party.
8. DILUTION
8.1 If the Owner elected not to contribute its 30% of the funds
as contemplated in Section 6.22 and Section 6.23 of the
Agreement, its Interest will be diluted and the Investors'
Interests increased as Costs are incurred so that at all times
each Party's Interest is proportionate to its Contribution to
Costs compared to the total Costs contributed by the Parties
from the date of the Agreement. For this purpose, for
Development Properties the Owner shall be credited with deemed
Costs equal to 3/7ths of the Investors' Costs incurred prior
to the date
<PAGE> 66
Schedule G - 5
on which the Investors' Commitment Notice was delivered under
the Agreement.
9. DISTRIBUTION OF PRODUCTION
9.1 To the extent permitted by the Underlying Agreement for that
Property, a party contributing to mine costs is entitled to
receive, in kind, its proportionate share of any minerals
produced from a mine on the property and to separately dispose
of the same.
10. ACKNOWLEDGEMENT
10.1 The Parties acknowledge Section 6.22 of the Agreement
providing for the Owner's royalty if its interest is diluted
below 1O% and to Section 6.23 and Section 6.24 which deal with
the manner in which Costs are to be recovered.
11. GENERAL
11.1 A party shall be entitled to surrender its interest to the
other parties on notice to them. A surrender of interest shall
not release a party from liabilities accrued prior to the
effective surrender date.
11.2 The rights and obligations of the parties shall be several and
the parties shall hold their interests as tenants in common.
11.3 Upon payment for costs incurred by the operator under the
joint venture a party contributing to those costs shall be
entitled to all tax benefits with respect thereto.
11.4 Nothing contained in the joint venture agreement shall be
construed as creating a partnership or imposing any fiduciary
duty on any party.
11.5 No party shall institute any proceedings to partition the
Property.
<PAGE> 67
Schedule G - 6
11.6 A party shall be entitled to claim force majeure if it is
delayed or prevented from performing any obligation by reason
of any cause, excluding lack of finances, beyond its
reasonable control.
11.7 The joint venture shall continue so long as at least two
parties have a participating interest.
11.8 The agreement shall be governed by the laws of British
Columbia.
<PAGE> 68
Schedule H - 1
This is SCHEDULE H to the Agreement
Between MINCO MINING AND METALS CORPORATION
TECK CORPORATION and COMINCO LTD.
made the 20th day of February, 1996
NET SMELTER RETURNS
1. DEFINITION
1.1 "Net Smelter Returns" for purposes of the Agreement means,
with respect to that portion of the ores or concentrates
produced from the Property or reprocessed on the Property from
tailings or residues of production from the Property which is
received by each Party in kind or, if not received in kind,
which is attributable to the NCI held by that Party:
(a) where all or a portion of those ores or concentrates
are taken by a Party in kind and are sold as ores or
concentrates, the Net Smelter Returns shall be the
gross amount received from the purchaser following
sale thereof after deduction, if applicable under the
sale contract, of all smelter charges, penalties and
other deductions, and after deducting all costs of
transporting and insuring the ores or concentrates
from the mine to the smelter or other place of final
delivery; or
(b) where all or a portion of those ores or concentrates
are taken by a Party in kind and are treated in a
smelter and a portion of the metals recovered
therefrom are delivered and sold, the Net Smelter
Returns shall be the gross amount received from the
purchaser following sale of the metals so delivered,
after deduction of all smelter charges, penalties and
other deductions, and after deducting all costs of
transporting and insuring the ores or concentrates
from the mine to the smelter, and, if applicable
<PAGE> 69
Schedule H - 2
under the smelter contract, all costs of transporting
and insuring the metals from the smelter to the place
of final delivery by the purchaser; and
(c) where the ores or concentrates are not taken in kind
by the Party, but rather the Party is only entitled
to receive a distribution of profits from the Chinese
entity, the Party shall, to the greatest extent
practicable, calculate Net Smelter Returns so as to
provide the royaltyholder with the same royalty as
would be provided under Section 1.1 (a) and (b)
using the best information it has available as to
production of ores and concentrates and the costs and
charges.
Where any ores or concentrates are taken in kind and sold to,
or treated in, a smelter owned or controlled by a Party, the
pricing for that sale or treatment will be established by a
Party on an arms-length basis so as to be fairly competitive
with pricing, net of transportation, insurance, treatment
charges and other related costs, then available on world
markets for product of like quantity and quality.
2. PAYMENT OF NET SMELTER RETURNS
2.1 A Party which is obligated to pay a royalty shall maintain its
accounts in accordance with accounting principles generally
accepted in the mining industry and shall calculate the Net
Smelter Returns and the sums to be disbursed to the royalty
holder contemplated in Section 6.22 of the Agreement.
2.2 Each Party which is obligated to pay a royalty under Section
6.22 of the Agreement shall, within 60 days of the end of each
calendar quarter from the commencement of commercial
production, deliver to the royaltyholder a statement
indicating:
<PAGE> 70
Schedule H-3
(a) the gross amounts received as contemplated in
Section 1.1 of this Schedule H;
(b) the deductions therefrom in accordance with
Section 1.1 of this Schedule H; and
(c) the amount of Net Smelter Returns remaining.
supported by such reasonable information as to the tonnage and
grade of ores or concentrates shipped as is in the possession
or control of that Party as will enable the royalty holder to
verify the gross amount payable by the smelter or other
purchaser.
2.3 To the extent which the Parties take their share of mineral
production from a Property in kind or there are monies which
have been paid or distributed to that Party by the Chinese
entity which holds the Property, each Party shall pay or cause
to be paid to the royaltyholder one percent of the Net Smelter
Returns on the share of production which it has taken or which
is attributable to its Interest. To the extent the Parties are
not entitled to take in kind but rather monies are paid or
distributed to them by Chinese entity and those distributions,
the one percent Net Smelter Returns shall accrue to the
royaltyholder and shall be paid following receipt by that
Party of the payment or distribution from the Chinese entity;
provided that the maximum payable to the royaltyholder shall
be 10 percent of any payment or distribution received by the
Party from the Chinese entity.
2.4 Payments to the royaltyholder shall be within 60 days of the
end of the calendar quarter in which either monies are
received from the smelter or distributed by the Chinese entity
as contemplated in Section 2.3 and shall be made by way of
cash, certified cheque or wire transfer. Any royalty payments
due and unpaid on the 60th day shall accrue interest from that
day at the Prime Rate plus two percent until paid.
<PAGE> 71
Schedule H - 4
3. ADJUSTMENTS AND VERIFICATION
3.1 Payment of any Net Smelter Returns by a Party shall not
prejudice the right of that Party to adjust any statement
supporting the payment; provided, however, that all statements
presented to the royaltyholder by a Party for any quarter
shall conclusively be presumed to be true and correct upon the
expiration of 12 months following the end of the quarter to
which the statement relates, unless within that 12-month
period that Party gives notice to the royaltyholder claiming
an adjustment to the statement which will be reflected in
subsequent payment of Net Smelter Returns.
3.2 A Party shall not adjust any statement in favour of itself
after the expiration of 12 months following the end of the
quarter to which the statement relates.
3.3 The royaltyholder shall, upon 30 days' notice in advance to a
Party, have the right to request that the Party have its
independent external auditors provide their audit certificate
for the statement or adjusted statement, as it may relate to
the Agreement and the calculation of Net Smelter Returns;
provided that in the case of Section 1.1 (c), the auditors
shall confirm that they have examined the information on which
the Party calculated the Net Smelter Returns and that the
calculation is reasonable.
3.4 The cost of the audit certificate shall be solely for the
royaltyholder's account unless the audit certificate discloses
a material error in the calculation of Net Smelter Returns, in
which case the Party shall reimburse the royaltyholder the
cost of the audit certificate. Without limiting the generality
of the foregoing, a discrepancy of one percent in the
calculation of Net Smelter Returns shall be deemed to be
material.
<PAGE> 1
Exhibit 3j
LETTER OF INTENT REGARDING
ASSESSMENT OF EXPLORATION POTENTIAL
OF THE XINFANPING COPPER PROJECT
OF YANYUAN, SICHUAN
BETWEEN:
SICHUAN BUREAU OF GEOLOGY AND MINERAL RESOURCES of the Ministry of
Geology and Mineral Resources of China (referred to herein as
("MGMR-SICHUAN")
AND:
MINCO MINING AND METALS CORPORATION (referred to herein as "MINCO")
WHEREAS:
MGMR-SICHUAN and MINCO (the "PARTIES"), have made great progress in the
cooperation of exploration and development of mineral resources in Sichuan
province, China. In order to enlarge the scope for mutual cooperation, provide a
supplementary mineral property to the Chapuzi project, and establish long-term
strategic mutual joint venture relationship, during October 8-12, 1996. Mr.
Yanying Zhang, Director of MGMR-SICHUAN, and Mr. Ken Cai, the President of
MINCO, jointly visited the Xifanping copper Project (the "PROJECT") located in
the Yanyuan County, Sichuan province and discussed the cooperation between the
Parties to assess the exploration potential of the Project and later jointly
explore and exploit the Project.
NOW THEREFORE, in consideration of the premises set out above, and the mutual
promises set out below, MGMR-SICHUAN and MINCO agree as follows:
1. After the site visit to the Project, Mr. Yaonan Luo, Chief Geologist of
MGMR-SICHUAN, gave Mr. Ken Cai a presentation on the geology and
mineralization conditions of Sichuan province. Mr. Cai indicated that
Sichuan has great exploration potential because of excellent
mineralization conditions and many underexplored mineral properties. The
Parties should use Chapuzi as a starting project and further jointly
explore and exploit the Shanjiang and Panxi region in Sichuan province.
2. The Parties agree that the Xifanping area, covering 50 square km, is a
supplementary property for the further cooperation between the Parties.
The Parties will jointly assess the exploration potential of the Project
and the possibility of developing a large-scale open pitiable mine on the
property.
3. MGMR-SICHUAN will carry out the following works (the "ASSESSMENT WORKS")
on the property:
a) Geological and geochemical survey of 1:10,000 scale to define Cu-Au
anomalies;
b) IP survey along many profiles covering the anomalous area;
<PAGE> 2
c) A comprehensive detailed analysis and study of the results of the newly
discovered and mineralized No. 80 porphyry system to determine the
mineralization characteristics and the prospecting criteria and further
establish mineralization model for the Project.
MINCO will provide MGMR-SICHUAN with free consulting and instruction to
the Assessment Works. MGMR-SICHUAN will provide MINCO with all data
available for MINCO's evaluation.
4. If the results of the Assessment Works are positive, MGMR-SICHUAN and
MINCO will discuss and negotiate to explore and exploit the Project
jointly.
5. MGMR-SICHUAN will provide MINCO with the results of the Assessment Works
before March 1997. MINCO will analyze the above said results and confirm
its interest on the Project before August, 1997.
6. The term of this letter of intent is from its execution date to August,
1997. If MINCO comes to positive conclusion from its assessment of the
Project and wishes to proceed, then MINCO will has exclusive rights to
invest in the Project. During the term of this agreement, if there is a
third party wishes to invest in exploring the Project, MINCO has the right
of first refusal on the Project under equal conditions,
7. If MINCO decides not to invest in the Project, MINCO will return all the
data (the "Data") provided by MGMR-SICHUAN to MGMR-SICHUAN. MINCO further
agree to preserve the confidentiality of all the Data and not to transfer
the Data to any third party.
IN WITNESS WHEREOF the Parties have duly executed this letter of Intent on this
15th day of October 1996 as evidenced by each signature below.
SICHUAN BUREAU OF GEOLOGY AND MINERAL RESOURCES
REPRESENTATIVE: Mr. Yanying Zhang (SIGNATURE)
TITLE: Director
MINCO MINING AND METALS CORPORATION
REPRESENTATIVE: Mr. Ken Cai (SIGNATURE)
TITLE: President and Chief Executive Officer
(THIS IS A ENGLISH TRANSLATION FROM THE ORIGINAL LETTER OF INTENT WRITTEN
AND SIGNED IN CHINESE)
<PAGE> 1
Exhibit 3k
CONSULTING AGREEMENT
THIS AGREEMENT is dated the 25 day of June, 1996,
BETWEEN:
MINCO MINING & METALS CORPORATION
1870-401 West Georgia Street
Vancouver
British Columbia, V6B 5A1
(herein the "CLIENT")
- and -
KAISUN GROUP CANADA INC.
3220 Colonial Drive
Mississauga
Ontario, L5L 5K8
(herein the "CONSULTANT")
WHEREAS the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement and the Consultant has agreed to provide
such services, all in consideration and upon the terms and conditions contained
herein;
NOW THEREFORE it is hereby agreed as follows:
1. SERVICES
The Client agrees to engage the Consultant to act as President and
Chief Executive Officer and to provide the Client with such other
consulting services as the Client and the Consultant agree upon and the
Consultant has agreed to perform and provide such services
(collectively the "SERVICES").
2. TERM
Except as otherwise provided in this Agreement, the Client agrees to
engage the Consultant to provide the Services for a term commencing
March 1, 1996 and ending June 25, 1999.
3. FEE
(a) The Client agrees to pay the Consultant a fee for the Services
provided by the
<PAGE> 2
Consultant under the Agreement in the amount of $500.00 per day payable
monthly on the last day of each month to a maximum of $100,000 per
year with such amounts reviewable upon each successive anniversary
dates during the term of this Agreement.
(b) The Consultant agrees to render monthly invoices to the
Client, in a form reasonably acceptable to the Client,
detailing the Services performed by the Consultant.
(c) The Client shall be responsible for all sales taxes (including
goods and services taxes) due in respect of the fees paid to
the Consultant. The fees paid to the Consultant under this
Agreement shall be increased to take into account any
applicable goods and services taxes or other sales or value
added taxes payable in respect of such fees, and all invoices
provided by the Consultant shall include the GST registration
number and any other applicable sales or value added tax
registration numbers of the Consultant.
4. EXPENSES
The Client shall pay for or reimburse the Consultant for all
reasonable, ordinary and necessary expenses incurred by the Consultant
in the ordinary course of performing the Services upon presentation of
proper accounts, statements, invoices or receipts for such items.
5. INDEPENDENT CONTRACTOR
The Consultant's relationship with the Client as created by this
Agreement is that of an independent contractor for the purposes of the
Income Tax Act (Canada) and any similar provincial taxing legislation.
It is intended that the Consultant shall have general control and
direction over the manner in which its services are to be provided to
the Client under this Agreement. Nothing contained in this Agreement
shall be regarded or construed as creating any relationship (whether by
way of employer/employee, agency, joint venture, association. or
partnership) between the parties other than as an independent
contractor as set forth herein.
6. TIME AND EFFORT
The Consultant shall be free to devote such portion of the Consultant's
time, energy, effort and skill as the Consultant sees fit, and to
perform the Consultant's duties when and where the Consultant sees fit,
so long as the Consultant performs the Services set out in this
Agreement in a timely and professional fashion.
7. AUTHORITY
-2-
<PAGE> 3
The Consultant acknowledges that it is being retained as a consultant
to the Client and that as such it does not have the authority and
cannot commit or bind the Client to any matter, contract or negotiation
without the prior authorization of the Client.
8. COMPLIANCE
(a) The Consultant shall comply with a applicable federal,
provincial and municipal laws, rules and regulations arising
out of or connected with the performance of the Services under
this Agreement by the Consultant or its employees.
(b) The Consultant shall be responsible for all Unemployment
Insurance Contributions, Canada Pension Plan contributions,
Income Tax and Workers' Compensation payments relating to or
arising out of the fees paid to the Consultant under this
Agreement and the Services performed by the Consultant or its
employees. Payments relating to any of the above shall be the
responsibility of the Consultant and shall be forwarded by the
Consultant as appropriate, directly to the government agencies
involved. Proof of compliance with this requirement shall be
available to the Client upon request.
(c) In the event that any taxing authority, for whatever reason,
seeks from the Client any Unemployment Insurance
Contributions, Canada Pension Plan contributions, Income Taxes
or Workers' Compensation payments, the Consultant agrees to
indemnify the Client and any of its directors, officers and
employees, for the full amount of any such contributions or
payments (including any applicable interest and penalties
thereon). The Consultant further agrees that the Client may
set off an equal amount of such contributions or payments
(including any applicable interest and penalties thereon)
against any fees and expenses payable to the Consultant under
this Agreement.
9. KEY PERSON
The parties acknowledge that Ken Cai is a key employee of the
Consultant and is integral to the successful performance of the
Services by the Consultant under this Agreement. It is acknowledged by
the Consultant that Ken Cai will perform all of the Services, unless
the Client otherwise consents in writing.
10. SUPPORT
The Client agrees to provide such assistance and make available such
employees, office space and support to the Consultant as is reasonably
necessary to enable the Consultant to perform the Services under this
Agreement.
-3-
<PAGE> 4
11. CONFIDENTIAL INFORMATION
(a) The Consultant acknowledges that certain of the material and
information made available to the Consultant by the Client in
the performance of the Services (the "CONFIDENTIAL
INFORMATION") will be of a confidential nature. The Consultant
recognizes that the Confidential Information is the sole and
exclusive property of the Client, and the Consultant shall use
its best efforts and exercise utmost diligence to protect and
maintain the confidentiality of the Confidential Information.
The Consultant shall not, directly or indirectly, use the
Confidential Information for its own benefit, or disclose to
another any Confidential Information, whether or not acquired,
learned, obtained or developed by the Consultant alone or in
conjunction with others, except as such disclosure or use may
be required in connection with the performance of the Services
or as may be consented to in writing by the Client.
(b) The Confidential Information is and shall remain the sole and
exclusive property of the Client regardless of whether such
information was generated by the Consultant or by others, and
the Consultant agrees that upon termination of this Agreement
it shall deliver promptly to the Client all such tangible
parts of the Confidential Information including records, data,
notes, reports, proposals, client lists, correspondence,
materials, marketing or sales information, computer programs,
equipment. or other documents or property which are in the
possession or under the control of the Consultant without
retaining copies thereof.
(c) Each of the foregoing obligations of the Consultant in this
clause shall also apply to any confidential information of
customers, joint venture parties, contractors and other
entities, of any nature whatsoever, with whom the Client or
any associate or affiliate of the Client has business
relations.
(d) Notwithstanding the foregoing provisions of this clause, the
Consultant shall not be liable for the disclosure or use of
any of the Confidential Information to the extent that:
(i) the Confidential Information is or becomes available to
the public from a source other than the Consultant and
through no fault of the Consultant; or
(ii) the Confidential Information is lawfully obtained by
the Consultant from a third party or a source outside
of this Agreement.
(e) The covenants and agreements contained in this clause shall
survive the termination of this Agreement.
12. OTHER SERVICES
-4-
<PAGE> 5
The Consultant will be free to perform consulting and other services to
the Consultant's other clients during the term of this Agreement,
provided however, that the Consultant shall ensure that the Consultant
is able to perform the Services pursuant to this Agreement in a timely
and professional fashion. The Consultant agrees not to perform services
for the Consultant's other clients which may create a conflict of
interest or interfere with the Consultant's duties pursuant to this
Agreement.
13. TERMINATION
(a) In the event that the Consultant breaches this Agreement, or
otherwise fails to perform the Services in accordance with the
terms of this Agreement, the Client may terminate this
Agreement immediately and without notice for cause. Either
party may terminate this Agreement at any time, without cause
or reason, upon living 2 months advance written notice to the
other.
(b) Upon termination of this Agreement:
(i) the Client's obligations to the Consultant under this
Agreement shall terminate except for the Client's
obligation to pay any fees and expenses in accordance
with the terms of this Agreement, to the date of
termination; and
(ii) the Consultant's obligations to the Client under this
Agreement shall terminate except those obligations
which are specifically expressed to survive the
termination of this Agreement.
14. INDEMNIFICATION
(a) The Client undertakes to, and does hereby agree to, indemnify
the Consultant and its directors. officers and employees
against any and all actions, suits, claims, costs, and
demands, losses, damages and expenses which may be brought
against or suffered by them or which they may sustain, pay or
incur by reason of the Consultant's performance of the
Services under this Agreement, with the exception of any such
actions, suits, claims, costs and demands, losses, damages and
expenses caused by the wilful misconduct or gross negligence
of the Consultant or any of its directors, officers or
employees.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
16. SEVERABILITY
-5-
<PAGE> 6
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be determined to
be invalid, illegal or unenforceable, the remaining provisions of this
Agreement, and the application of such provision to any person or in
any circumstance other than that to which it is held to be invalid,
illegal or unenforceable, shall not be affected thereby.
17. AMENDMENTS
Any amendment to this Agreement must be in writing and signed by both
parties hereto.
18. TIME OF ESSENCE
Time shall be of the essence in this Agreement.
19. ENTIRE AGREEMENT
This is the entire Agreement between the Client and the Consultant with
respect to the consulting services to be provided by the Consultant to
the Client and supersedes any prior agreements with respect to such
services whether written or oral.
20. NOTICES
Notices hereunder shall be in writing and must be either personally
delivered or sent by registered mail to the address(es) set forth
above. A party may change the address set forth above by proper notice
to the other.
21. NO WAIVER
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time
for which such failure continues, shall not be a waiver of such party's
right to demand strict performance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance
of any covenant or obligation hereunder shall constitute a consent or
waiver to or of any other breach or default in the performance of the
same or of any other obligation hereunder.
22. ASSIGNMENT
This Agreement is personal in nature and may not be assigned by either
party hereto.
23. ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of
each of the parties
-6-
<PAGE> 7
hereto and their respective employees and permitted receivers,
successors and assigns.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
MINCO MINING & METALS CORPORATION
Per: /s/ Peter Tsaparas
------------------------------
Peter Tsaparas
Chairman of the Board
KAISUN GROUP CANADA INC.
Per: /s/ Ken Cai
------------------------------
Ken Cai
President
-7-
<PAGE> 1
Exhibit 3l
CONSULTING AGREEMENT
THIS AGREEMENT is dated the 25 day of June, 1996,
BETWEEN:
MINCO MINING & METALS CORPORATION
1870-401 West Georgia Street
Vancouver
British Columbia, V6B 5A1
(herein the "CLIENT")
- and -
PETER TSAPARAS
c/o 1870-401 West Georgia Street
Vancouver
British Columbia, V6B 5A1
(herein the "CONSULTANT")
WHEREAS the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement and the Consultant has agreed to provide
such services, all in consideration and upon the terms and conditions contained
herein;
NOW THEREFORE it is hereby agreed as follows:
1. SERVICES
The Client agrees to engage the Consultant to act as Chairman and to
provide such other consulting services as the Client and the Consultant
agree upon and the Consultant has agreed to perform and provide such
services (collectively the "SERVICES").
2. TERM
Except as otherwise provided in this Agreement, the Client agrees to
engage the Consultant to provide the Services for a term commencing
June 25, 1996 and ending upon the completion of the Services.
3. FEE
(a) The Client agrees to pay the Consultant a fee for the Services
provided by the Consultant under the Agreement in the amount
of $2,000.00 per month payable
<PAGE> 2
semi-monthly on the fifteenth and last days of each month.
(b) The Consultant agrees to render monthly invoices to the
Client, in a form reasonably acceptable to the Client,
detailing the Services performed by the Consultant.
(c) The Client shall be responsible for all sales taxes (including
goods and services taxes) due in respect of the fees paid to
the Consultant. The fees paid to the Consultant under this
Agreement shall be increased to take into account any
applicable goods and services taxes or other sales or value
added taxes payable in respect of such fees, and all invoices
provided by the Consultant shall include the GST registration
number and any other applicable sales or value added tax
registration numbers of the Consultant.
4. EXPENSES
The Client shall pay for or reimburse the Consultant for all
reasonable, ordinary and necessary expenses incurred by the Consultant
in the ordinary course of performing the Services upon presentation of
proper accounts, statements, invoices or receipts for such items.
5. INDEPENDENT CONTRACTOR
The Consultant's relationship with the Client as created by this
Agreement is that of an independent contractor for the purposes of the
Income Tax Act (Canada) and any similar provincial taxing legislation.
It is intended that the Consultant shall have general control and
direction over the manner in which its services are to be provided to
the Client under this Agreement. Nothing contained in this Agreement
shall be regarded or construed as creating any relationship (whether by
way of employer/employee, agency, joint venture, association, or
partnership) between the parties other than as an independent
contractor as set forth herein.
6. AUTHORITY
The Consultant acknowledges that it is being retained as a consultant
to the Client and that as such it does not have the authority and
cannot commit or bind the Client to any matter, contract or negotiation
without the prior authorization of the Client.
7. COMPLIANCE
(a) The Consultant shall comply with all applicable federal,
provincial and municipal laws, rules and regulations arising
out of or connected with the performance of the Services under
this Agreement by the Consultant or its employees.
-2-
<PAGE> 3
(b) The Consultant shall be responsible for all Unemployment
Insurance Contributions, Canada Pension Plan contributions,
Income Tax and Workers' Compensation payments relating to or
arising out of the fees paid to the Consultant under this
Agreement and the Services performed by the Consultant or its
employees. Payments relating to any of the above shall be the
responsibility of the Consultant and shall be forwarded by the
Consultant as appropriate, directly to the government agencies
involved. Proof of compliance with this requirement shall be
available to the Client upon request.
(c) In the event that any taxing authority, for whatever reason,
seeks from the Client any Unemployment Insurance
Contributions, Canada Pension Plan contributions, Income Taxes
or Workers' Compensation payments, the Consultant agrees to
indemnify the Client and any of its directors, officers and
employees, for the full amount of any such contributions or
payments (including any applicable interest and penalties
thereon). The Consultant further agrees that the Client may
set off an equal amount of such contributions or payments
(including any applicable interest and penalties thereon)
against any fees and expenses payable to the Consultant under
this Agreement.
8. KEY PERSON
It is acknowledged by Peter Tsaparas that he will perform all of the
Services, unless the Client otherwise consents in writing.
9. SUPPORT
The Client agrees to provide such assistance and make available such
employees, office space and support to the Consultant as is reasonably
necessary to enable the Consultant to perform the Services under this
Agreement.
10. CONFIDENTIAL INFORMATION
(a) The Consultant acknowledges that certain of the material and
information made available to the Consultant by the Client in
the performance of the Services (the "CONFIDENTIAL
INFORMATION") will be of a confidential nature. The Consultant
recognizes that the Confidential Information is the sole and
exclusive property of the Client, and the Consultant shall use
its best efforts and exercise utmost diligence to protect and
maintain the confidentiality of the Confidential Information.
The Consultant shall not, directly or indirectly, use the
Confidential Information for its own benefit, or disclose to
another any Confidential Information, whether or not acquired,
learned, obtained or developed by the Consultant alone or in
conjunction with others, except as such disclosure or use
-3-
<PAGE> 4
may be required in connection with the performance of the
Services or as may be consented to in writing by the Client.
(b) The Confidential Information is and shall remain the sole and
exclusive property of the Client regardless of whether such
information was generated by the Consultant or by others, and
the Consultant agrees that upon termination of this Agreement
it shall deliver promptly to the Client all such tangible
parts of the Confidential Information including records, data,
notes, reports, proposals, client lists, correspondence,
materials, marketing or sales information, computer programs,
equipment, or other documents or property which are in the
possession or under the control of the Consultant without
retaining copies thereof.
(c) Each of the foregoing obligations of the Consultant in this
clause shall also apply to any confidential information of
customers, joint venture parties, contractors and other
entities, of any nature whatsoever, with whom the Client or
any associate or affiliate of the Client has business
relations.
(d) Notwithstanding the foregoing provisions of this clause, the
Consultant shall not be liable for the disclosure or use of
any of the Confidential Information to the extent that:
(i) the Confidential Information is or becomes available to
the public from a source other than the Consultant and
through no fault of the Consultant; or
(ii) the Confidential Information is lawfully obtained by
the Consultant from a third party or a source outside
of this Agreement.
(e) The covenants and agreements contained in this clause shall
survive the termination of this Agreement.
11. OTHER SERVICES
The Consultant will be free to perform consulting and other services to
the Consultant's other clients during the term of this Agreement,
provided however, that the Consultant shall ensure that the Consultant
is able to perform the Services pursuant to this Agreement in a timely
and professional fashion. The Consultant agrees not to perform services
for the Consultant's other clients which may create a conflict of
interest or interfere with the Consultant's duties pursuant to this
Agreement.
12. TERMINATION
(a) In the event that the Consultant breaches this Agreement, or
otherwise fails to perform the Services in accordance with the
terms of this Agreement, the Client
-4-
<PAGE> 5
may terminate this Agreement immediately and without notice for cause.
Either party may terminate this Agreement at any time, without cause or
reason, upon giving two months advance written notice to the other.
(b) Upon termination of this Agreement:
(i) the Client's obligations to the Consultant under this
Agreement shall terminate except for the Client's
obligation to pay any fees and expenses in accordance
with the terms of this Agreement, to the date of
termination; and
(ii) the Consultant's obligations to the Client under this
Agreement shall terminate except those obligations which
are specifically expressed to survive the termination of
this Agreement.
13. INDEMNIFICATION
(a) The Client undertakes to, and does hereby agree to, indemnify
the Consultant and its directors, officers and employees
against any and all actions, suits, claims, costs, and
demands, losses, damages and expenses which may be brought
against or suffered by them or which they may sustain, pay or
incur by reason of the Consultant's performance of the
Services under this Agreement, with the exception of any such
actions, suits, claims, costs and demands, losses, damages and
expenses caused by the wilful misconduct or gross negligence
of the Consultant or any of its directors, officers or
employees.
14. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of British
Columbia and the federal laws of Canada applicable therein.
15. SEVERABILITY
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be determined to
be invalid, illegal or unenforceable, the remaining provisions of this
Agreement, and the application of such provision to any person or in
any circumstance other than that to which it is held to be invalid,
illegal or unenforceable, shall not be affected thereby.
16. AMENDMENTS
Any amendment to this Agreement must be in writing and signed by both
parties hereto.
-5-
<PAGE> 6
17. TIME OF ESSENCE
Time shall be of the essence in this Agreement.
18. ENTIRE AGREEMENT
This is the entire Agreement between the Client and the Consultant with
respect to the consulting services to be provided by the Consultant to
the Client and supersedes any prior agreements with respect to such
services whether written or oral.
19. NOTICES
Notices hereunder shall be in writing and must be either personally
delivered or sent by double registered mail to the address(es) set
forth above. A party may change the address set forth above by proper
notice to the other.
20. NO WAIVER
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time
for which such failure continues, shall not be a waiver of such party's
right to demand strict performance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance
of any covenant or obligation hereunder shall constitute a consent or
waiver to or of any other breach or default in the performance of the
same or of any other obligation hereunder.
21. ASSIGNMENT
This Agreement is personal in nature and may not be assigned by either
party hereto.
22. ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of
each of the parties hereto and their respective employees and permitted
receivers, successors and assigns.
-6-
<PAGE> 7
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
MINCO MINING & METALS CORPORATION
Per: /s/ Colin McAleenan
------------------------------
Colin McAleenan
Vice President
/s/ Peter Tsaparas
- ----------------------------------
PETER TSAPARAS
-7-
<PAGE> 1
Exhibit 3m
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated the 1st day of November, 1996,
BETWEEN:
MINCO MINING & METALS CORPORATION
1870-401 West Georgia Street
Vancouver, British Columbia, V6B 5A1
(herein the "EMPLOYER")
- and -
PETER TSAPARAS
c/o 1870-401 West Georgia Street
Vancouver, British Columbia, V6B 5A1
(herein the "EMPLOYEE")
WHEREAS the Employer desires to engage the Employee to provide services to the
Employer as an employee for the term of this Agreement and the Employee has
agreed to provide such services, all in consideration and upon the terms and
conditions contained herein;
NOW THEREFORE it is hereby agreed as follows:
1. EMPLOYMENT
A. The Employer agrees to employ the Employee as Chairman on a part-time basis
and to provide services pursuant to the terms of this Agreement and the Employee
agrees to accept such position of employment.
B. The Employee agrees to perform such duties and assume such responsibilities
as assigned by the Employer from time to time which are customarily associated
with the position of Chairman.
2. COMPENSATION AND BENEFITS
A. The Employer agrees to pay the Employee, as basic compensation for the
services provided by the Employee hereunder, $2,000.00 per month payable
semi-monthly on the fifteenth and last days of each month with such amount
reviewable in June of each year during the term of this Agreement.
<PAGE> 2
B. Deductions will be made from the Employee's compensation for Unemployment
Insurance Contributions. Canada Pension Plan contributions, and income tax as
required by law. Eligible employees may also be covered under provincial
workers' compensation legislation and the Employer will be responsible for
remitting all workers' compensation payments.
3. EXPENSES
The Employer shall pay for or reimburse the Employee for all reasonable,
ordinary and necessary expenses incurred by the Employee in the ordinary course
of his or her employment upon presentation by the Employee to the Employer of
proper accounts, statements, invoices or receipts for such items.
4. CONFLDENTIAL INFORMATION
A. The Employee acknowledges that certain of the material and information made
available to the Employee by the Employer in the performance of his or her
duties (the "CONFIDENTIAL INFORMATION") will be of a confidential nature. The
Employee recognizes that the Confidential Information is the sole and exclusive
property of the Employer, and the Employee shall use his or her best efforts and
exercise utmost diligence to protect and maintain the confidentiality of the
Confidential Information. The Employee shall not, directly or indirectly, use
for himself or herself or another, or disclose to another any Confidential
Information, whether or not acquired, learned, obtained or developed by the
Employee alone or in conjunction with others, except as such disclosure or use
may be required in connection with his or her employment or as may be consented
to in writing by the Employer.
B. The Confidential Information is and shall remain the sole and exclusive
property of the Employer regardless of whether such information was generated by
the Employee or by others, and the Employee agrees that upon termination of this
Agreement he or she shall deliver promptly to the Employer all such tangible
parts of the Confidential Information including records, data, notes, reports,
proposals, client lists, correspondence, materials, marketing or sales
information, computer programs, equipment, or other documents or property which
are in the possession or under the control of the Employee without retaining
copies thereof.
C. Each of the foregoing obligations of the Employee in this clause shall also
apply to any confidential information of customers, joint venture parties,
contractors and other entities, of any nature whatsoever, with whom the Employer
or any associate or affiliate of the Employer has business relations.
D. Notwithstanding the foregoing provisions of this clause, the Employee shall
not be liable for the disclosure or use of any of the Confidential Information
to the extent that:
(a) the Confidential Information is or becomes available to the
public from a source other than the Employee and through no
fault of the Employee; or
-2-
<PAGE> 3
(b) the Confidential Information is lawfully obtained by the
Employee from a third party or a source outside of this
Agreement.
E. The covenants and agreements contained in this clause shall survive the
termination of this Agreement and the employment relationship with the Employer.
5. TERM
Except as otherwise provided in this Agreement, the term of this
Agreement shall expire on June 25, 1999.
6. TERMINATION
A. The Employer may terminate this Agreement and the Employee's employment
immediately and without severance pay upon the occurrence of any one of the
following events:
(a) any act or omission of the Employee which constitutes grounds
for dismissal of an employee for just cause as that term is
interpreted by the applicable employment and labour law of the
province; or
(b) death of the Employee.
B. The Employer may also terminate this Agreement and the Employee's employment
by providing the Employee with two months If the applicable statutory employment
and labour laws of the province provide for a period of notice greater than that
set out in this section, then the Employer shall comply with such laws. However,
the Employee will not be entitled to any more notice or severance pay than set
out in this Agreement or as provided by the applicable statutory employment and
labour laws of the province.
C. The Employee may terminate this Agreement and the Employee's employment by
providing at least two months notice of termination.
D. Upon termination of this Agreement:
(a) the Employer's obligations to the Employee under this
Agreement shall terminate except for the Employer's obligation
to pay the Employee's compensation and expenses in accordance
with the terms of this Agreement, to the date of termination:
and
(b) the Employee's obligations to the Employer under this
Agreement shall terminate except those obligations which are
specifically expressed to survive the termination of this
Agreement.
-3-
<PAGE> 4
7. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of British
Columbia and the federal laws of Canada applicable therein.
8. SEVERABILITY
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be determined to be
invalid, illegal or unenforceable, the remaining provisions of this Agreement,
and the application of such provision to any person or in any circumstance other
than that to which it is held to be invalid, illegal or unenforceable, shall not
be affected thereby.
9. AMENDMENTS
Any amendment to this Agreement must be in writing and signed by both
parties hereto.
10. TIME OF ESSENCE
Time shall be of the essence in this Agreement.
11. ENTIRE AGREEMENT
This is the entire Agreement between the Employer and the Employee with
respect to the employment of the Employee by the Employer and supersedes any
prior agreements with respect to such employment whether written or oral.
12. NOTICES
Notices hereunder shall be in writing and must be either personally
delivered or sent by double registered mail to the address(es) set forth above.
A party may change the address set forth above by proper notice to the other.
13. NO WAIVER
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time for which
such failure continues, shall not be a waiver of such party's right to demand
strict performance in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any covenant or obligation
hereunder shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or of any other obligation hereunder.
-4-
<PAGE> 5
14. ASSIGNMENT
This Agreement is personal in nature and may not be assigned by either
party hereto.
15. ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of
each of the parties hereto and their respective permitted receivers, successors
and assigns.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
MINCO MINING & METALS CORPORATION
Per: /s/ Colin McAleenan
------------------------------
Colin McAleenan
Vice President
/s/ Peter Tsaparas
- ----------------------------------
PETER TSAPARAS
<PAGE> 1
Exhibit 3n
CONSULTING AGREEMENT
THIS AGREEMENT is dated the 25th day of June, 1996,
BETWEEN:
MINCO MINING & METALS CORPORATION
1870-401 West Georgia Street
Vancouver
British Columbia, V6B 5AI
(herein the "CLIENT")
- and -
COLIN MCALEENAN
2596 Harrier Drive
Coquitlam
British Columbia, V3E 2A9
(herein the "CONSULTANT")
WHEREAS the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement and the Consultant has agreed to provide
such services, all in consideration and upon the terms and conditions contained
herein;
NOW THEREFORE it is hereby agreed as follows:
1. SERVICES
The Client agrees to engage the Consultant to act as a Vice President and
to provide the Client with such other consulting services as the Client
and the Consultant agree upon and the Consultant has agreed to perform and
provide such services (collectively the "SERVICES").
2. TERM
Except as otherwise provided in this Agreement, the Client agrees to
engage the Consultant to provide the Services for a term commencing June
25, 1996 and ending June 25, 1997.
3. FEE
(a) The Client agrees to pay the Consultant a fee for the Services
provided by the
<PAGE> 2
Consultant under the Agreement in the amount of $325.00 per day
payable bimonthly on the fifteenth and last day of each month to a
maximum of $84,000 per year for the term of this Agreement with such
amounts reviewable upon any extensions or renewals of this
Agreement.
(b) The Consultant agrees to render bimonthly invoices to the Client, in
a form reasonably acceptable to the Client, detailing the Services
performed by the Consultant.
(c) The Client shall be responsible for all sales taxes (including goods
and services taxes) due in respect of the fees paid to the
Consultant. The fees paid to the Consultant under this Agreement
shall be increased to take into account any applicable goods and
services taxes or other sales or value added taxes payable in
respect of such fees, and all invoices provided by the Consultant
shall include the GST registration number and any other applicable
sales or value added tax registration numbers of the Consultant.
4. EXPENSES
The Client shall pay for or reimburse the Consultant for all reasonable,
ordinary and necessary expenses incurred by the Consultant in the ordinary
course of performing the Services upon presentation of proper accounts,
statements, invoices or receipts for such items.
5. INDEPENDENT CONTRACTOR
The Consultant's relationship with the Client as created by this Agreement
is that of an independent contractor for the purposes of the Income Tax
Act (Canada) and any similar provincial taxing legislation. It is intended
that the Consultant shall have general control and direction over the
manner in which its services are to be provided to the Client under this
Agreement. Nothing contained in this Agreement shall be regarded or
construed as creating any relationship (whether by way of
employer/employee, agency, joint venture, association, or partnership)
between the parties other than as an independent contractor as set forth
herein.
6. TIME AND EFFORT
The Consultant shall be free to devote such portion of the Consultant's
time, energy, effort and skill as the Consultant sees fit, and to perform
the Consultant's duties when and where the Consultant sees fit, so long as
the Consultant performs the Services set out in this Agreement in a timely
and professional fashion.
7. AUTHORITY
- 2 -
<PAGE> 3
The Consultant acknowledges that it is being retained as a consultant to
the Client and that as such it does not have the authority and cannot
commit or bind the Client to any matter, contract or negotiation without
the prior authorization of the Client.
8. COMPLIANCE
(a) The Consultant shall comply with all applicable federal, provincial
and municipal laws, rules and regulations arising out of or
connected with the performance of the Services under this Agreement
by the Consultant or its employees.
(b) The Consultant shall be responsible for all Unemployment Insurance
Contributions, Canada Pension Plan contributions, Income Tax and
Workers' Compensation payments relating to or arising out of the
fees paid to the Consultant under this Agreement and the Services
performed by the Consultant or its employees. Payments relating to
any of the above shall be the responsibility of the Consultant and
shall be forwarded by the Consultant as appropriate, directly to the
government agencies involved. Proof of compliance with this
requirement shall be available to the Client upon request.
(c) In the event that any taxing authority, for whatever reason, seeks
from the Client any Unemployment Insurance Contributions, Canada
Pension Plan contributions, Income Taxes or Workers' Compensation
payments, the Consultant agrees to indemnify the Client and any of
its directors, officers and employees, for the fun amount of any
such contributions or payments (including any applicable interest
and penalties thereon). The Consultant further agrees that the
Client may set off an equal amount of such contributions or payments
(including any applicable interest and penalties thereon) against
any fees and expenses payable to the Consultant under this
Agreement.
9. SUPPORT
The Client agrees to provide such assistance and make available such
employees, office space and support to the Consultant as is reasonably
necessary to enable the Consultant to perform the Services under this
Agreement.
10. CONFIDENTIAL INFORMATION
(a) The Consultant acknowledges that certain of the material and
information made available to the Consultant by the Client in the
performance of the Services (the "CONFIDENTIAL INFORMATION") will be
of a confidential nature. The Consultant recognizes that the
Confidential Information is the sole and exclusive property of the
Client, and the Consultant shall use its best efforts and exercise
utmost
- 3 -
<PAGE> 4
diligence to protect and maintain the confidentiality of the
Confidential Information. The Consultant shall not, directly or
indirectly, use the Confidential Information for its own benefit, or
disclose to another any Confidential Information, whether or not
acquired, learned, obtained or developed by the Consultant alone or
in conjunction with others, except as such disclosure or use may be
required in connection with the performance of the Services or as
may be consented to in writing by the Client.
(b) The Confidential Information is and shall remain the sole and
exclusive property of the Client regardless of whether such
information was generated by the Consultant or by others. and the
Consultant agrees that upon termination of this Agreement it shall
deliver promptly to the Client all such tangible parts of the
Confidential Information including records, data, notes, reports,
proposals, client lists, correspondence, materials, marketing or
sales information, computer programs, equipment, or other documents
or property which are in the possession or under the control of the
Consultant without retaining copies thereof.
(c) Each of the foregoing obligations of the Consultant in this clause
shall also apply to any confidential information of customers, joint
venture parties, contractors and other entities, of any nature
whatsoever, with whom the Client or any associate or affiliate of
the Client has business relations.
(d) Notwithstanding the foregoing provisions of this clause, the
Consultant shall not be liable for the disclosure or use of any of
the Confidential Information to the extent that:
(i) the Confidential Information is or becomes available to the
public from a source other than the Consultant and through no
fault of the Consultant; or
(ii) the Confidential Information is lawfully obtained by the
Consultant from a third party or a source outside of this
Agreement.
(e) The covenants and agreements contained in this clause shall survive
the termination of this Agreement.
11. OTHER SERVICES
The Consultant will be free to perform consulting and other services to
the Consultant's other clients during the term of this Agreement, provided
however, that the Consultant shall ensure that the Consultant is able to
perform the Services pursuant to this Agreement in a timely and
professional fashion. The Consultant agrees not to perform services for
the Consultant's other clients which may create a conflict of interest or
interfere with the Consultant's duties pursuant to this Agreement.
- 4 -
<PAGE> 5
12. TERMINATION
(a) In the event that the Consultant breaches this Agreement, or
otherwise fails to perform the Services in accordance with the terms
of this Agreement, the Client may terminate this Agreement
immediately and without notice for cause. Either party may terminate
this Agreement at any time, without cause or reason, upon giving 2
months advance written notice to the other.
(b) Upon termination of this Agreement:
(i) the Client's obligations to the Consultant under this
Agreement shall terminate except for the Client's obligation
to pay any fees and expenses in accordance with the terms of
this Agreement, to the date of termination; and
(ii) the Consultant's obligations to the Client under this
Agreement shall terminate except those obligations which are
specifically expressed to survive the termination of this
Agreement.
13. INDEMNIFICATION
(a) The Client undertakes to, and does hereby agree to, indemnify the
Consultant and its directors, officers and employees against any and
all actions, suits, claims, costs, and demands, losses, damages and
expenses which may be brought against or suffered by them or which
they may sustain, pay or incur by reason of the Consultant's
performance of the Services under this Agreement, with the exception
of any such actions, suits, claims, costs and demands, losses,
damages and expenses caused by the wilful misconduct or gross
negligence of the Consultant or any of its directors, officers or
employees.
14. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of British
Columbia and the federal laws of Canada applicable therein.
15. SEVERABILITY
If any provision of this Agreement, or the application of such provision
to any person or in any circumstance, shall be determined to be invalid,
illegal or unenforceable, the remaining provisions of this Agreement, and
the application of such provision to any person or in any circumstance
other than that to which it is held to be invalid, illegal or
unenforceable, shall not be affected thereby.
- 5 -
<PAGE> 6
16. AMENDMENTS
Any amendment to this Agreement must be in writing and signed by both
parties hereto.
17. TIME OF ESSENCE
Time shall be of the essence in this Agreement.
18. ENTIRE AGREEMENT
This is the entire Agreement between the Client and the Consultant with
respect to the consulting services to be provided by the Consultant to the
Client and supersedes any prior agreements with respect to such services
whether written or oral.
19. NOTICES
Notices hereunder shall be in writing and must be either personally
delivered or sent by double registered mail to the address(es) set forth
above. A party may change the address set forth above by proper notice to
the other.
20. NO WAIVER
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time for
which such failure continues, shall not be a waiver of such party's right
to demand strict performance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any
covenant or obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or of any
other obligation hereunder.
21. ASSIGNMENT
This Agreement is personal in nature and may not be assigned by either
party hereto.
22. ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of
each of the parties hereto and their respective employees and permitted
receivers, successors and assigns.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
MINCO MINING & METALS CORPORATION
Per: /s/ Ken Cai
--------------------------------------
Ken Cai
President
/s/ Colin McAleenan
- --------------------------------------
Colin McAleenan
- 7 -
<PAGE> 1
Exhibit 3o
CONSULTING AGREEMENT
THIS AGREEMENT is dated the 25 day of June, 1996,
BETWEEN:
MINCO MINING & METALS CORPORATION
1870-401 West Georgia Street
Vancouver
British Columbia, V6B 5A1
(herein the "CLIENT")
- and -
1066098 ONTARIO INC.
363 Lawrence Avenue West
North York
Ontario, M5M IB8
(herein the "CONSULTANT")
WHEREAS the Client desires to engage the Consultant to provide services to the
Client for the term of this Agreement and the Consultant has agreed to provide
such services, all in consideration and upon the terms and conditions contained
herein;
NOW THEREFORE it is hereby agreed as follows:
1. SERVICES
The Client agrees to engage the Consultant to act as Vice President,
Corporate Development and to provide the Client with such other
consulting services as the Client and the Consultant agree upon and the
Consultant has agreed to perform and provide such services
(collectively the "SERVICES").
2. TERM
Except as otherwise provided in this Agreement, the Client agrees to
engage the Consultant to provide the Services for a term Commencing
March 1, 1996 and ending December 31, 1996.
3. FEE
(a) The Client agrees to pay the Consultant a fee for the Services
provided by the
<PAGE> 2
Consultant under the Agreement in the amount of $330.00 per
day payable monthly on the last day of the month to a maximum
of $79,200 per year during the term of this Agreement.
(b) The Consultant agrees to render monthly invoices to the
Client, in a form reasonably acceptable to the Client,
detailing the Services performed by the Consultant.
(c) The Client shall be responsible for all sales taxes (including
goods and services taxes) due in respect of the fees paid to
the Consultant. The fees paid to the Consultant under this
Agreement shall be increased to take into account any
applicable goods and services taxes or other sales or value
added taxes payable in respect of such fees, and all invoices
provided by the Consultant shall include the GST registration
number and any other applicable sales or value added tax
registration numbers of the Consultant.
4. EXPENSES
The Client shall pay for or reimburse the Consultant for all
reasonable, ordinary and necessary expenses incurred by the Consultant
in the ordinary course of performing the Services upon presentation of
proper accounts, statements, invoices or receipts for such items.
5. INDEPENDENT CONTRACTOR
The Consultant's relationship with the Client as created by this
Agreement is that of an independent contractor for the purposes of the
Income Tax Act (Canada) and any similar provincial taxing legislation.
It is intended that the Consultant shall have general control and
direction over the manner in which its services are to be provided to
the Client under this Agreement. Nothing contained in this Agreement
shall be regarded or construed as creating any relationship (whether by
way of employer/employee, agency, joint venture, association or
partnership) between the parties other than as an independent
contractor as set forth herein.
6. TIME AND EFFORT
The Consultant shall be free to devote such portion of the Consultant's
time, energy, effort and skill as the Consultant sees fit, and to
perform the Consultant's duties when and where the Consultant sees fit,
so long as the Consultant performs the Services set out in this
Agreement in a timely and professional fashion.
7. AUTHORITY
-2-
<PAGE> 3
The Consultant acknowledges that it is being retained as a consultant
to the Client and that as such it does not have the authority and
cannot commit or bind the Client to any matter, contract or negotiation
without the prior authorization of the Client.
8. COMPLIANCE
(a) The Consultant shall comply with all applicable federal,
provincial and municipal laws, rules and regulations arising
out of or connected with the performance of the Services under
this Agreement by the Consultant or its employees.
(b) The Consultant shall be responsible for all Unemployment
Insurance Contributions, Canada Pension Plan contributions,
Income Tax and Workers' Compensation payments relating to or
arising out of the fees paid to the Consultant under this
Agreement and the Services performed by the Consultant or its
employees. Payments relating to any of the above shall be the
responsibility of the Consultant and shall be forwarded by the
Consultant as appropriate, directly to the government agencies
involved. Proof of compliance with this requirement shall be
available to the Client upon request.
(c) In the event that any taxing authority, for whatever reason,
seeks from the Client any Unemployment Insurance
Contributions, Canada Pension Plan contributions, Income Taxes
or Workers' Compensation payments, the Consultant agrees to
indemnify the Client and any of its directors, officers and
employees, for the full amount of any such contributions or
payments (including any applicable interest and penalties
thereon). The Consultant further agrees that the Client may
set off an equal amount of such contributions or payments
(including any applicable interest and penalties thereon)
against any fees and expenses payable to the Consultant under
this Agreement.
9. KEY PERSON
The parties acknowledge that Donald Hicks is a key employee of the
Consultant and is integral to the successful performance of the
Services by the Consultant under this Agreement. It is acknowledged by
the Consultant that Donald Hicks will perform all of the Services,
unless the Client otherwise consents in writing.
10. SUPPORT
The Client agrees to provide such assistance and make available such
employees, office space and support to the Consultant as is reasonably
necessary to enable the Consultant to perform the Services under this
Agreement.
11. CONFIDENTIAL INFORMATION
-3-
<PAGE> 4
(a) The Consultant acknowledges that certain of the material and
information made available to the Consultant by the Client in
the performance of the Services (the "CONFIDENTIAL
INFORMATION") will be of a confidential nature. The Consultant
recognizes that the Confidential Information is the sole and
exclusive property of the Client, and the Consultant shall use
its best efforts and exercise utmost diligence to protect and
maintain the confidentiality of the Confidential Information.
The Consultant shall not, directly or indirectly, use the
Confidential Information for its own benefit, or disclose to
another any Confidential Information, whether or not acquired,
learned, obtained or developed by the Consultant alone or in
conjunction with others, except as such disclosure or use may
be required in connection with the performance of the Services
or as may be consented to in writing by the Client.
(b) The Confidential Information is and shall remain the sole and
exclusive property of the Client regardless of whether such
information was generated by the Consultant or by others, and
the Consultant agrees that upon termination of this Agreement
it shall deliver promptly to the Client all such tangible
parts of the Confidential Information including records, data,
notes, reports, proposals, client lists, correspondence,
materials, marketing or sales information, computer programs,
equipment, or other documents or property which are in the
possession or under the control of the Consultant without
retaining copies thereof.
(c) Each of the foregoing obligations of the Consultant in this
clause shall also apply to any confidential information of
customers, joint venture parties, contractors and other
entities. of any nature whatsoever, with whom the Client or
any associate or affiliate of the Client has business
relations.
(d) Notwithstanding the foregoing provisions of this clause, the
Consultant shall not be liable for the disclosure or use of
any of the Confidential Information to the extent that:
(i) the Confidential Information is or becomes available to
the public from a source other than the Consultant and
through no fault of the Consultant; or
(ii) the Confidential Information is lawfully obtained by
the Consultant from a third party or a source outside
of this Agreement.
(e) The covenants and agreements contained in this clause shall
survive the termination of this Agreement.
12. OTHER SERVICES
-4-
<PAGE> 5
The Consultant will be free to perform consulting and other services to
the Consultant's other clients during the term of this Agreement,
provided however, that the Consultant shall ensure that the Consultant
is able to perform the Services pursuant to this Agreement in a timely
and professional fashion. The Consultant agrees not to perform services
for the Consultant's other clients which may create a conflict of
interest or interfere with the Consultant's duties pursuant to this
Agreement.
13. TERMINATION
(a) In the event that the Consultant breaches this Agreement, or
otherwise fails to perform the Services in accordance with the
terms of this Agreement, the Client may terminate this Agreement
immediately and without notice for cause. Either party may
terminate this Agreement at any time, without cause or reason,
upon giving 2 months advance written notice to the other.
(b) Upon termination of this Agreement:
(i) the Client's obligations to the Consultant under this
Agreement shall terminate except for the Client's
obligation to pay any fees and expenses in accordance
with the terms of this Agreement, to the date of
termination; and
(ii) the Consultant's obligations to the Client under this
Agreement shall terminate except those obligations which
are specifically expressed to survive the termination of
this Agreement.
14. INDEMNIFICATION
(a) The Client undertakes to, and does hereby agree to, indemnify
the Consultant and its directors, officers and employees
against any and all actions, suits, claims, costs, and
demands, losses, damages and expenses which may be brought
against or suffered by them or which they may sustain, pay or
incur by reason of the Consultant's performance of the
Services under this Agreement, with the exception of any such
actions, suits, claims, costs and demands, losses, damages and
expenses caused by the wilful misconduct or gross negligence
of the Consultant or any of its directors, officers or
employees.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
16. SEVERABILITY
-5-
<PAGE> 6
If any provision of this Agreement, or the application of such
provision to any person or in any circumstance, shall be determined to
be invalid, illegal or unenforceable, the remaining provisions of this
Agreement, and the application of such provision to any person or in
any circumstance other than that to which it is held to be invalid,
illegal or unenforceable, shall not be affected thereby.
17. AMENDMENTS
Any amendment to this Agreement must be in writing and signed by both
parties hereto.
18. TIME OF ESSENCE
Time shall be of the essence in this Agreement.
19. ENTIRE AGREEMENT
This is the entire Agreement between the Client and the Consultant with
respect to the consulting services to be provided by the Consultant to
the Client and supersedes any prior agreements with respect to such
services whether written or oral.
20. NOTICES
Notices hereunder shall be in writing and must be either personally
delivered or sent by double registered mail to the address(es) set
forth above. A party may change the address set forth above by proper
notice to the other.
21. No Waiver
The failure of any party to insist upon the strict performance of a
covenant or obligation hereunder, irrespective of the length of time
for which such failure continues, shall not be a waiver of such party's
right to demand strict performance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance
of any covenant or obligation hereunder shall constitute a consent or
waiver to or of any other breach or default in the performance of the
same or of any other obligation hereunder.
22. ASSIGNMENT
This Agreement is personal in nature and may not be assigned by either
party hereto.
23. ENUREMENT
This Agreement shall be binding upon and shall enure to the benefit of
each of the parties
-6-
<PAGE> 7
hereto and their respective employees and permitted receivers,
successors and assigns.
IN WITNESS WHEREOF the parties hereto have signed this Agreement as of the day
and year first above written.
MINCO MINING & METALS CORPORATION
Per: /s/ Ken Cai
------------------------------
Ken Cai
President
1066098 ONTARIO INC.
Per: /s/ Donald Hicks
------------------------------
Donald Hicks
President
-7-
<PAGE> 1
THIS STOCK OPTION AGREEMENT made as of the 2nd day of June, 1995.
Exhibit 3p
BETWEEN:
MINCO MINING AND METALS CORPORATION, a company duly
incorporated under the laws of the Province of British
Columbia, having its Registered Office at Suite 1750, 1185
West Hastings Street, in the City of Vancouver, in the
Province of British Columbia, and its Head Office at Suite
1870, 401 W. Georgia Street, in the City of Vancouver, in the
Province of British Columbia
(hereinafter called the "Company")
OF THE FIRST PART
A N D:
PETROS TSAPARAS, Businessman, of 4112 Puget Drive, in the City
of Vancouver, in the Province of British Columbia, V6L 2V8
(hereinafter called the "Holder")
OF THE SECOND PART
W H E R E A S:
A. The Holder is a director of the Company or of its subsidiary (a "Director"),
or an employee of the Company, its subsidiary or a company providing management
services to the Company (an "Employee").
B. The effective date of this Agreement and the date for reference shall be the
2nd day of June, 1995.
NOW THEREFORE THIS AGREEMENT WITNESSETH as follows:
1. The Company hereby grants to the Holder upon the terms and conditions
hereinafter contained, the sole and exclusive right and option for a period of
FIVE (5) years to purchase all or any part of THIRTY FIVE THOUSAND EIGHT HUNDRED
SEVENTY FIVE (35,875) shares of its capital as fully paid and non-assessable
freely trading shares, exercisable
<PAGE> 2
-2-
up to and inclusive of the fifth anniversary of the effective date hereof, at a
price of $1.00 per share (the "option shares"), the grant of such option being
subject always to the provisions as to earlier termination as set out in
paragraph 2 hereof.
2. (a) SAVE AND EXCEPT as hereinafter provided, in the event that the
Holder becomes neither a Director nor an Employee, all the
rights granted to the Holder hereunder as to any of the option
shares and with respect to which the Holder has not
theretofore exercised the Holder's option to purchase shall
forthwith cease and determine upon the expiry of a period of
thirty (30) days next following the date upon which the Holder
becomes neither a Director nor an Employee;
(b) (i) In the event of the death of the Holder during the term of
the option granted to the Holder under this Agreement, the
Holder's personal representatives shall be entitled to
purchase all or any part of the option shares; PROVIDED ALWAYS
that the option is exercised and the payment is tendered
within one (1) year of the date of death;
(ii) SAVE AND EXCEPT as expressly provided in sub-clause
(i) hereof, the option granted to the Holder shall
cease and determine upon the Holder's death.
3. If the Holder at any time and from time to time during the option period
desires to purchase any of the option shares, the Holder may do so by giving
notice to the Company at its Registered Office or Head Office within the time or
times herein limited for exercise of the option and by tendering to the Company
at its Registered Office or Head Office the Holder's certified cheque in favour
of the Company in the full amount of the purchase price payable hereunder for
such number of the shares comprised in the election.
4. The option granted under this Agreement is non-assignable and
non-transferable.
<PAGE> 3
-3-
5. Time shall be of the essence of this Agreement.
6. (a) Save and except in the case of the issuance of additional
shares of the Company for a consideration, in the case of any
reclassification or reorganization of the capital of the
Company or in the case of the merger or amalgamation of the
Company with or into any other company, or if and whenever the
shares of the Company are subdivided into a greater number or
consolidated into a lesser number of shares, or in the event
of any payment by the Company of a stock dividend, then as a
condition of such reclassification or reorganization of
capital, merger, amalgamation, subdivision, consolidation or
payment of a stock dividend, this option shall be adjusted and
lawful and adequate provision shall be made whereby the Holder
hereof shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in
this Option Agreement and in lieu of the shares of the Company
immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares
equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of
the rights represented hereby had such reclassification or
reorganization of capital, merger, amalgamation, subdivision,
consolidation or payment of a stock dividend not taken place,
and in any such case appropriate provision shall be made with
respect to the rights and interest of the Holder to the end
that the provisions hereof (including without limitation
provisions for adjustments of the option price and of the
number of shares purchasable upon the conversion of this
option) shall thereafter be applicable, as nearly as may be in
relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof.
(b) The adjustments provided for in this section in the
subscription rights pursuant to this option are cumulative.
<PAGE> 4
-4-
(c) If any question shall at any time arise with respect to any
adjustments to be made under this Clause 6, such question
shall be conclusively determined by the Company's auditor, or,
if he declines to so act, any other chartered accountant in
Vancouver, B.C. that the Company may designate and who shall
have access to all appropriate records, and such determination
shall be binding upon the Company and the Holder.
(d) Nothing in this Clause 6 shall in anyway extend the time
within which this option may be exercised.
7. The Holder represents that he is a Director, an Employee or both.
8. The Holder represents that he has not been induced to enter into this
Agreement by the expectation of employment or continued employment.
9. This Agreement and any amendments thereto are subject to their acceptance for
filing with the appropriate securities' regulatory authorities.
10. The grant of the option herein contained shall be subject to its approval by
the shareholders of the Company prior to the exercise of all or a portion of the
option if the Holder is an "insider" of the Company, as that term is defined in
the Securities Act (British Columbia) S.B.C. 1985, Ch. 83.
11. Any amendment to this Agreement shall be subject to its approval by the
shareholders of the Company if the option granted herein, as originally
constituted, was approved by the shareholders of the Company or if at the time
of such amendment the Holder is an "insider" of the Company.
12. This Agreement shall enure to the benefit of the Holder and shall to the
extent hereinbefore provided enure to the benefit of the Holder's heirs,
executors and administrators.
<PAGE> 5
-5-
IN WITNESS WHEREOF the parties hereto have caused these
presents to be executed as and from the day, month and year first above written.
THE COMMON SEAL of MINCO, )
MINING AND METALS )
CORPORATION was hereto affixed )
in the presence of: )
) c/s
/s/ Illegible Signature )
- ----------------------------- )
)
)
)
)
SIGNED, SEALED and DELIVERED by )
PETROS TSAPARAS in the presence of: )
)
)
/s/ Ilegible Signature )
- ----------------------------- )
Signature )
)
)
316-125 W. 19th Street )
- ----------------------------- )
Address ) /s/ Petros Tsaparas
) --------------------------
) PETROS TSAPARAS
N. VcR. Bc )
- ----------------------------- )
)
)
Businesswoman )
- ----------------------------- )
Occupation )
)
)
<PAGE> 6
APPENDIX I
DECLARATION OF STOCK OPTION POSITION
THIS FORM FOR COMPLETION BY OPTIONEE
RE: MINCO MINING AND METALS CORPORATION
RE: 35,875 incentive share options in Minco Mining and Metals Corporation
1, PETROS TSAPARAS, HEREBY CERTIFY that the aforesaid non-transferable options
have been granted to me in compliance with the requirements of the V.S.E.
Listings Policy Statement No. 1; and more particularly that at the time of
grant, I was not aware of any change in the affairs of the Company which might
have affected the trading price and had not been disclosed to the public. If the
Company is classified as a Venture Company as of the date of this declaration, I
confirm that I have not been granted a stock option in the said Company within 2
years of the date of grant of the above-stated options.
I HEREBY FURTHER CERTIFY (complete either Part I or Part 11 as applicable)
PART I
THAT I have not been granted any director or employee incentive share options by
any other listed companies.
DATED the _____ day of ________, 1995. Signature:____________________________
PART II
THAT I hold as of the date of this Declaration existing incentive share options
which have been granted to me by the above named company or other listed
companies as follows:
<TABLE>
<CAPTION>
Outstanding
Name of No. of Balance as
Listed Shares Date of Date of at Date of
Company Optioned Exercise Grant Certificate
<S> <C> <C> <C> <C>
San Andreas Resources 50,000 N/A Sept 6/94 50,000
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(Complete on separate sheet if insufficient space)
DATED the 19 day of June, 1995. Signature: /s/ Petros Tsaparas
-- ---- -----------------------------------
<PAGE> 1
Exhibit 3q
ESCROW AGREEMENT - PROPERTY
THIS AGREEMENT is made as of the 24th day of Dec, 1992.
BETWEEN:
OF CANADA
MONTREAL TRUST COMPANY, 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9
(hereinafter called the "Escrow Agent"
OF THE FIRST PART
AND:
CONSOLIDATED CAPROCK RESOURCES LTD., Suite 900, 777
Hornby Street, Vancouver, British Columbia, V6Z 1S4
(hereinafter called the "Company")
OF THE SECOND PART
AND:
THE UNDERSIGNED SHAREHOLDERS IN CONSOLIDATED CAPROCK
RESOURCES LTD.
(hereinafter individually called "Shareholder" and
collectively called the "Shareholders")
OF THE THIRD PART
WHEREAS:
A. The Shareholder has acquired or is about to acquire shares, of the Company
and has agreed to enter into this Escrow Agreement on the terms and conditions
hereinafter provided;
B. The Escrow Agent has agreed to undertake and perform its duties according
to the terms and conditions hereof.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
aforesaid agreements and the mutual covenants and conditions herein contained
and other good and valuable consideration, the Shareholders jointly and
severally covenant and agree with the Company and the Company and the Escrow
Agent covenant with the other and with the Shareholders jointly and severally as
follows:
1
<PAGE> 2
1. In this Agreement:
(a) "Exchange" shall mean the Vancouver Stock Exchange;
(b) "lost or alienated" shall mean that circumstance where the Company
has lost, alienated, or has not obtained a good or marketable title
to, or that the Company has abandoned or discontinued development
of, any or all of the property or asset, or that any or all of the
property or asset has become of little or no value;
(c) "property or asset" shall mean the property or asset transferred to
the Company in whole or in part consideration for the issuance of
the shares referred to in Schedule A attached hereto;
(d) "Shares" shall mean the shares of each Shareholder set opposite his
name in Schedule A attached hereto, together with any additional
shares issued by way of a dividend paid in shares which accrues to
the Shares, and shall be deemed to refer to the certificate or
certificates representing such shares;
(e) "Superintendent" shall mean the Superintendent of Brokers of the
Province of British Columbia or any Deputy Superintendent of Brokers
of the Province of British Columbia, or any duly authorized person
performing his duties under the Securities Act of the Province of
British Columbia as from time to time amended; and
(f) "Superintendent or Exchange" means the Superintendent, if the shares
of the Company are not listed on the Exchange, or the Exchange if
the shares of the Company are listed on the Exchange.
2. Each Shareholder hereby places and deposits in escrow with the Escrow
Agent the number of Shares of the Company set forth opposite his name in
Schedule A attached hereto.
3. The parties hereby agree that the Shares and the beneficial ownership of
or any interest in them shall not be sold, assigned, hypothecated, alienated,
released from escrow, transferred with escrow, or otherwise in any manner dealt
with except as may be required by reason of the death or bankruptcy of any
Shareholder, in which case the Escrow Agent shall hold the Shares subject to
this Agreement, for whatever person, firm or corporation shall be legally
entitled to be or become the registered owner thereof.
4. The Shareholders hereby direct the Escrow Agent to retain their Shares,
and not to do or cause anything to be done to release the same from escrow or to
allow any transfer,
2
<PAGE> 3
hypothecation or alienation thereof. The Escrow Agent hereby accepts the
responsibilities placed on it hereby and agrees to perform the same in
accordance with the terms hereof and in accordance with any order or direction
of the Superintendent or Exchange, subject only to any right of appeal against
any such order or direction as referred to herein.
5. If, during the period in which any of the Shares are retained in escrow
pursuant hereto, any dividend, other than a dividend paid in shares of the
Company, is received by the Escrow Agent in respect of Shares, such dividend
shall be paid or transferred forthwith to the Shareholders entitled thereto. Any
shares received by the Escrow Agent by way of dividend in respect of the Shares
shall be dealt with as if they were Shares hereunder.
6. All voting rights attached to the Shares may at all times be exercised by
the respective registered owners thereof.
7. The Company hereby acknowledges the terms and conditions of this Agreement
and agrees to take all reasonable steps to facilitate its performance.
8. The written consent, order or direction of the Superintendent or Exchange
to a release from escrow of all or part of the Shares shall terminate this
Agreement only in respect to those Shares so released. For greater certainty
this clause does not apply to Shares transferred within escrow.
9. It is understood and acknowledged by the Company and the Shareholder that
a portion of the consideration for the issuance of the Shares is to encourage
the Shareholder to act in the best interests of the Company and, if the Company
becomes successful due in part for the efforts of the Shareholders, and in such
case, and notwithstanding that the property or asset has been lost or alienated,
the Shareholder shall be entitled to maintain their ownership of the Shares and
to a release of the Shares from the terms of this Agreement from time to time in
accordance with the general policies of the Superintendent or Exchange.
10. In the event that the Company has lost or alienated the property or asset,
the Company and each Shareholder have the express obligation and hereby agree to
declare any such event or the circumstance and the particulars thereof to the
Superintendent or Exchange.
11. Upon the Superintendent or Exchange being advised of the loss or
alienation of the property or asset, they may, at their discretion, make such
order or direction for the cancellation of all or any portion of the Shares as
they deem advisable, provided however, that the fact that the property or
3
<PAGE> 4
asset has been lost or alienated shall not, in itself, be cause for cancellation
of all or a part of the shares. It shall advise Escrow Agent of such order or
direction and the Escrow Agent, subject to paragraph 15 hereof, shall cancel
such Shares as the Superintendent or Exchange has ordered or directed.
12. If the Company ceases to own any substantial property or asset whatsoever,
any Shareholder or group of Shareholders of the Company, holding in the
aggregate not less than 5% of the issued and outstanding common shares of the
Company may, by notice in writing directed to the Superintendent or Exchange,
request that the Superintendent or Exchange order or direct that all or a
portion of the Shares be cancelled. Any such shareholder or group of
shareholders shall have the same right of appeal as is set out in paragraph 15.
13. If the Company ceases to own any substantial property or assets whatsoever
and ceases for a period of three (3) months or more to engage in any substantial
business Activity relating to its normal business, then and in such case, the
Superintendent or the Exchange may make an order or direction to cancel all or
any of the shares.
14. Upon receipt of any order or direction of the Superintendent or Exchange
and subject as herein provided, the Shareholder here irrevocably appoints the
Escrow Agent their attorney for the purpose of cancelling, selling, assigning or
transferring any portion of the Shares for the purpose of executing any
necessary acts of assignment or transfer, and with authority to substitute one
or more persons with like full power.
15. Upon receipt by the Escrow Agent of any order or direction for the
cancellation of any of the Shares, the Escrow Agent shall forthwith advise the
Shareholders and shall not take any steps to cancel such Shares for 90 days from
receipt of the order or direction. The Company or any Shareholder shall have the
right to appeal the decision of the Superintendent or Exchange as if it were a
decision of the Superintendent in accordance with the provisions of the
Securities Act of the Province of British Columbia.
16. Any order or direction of the Superintendent or Exchange for the release
of all or any of the Shares from the terms of this Agreement shall be subject to
the same right of appeal by the Company or any shareholder as is set out in
paragraph 15 above and the Escrow Agent shall not release any Shares from the
terms of this Agreement until the expiry of ten (10) days from the receipt of
the order or direction of the Superintendent or Exchange.
17. Nothing herein shall prevent the Company and the Shareholder, or any
successors or permitted assigns of the Shareholder, from amending any agreement
pursuant to which the
4
<PAGE> 5
Shares were originally issued, including any amendment which substitutes one
property or asset for the property or asset originally blended to the Company,
PROVIDED HOWEVER, that any such amendment or substitution shall be subject to
the consent of the Superintendent or Exchange.
18. Nothing herein shall prevent the Superintendent or Exchange from
consenting to the release of Shares from the terms of this Agreement from time
to time, even though all or a portion of the property or asset for which the
Shares were originally issued or any property or asset substituted therefor,
has been lost or alienated.
19. Notice of any order or direction of the Superintendent or Exchange shall
be given by the Escrow Agent to all persons or parties affected thereby at their
last known registered address.
20. This Agreement may be executed in several parts in the same form and such
parts as so executed shall together form one original agreement, and such parts,
if more than one, shall be read together and construed as if all the signing
parties hereto had executed one copy of this Agreement.
21. Wherever the singular or masculine are used through this Agreement, the
same shall be construed as being the plural or feminine or neuter when the
context so requires.
22. This Agreement shall enure to the benefit of and be binding upon the
parties hereto, their and each of their heirs, successors, administrators,
successors and permitted assigns.
23. The parties hereto agree that in consideration of the premises and of the
Escrow Agent agreeing to act in such capacity, the Shareholders and the Company
do hereby jointly and severally covenant and agree from time to time and at all
times hereafter well and truly to save, defend and keep harmless and fully
indemnify the Escrow Agent, its successors and assigns, from and against all
loss, costs, charges, suits, demands, claims, damages and expenses which the
Escrow Agent, its successors or assigns, may from time to time hereafter bear,
sustain, suffer or be put unto for or by reason or on account of its acting as
Escrow Agent or anything in any manner relating thereto or by reason of the
Escrow Agent's compliance in good faith with the terms hereof.
24. It is further agreed by and between the parties hereto, and without
restricting the foregoing indemnity, that in case proceedings should hereafter
be taken in any court respecting the Shares, the Escrow Agent shall not be
obliged to defend any such action or submit its rights to the court until it
shall have been indemnified by other good and sufficient security in addition to
5
<PAGE> 6
the indemnity hereinbefore given against its costs of such proceedings.
IN WITNESS WHEREOF the parties hereto have executed these presents the day
and year first written above.
THE COMMON SEAL OF MONTREAL )
TRUST COMPANY was hereunto )
affixed in the presence of: ) C/S
)
)
/s/ )
- --------------------------- )
Authorized Signatory )
)
)
/s/ )
- --------------------------- )
Authorized Signatory )
/s/ /s/ Peter P. Tsaparas
- --------------------------- ) -----------------------------
Witness ) Peter P. Tsaparas
THE COMMON SEAL OF )
CONSOLIDATED CAPROCK )
RESOURCES LTD was hereunto )
affixed in the presence of: ) C/S
)
/s/ Peter P. Tsaparas )
- --------------------------- )
Authorized Signatory )
)
)
- --------------------------- )
Authorized Signatory )
6
<PAGE> 7
SCHEDULE A
TO THE ESCROW AGREEMENT - PROPERTY
DATED AS OF THE DAY OF DECEMBER, 1992
AMONG MONTREAL TRUST COMPANY,
CONSOLIDATED CAPROCK RESOURCES LTD.
AND PETER P. TSAPARAS
Shares held in escrow are subject to rules, regulations and policies of the
Superintendent of Brokers and the Vancouver Stock Exchange, as may be in effect
during the currency of this Agreement.
<TABLE>
<CAPTION>
Name and Address of Shareholder Number of Shares
- ------------------------------- ----------------
<S> <C>
Peter Tsaparas 194,276
c/o 900 - 595 Howe Street
Vancouver, B.C.
V6C 2T5
</TABLE>
<PAGE> 8
(APPENDIX A TO LOCAL POLICY STATEMENT 3-07)
ESCROW AGREEMENT ADDITIONAL PRINCIPALS SHARES
THIS AGREEMENT is dated for reference June 25, 1990 and made
AMONG:
MONTREAL TRUST COMPANY OF CANADA, 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9
(the "Escrow Agent");
AND:
CONSOLIDATED CAPROCK RESOURCES LTD., Suite 900, 777
Hornby Street, Vancouver, British Columbia, V6Z 1S4
(the "Issuer");
AND:
EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares of the
Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of the
shares upon the acquisition of the shares by the Shareholder;
NOW THEREFORE in consideration of the covenants contained in this Agreement and
other good and valuable consideration (the receipt and sufficiency of which is
acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this Agreement:
(a) "Acknowledgement" means the acknowledgement and agreement to be
bound in the form attached as Schedule A to this Agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c.83;
(c) "Exchange" means the Vancouver Stock Exchange
(d) "Local Policy Statement 3-07" means the Local Policy Statement 3-07
in effect as of the date of reference of
1
<PAGE> 9
this Agreement and attached to Schedule 8 to this Agreement;
(e) "Shareholder" means a holder of shares or the Issuer who executes
this Agreement or an Acknowledgement;
(f) "Shares" means the shares of the Shareholder described in Schedule C
to this Agreement, as amended from time to time in accordance with
section 9;
(g) "Superintendent" means the Superintendent of Brokers appointed under
the Act; and
(h) "Superintendent or the Exchange" means the Superintendent, if the
shares of the Issuer are not listed on the Exchange, or the
Exchange, if the shares of the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon as
practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise all voting
rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares
(a) to vote the Shares on a resolution to cancel any of the Shares;
(b) to receive dividends; and
(c) to participate in the assets and property of the Issuer on a winding
up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall abstain from
voting on a directors' resolution to cancel any of the Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the consent of
the Superintendent or the Exchange.
2
<PAGE> 10
(2) The Escrow Agent shall not effect a transfer of the Shares within
escrow unless the Escrow Agent has received
(a) a copy of an Acknowledgement executed by the person to whom
the Shares are to be transferred; and
(b) a letter from the Superintendent or the Exchange consenting to
the transfer.
(3) Upon the death or bankruptcy of a Shareholder,, the Escrow Agent
shall hold the Shares subject to this Agreement for the person that
is legally entitled to become the registered owner of the Shares.
(4) If a Shareholder ceases to be a principal, as that term is defined
in Local Policy Statement 3-07, dies, or becomes bankrupt, the
Shareholder shall be entitled to retain the Shares and shall not be
required to transfer or surrender the Shares to the Issuer for
cancellation.
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain the
Shares until the Shares are released from escrow pursuant to
subsection (2) or surrendered for cancellation pursuant to section
8.
(2) The Escrow Agent shall not release the Shares from escrow unless the
Escrow Agent has received a letter from the Superintendent or the
Exchange consenting to the release.
(3) The approval of the Superintendent or the Exchange to a release from
escrow of any of the Shares shall terminate this Agreement only in
respect of the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow Agent
shall deliver the certificates representing the Share to the Issuer
(a) at the time of a major reorganization of the Issuer, if required as
a condition of the consent to the reorganization by the
Superintendent or the Exchange;
(b) where the Issuer's shares have been subject to a cease trade order
issued under the Act for a period of 2 consecutive years;
3
<PAGE> 11
(c) any of, the Shares which have not been released from the escrow
hereby created before the expiration of 5 years from the date the
Exchange accepts this Agreement for filing shall be cancelled
forthwith and the Issuer and the Escrow Agent hereby agree to take
all such actions as may be necessary to expeditiously effect such
cancellation; or
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2), this Agreement may be amended only by a
written agreement among the Parties and with the written consent of
the Superintendent or the Exchange.
(2) Schedule C to this Agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6;
(b) a release of Shares from escrow pursuant to section 7; or
(c) a surrender of Shares for cancellation pursuant to section 8;
and the Escrow Agent shall note the amendment on the Schedule C in
its possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release, indemnify and
save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agent's compliance in
good faith with this Agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in respect of
the Shares, the Escrow Agent shall give notice to the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow agent in
respect of the Shares, the Issuer shall give notice to the Escrow
Agent.
(3) A notice referred to in subsection (1) or (2) shall be in writing
and delivered to
(a) the Issuer at Suite 900, 777 Hornby Street, Vancouver, British
Columbia, V6Z 1S4 or
4
<PAGE> 12
(b) the Escrow Agent, Montreal Trust Company of Canada at 510
Burrard Street, Vancouver, British Columbia, V6C 3B9
and the notice shall be deemed to have been received on the date of
delivery. The Issuer or the Escrow Agent may change its address for
notice by giving notice to the other party in accordance with this
subsection.
(4) A copy of a notice referred to in subsection (1) or shall
concurrently be delivered to the Superintendent or the Exchange.
(5) The resignation of the Escrow Agent shall be effective and the
Escrow Agent shall cease to be bound by this Agreement on the date
that is 180 days after the date of receipt of the notice referred to
in subsection (1) or (2) or on such other date as the Escrow Agent
and the Issuer may agree upon (the "resignation date").
(6) The Issuer shall, before the resignation date and with the written
consent of the Superintendent or the Exchange, appoint another
escrow agent. and that appointment shall be binding on the Issuer
and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
13. TIME
Time is of the essence of this Agreement.
14. GOVERNING LAWS
This Agreement shall be construed in accordance with and governed by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which shall constitute one agreement.
16. LANGUAGE
WHEREVER a singular expression is used in this Agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
5
<PAGE> 13
17. ENUREMENT
This Agreement enures to the benefit of and Is binding on the Parties and their
heirs, executors, administrators, successors and permitted assigns.
The Parties have executed and delivered this Agreement as of the date of
reference of this Agreement.
THE CORPORATE SEAL OF MONTREAL )
TRUST COMPANY OF CANADA was here- )
unto affix the presence of: )
)
/s/ ) C/S
- -------------------------------- )
Authorized Signatory )
)
/s/ )
- -------------------------------- )
Authorized Signature )
THE CORPORATE SEAL OF )
CONSOLIDATED CAPROCK RESOURCES )
LTD. was hereunto affixed in the )
presence of: )
)
/s/ ) C/S
- -------------------------------- )
Authorized Signatory )
)
/s/ )
- -------------------------------- )
Authorized Signatory )
SIGNED, SEALED AND DELIVERED by )
ROBIN T. FORSHAW in the presence )
of: ) No. of Shares: 60,724
)
/s/ )
- -------------------------------- )
SIGNATURE )
)
/s/ N.E. Smith )
- -------------------------------- )
NAME )
)
Suite 1140-625 Howe Street ) /s/ Robin T. Forshaw
Vancouver, B.C. Canada ) -----------------------------
V6C 2T6 ) ROBIN T. FORSHAW
- -------------------------------- )
ADDRESS )
)
Secretary )
- -------------------------------- )
OCCUPATION )
6
<PAGE> 14
SIGNED, SEALED AND DELIVERED by )
CHARLES S. UNDERHILL in the )
presence of: ) No. of Shares: 120,000
N.F. Smith )
- -------------------------------- )
Signature
- -------------------------------- )
N.F. Smith
- -------------------------------- )
Name
Suite 1140-625 Howe Street ) /s/ Charles S. Underhill
Vancouver, B.C. Canada ) -----------------------------
V6C 2T6 ) CHARLES S. UNDERHILL
- -------------------------------- )
Address
Secretary
- -------------------------------- )
Occupation
7
<PAGE> 15
LPS 3-07
SCHEDULE A T0 ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Superintendent of Brokers or Vancouver Stock Exchange
#1100 - 865 Hornby Street 609 Granville Street
Vancouver, B.C. Vancouver, B.C.
V6Z 2H4 V7Y 1H1
(if the shares are not (if the shares are listed
listed on the Vancouver on the Vancouver Stock
Stock Exchange) Exchange)
I acknowledge that
(a) I have entered into an agreement with under which shares of
(the "Shares") will be transferred to me upon receipt of regulatory
approval, and
(b) the Shares are held in escrow subject to an escrow agreement dated for
reference , 19 . (the "Escrow Agreement"), a copy of which is attached
as Schedule A to this acknowledgement.
In consideration of $1.00 and other good and valuable consideration (the receipt
and sufficiency of which is acknowledged) I agree, effective upon receipt of
regulatory approval of the transfer to me of the Shares, to be bound by the
Escrow Agreement in respect of the Shares as if I were an original signatory to
the Escrow Agreement.
Dated at ___________________________ on _______________ 19 ___.
Where the transferee is an individual:
Signed, sealed and delivered by )
[transferee] in the presence of: )
)
)
- ------------------------------------- )
Name
) --------------------------------
) [transferee]
- ------------------------------------- )
Address
- ------------------------------------- )
- ------------------------------------- )
Occupation
December 21, 1989
<PAGE> 16
LPS 3-07
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed )
in the presence of: )
)
) c/s
- ----------------------------------- )
Authorized signatory
)
)
- ----------------------------------- )
Authorized signatory )
December 21, 1989
<PAGE> 17
[LOGO] Province of
British Columbia BRITISH COLUMBIA SECURITIES COMMISSION
OFFICE OF THE
CHAIRMAN
LOCAL POLICY STATEMENT 3-07
POLICY GUIDELINES RESPECTING TRADING SHARES,
PERFORMANCE SHARES AND OTHER CONSIDERATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART TITLE PAGE
- ---- ----- ----
<S> <C>
1. IMPLEMENTATION 1
2. APPLICATION 1
2.1 Pre-prospectus
2.2 Reactivations and reorganizations
3. TRANSITION 2
3.1 Agreements made under former policy statement
3.2 option of conforming with new policy statement
4. DEFINITIONS 2
4.1 Defined terms
4.2 Terms defined in legislation
5. GENERAL MATTERS 5
5.1 Review of opinions and reports
5.2 Requirement for valuation opinion
5.3 out of pocket costs
5.4 confirmation of fair value
6. ISSUANCE OF TRADING SHARES 6
6.1 Minimum price and maximum aggregate value
6.2 Interest in operating subsidiary
6.3 Value assigned to non-cash assets
6.4 Purchase of interest in mineral property
6.5 Accumulated deficit related to issuer's
stated business purpose
6.6 Exclusion of amounts by Superintendent
</TABLE>
December 21, 1989
1200. 865 Hornby Street
Office:(604) 660-4881 Vancouver
Facsimile: (604) 660-2688 British Columbia
Telex: (604) 04-54599 V6Z 2H4
<PAGE> 18
<TABLE>
<CAPTION>
PART TITLE PAGE
- ---- ----- ----
<S> <C>
7. ISSUANCE OF PERFORMANCE SHARES 8
7.1 Issuance to principals
7.2 Natural resource issuer
7.3 Industrial issuer
7.4 Escrow requirement
7.5 Escrow agreement
7.6 Limitations on rights of holders of performance shares
7.7 Rights on ceasing to be a principal
7.8 Undertaking of holding company
8. TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW 10
8.1 Permitted transferees
8.2 Request for consent to transfer
8.3 Documents to be filed with request for consent to transfer
8.4 Letter of consent or objection
8.5 No transfer during period between prospectus receipt and listing
9. RELEASE OF PERFORMANCE SHARES FROM ESCROW 11
9.1 Release of shares of natural resource issuer
9.2 Reduction in release for natural resource issuer
9.3 Release of shares of industrial issuer
9.4 Adjustment of release calculation
9.5 Requirements for release
9.6 Annual release based on annual audited financial statements
9.7 Request for consent to release
9.8 Documents to be filed with request for consent to release
9.9 Letter of consent or objection
9.10 Request by holder of performance shares for consent to release
10. SURRENDER OF PERFORMANCE SHARES FOR 14
CANCELLATION
</TABLE>
December 21, 1989
<PAGE> 19
LPS 3-07
<TABLE>
<CAPTION>
PART TITLE PAGE
- ---- ----- ----
<S> <C>
11. OTHER CONSIDERATION 14
11.1 Natural resource issuer
11.2 industrial issuer
</TABLE>
Appendix A Escrow Agreement
Appendix B Examples of earn-out prices for performance shares issued by an
industrial issuer
Appendix C Undertaking Required from Non-Reporting or Closely Held Company
December 21, 1989
<PAGE> 20
PART 1 IMPLEMENTATION
1.1 The following local policy statements are hereby rescinded and this local
policy statement substituted therefor, effective March 1, 1990:
(a) Local Policy Statement 3-07, dated February 6, 1987 (the "Former
Policy Statement"), and
(b) Local Policy Statements 3-08, 3-09 and 3-10, each dated February 1,
1987.
PART 2 APPLICATION
2.1 Pre-prospectus - This local policy statement sets out guidelines for
issuance of shares and payment of consideration for assets by an issuer
intending to do an initial public offering and obtain a listing on the
Vancouver Stock Exchange. This local policy statement addresses
(a) the issuance of trading shares, which are common shares issued as
consideration for cash or assets contributed to the issuer and, in
certain cases, expenses incurred to advance the business of the
issuer,
(b) the issuance of and escrow restrictions imposed on performance
shares, which are common shares issued to directors, officers,
promoters and other principals of the issuer to provide them with
both a reasonable assurance of control during the formative stages
of the issuer's development and an incentive to support the issuer,
and
(c) the payment of other consideration by the issuer for assets or
services.
2.2 Reactivations and reorganizations - This local policy statement applies,
with the necessary changes, to
(a) the reactivation of an issuer by way of a prospectus, carried out in
accordance with Local Policy Statement 3-35 and the policies of the
Vancouver Stock Exchange, and
December 21, 1989
<PAGE> 21
2 LPS 3-07
(b) a major reorganization of an issuer, including a reverse take over,
carried out in accordance with the policies of the British Columbia
Securities Commission and the Vancouver Stock Exchange.
PART 3 TRANSITION
3.1 Agreements made under former policy statement - Subject to section 3.2,
shares issued in accordance with the Former Policy Statement will continue
to be governed by any agreements made in accordance with the Former Policy
Statement. Such shares, however, will be subject to the transfer
restrictions and procedures set out in Part 8 and the release criteria and
procedures set out in sections 9.5 through 9.10 of this local policy
statement.
3.2 Option of conforming with new policy statement - An issuer that has issued
shares in accordance with the Former Policy Statement may reorganize its
capital to fully conform with this local policy statement. Before doing
so, the issuer must obtain the approval of its shareholders and the
written consent of the Superintendent of Brokers, if the issuer's shares
are not listed on the Vancouver Stock Exchange, or the Vancouver Stock
Exchange, if the issuer's shares are listed on that exchange. Both the
approval and consent must be obtained by March 1, 1991.
PART 4 DEFINITIONS
4.1 Defined terms - In this local policy statement:
"Act" means the Securities Act, S.B.C. 1985, c. 83;
"arm's length transaction" means a transaction other than a non-arm's
length transaction;
"cash flow" means net income or loss before tax, adjusted to add back the
following expenses:
(a) depreciation,
(b) amortization of goodwill and deferred research and development
costs, excluding general and administrative costs,
December 21, 1989
<PAGE> 22
LPS 3-07 3
(c) expensed research and development costs excluding general and
administrative costs, and
(d) any other amounts permitted or required by the Superintendent;
"cumulative cash flow" means, at any time, the aggregate cash flow of an
issuer up to that time from a date no earlier than the issuer's financial
year end immediately preceding the date of its IPO, net of any negative
cash flow;
"earn-out factor" means the number obtained by squaring the performance
share percentage, expressed as a decimal, and multiplying by four;
"earn-out price" means the IPO price multiplied by the earn-out factor;
"escrow agreement" means an agreement in the form attached as Appendix A
to this local policy statement;
"Exchange" means the Vancouver Stock Exchange;
"industrial issuer" means an issuer other than a natural resource issuer;
"IPO" means the initial public offering of common shares of an issuer
under a prospectus which has been filed with, and for which a receipt has
been obtained from, the Superintendent under section 42 of the Act;
"IPO price" means the price per share paid by the public on an issuer's
IPO;
"non-arm's length transaction" means a transaction between the issuer and
a person that, at any time from the date of the transaction until the
date of completion of the issuer's IPO, is
(a) an insider, associate, affiliate or principal of the issuer,
(b) a person that
(i) has a control person, insider or promoter that is a control
person, insider or promoter of the issuer, or
December 21, 1989
<PAGE> 23
LPS 3-07
- 4 -
(ii) has a control person, insider or promoter that is an associate
or affiliate of a control person, insider or promoter of the
issuer
except where the person's insiders that are described in paragraphs
(i) and (ii) hold in total less than 10% of the voting securities of
the person, or
(c) determined by the Superintendent not to be at arm's length to the
issuer;
"performance shares" means common shares of an issuer issued in accordance
with Part 7 of this local policy statement, so long as they are held in
escrow in accordance with this local policy statement;
"Performance share percentage" means the percentage, determined on the
date the issuer's shares are listed, posted and called for trading on the
Exchange, that the issued performance shares of the issuer are of the
total issued and outstanding voting securities of the issuer;
"principal" means, in relation to an issuer,
(a) a promoter of the issuer,
(b) a director of the issuer or of an operating subsidiary of the
issuer,
(c) a full time management employee of the issuer, or of an operating
subsidiary of the issuer, whose direct or indirect employment is
with the issuer or the subsidiary,
(d) a person who has provided key services or contributed a fundamental
asset to the issuer and has elected to be treated as a principal, or
(e) a company all the voting securities of which are owned by one or
more of the persons referred to in subsections (a) through (d);
"Regulation" means the Securities Regulation, B.C. Reg. 270/86;
December 21, 1989
<PAGE> 24
LPS 3-07
- 5 -
"Superintendent or the Exchange" means the Superintendent, if the issuer's
shares are not listed on the Exchange, and the Exchange, if the issuer's
shares are listed on the Exchange;
"trading shares" means shares of the class of common shares issued on an
issuer's IPO, excluding performance shares issued in accordance with Part
7 of this local policy statement;
"valuation opinion" means, in respect of
(a) a natural resource issuer, a written opinion prepared by a qualified
expert as to the fair market value of a resource property,
determined either through the computation of present value or some
other recognized method of valuation acceptable to the
Superintendent, and
(b) an industrial issuer, a written opinion prepared in accordance with
generally applied valuation approaches by a Chartered Business
Valuator, or another expert acceptable to the Superintendent, as to
the highest price available for the issuer's business, assets or
shares in an open and unrestricted market between informed, prudent
parties, acting at arm's length and under no compulsion to act,
expressed in terms of money or money's worth.
4.2 Terms defined in legislation - Subject to section 4.1, terms defined in
the Act, the Regulation and the Interpretation Act, R.S.B.C. 1979, c. 206
and used in this local policy statement have the same meaning as in the
Act, the Regulation and the Interpretation Act.
PART 5 GENERAL MATTERS
5.1 Review of opinions and reports - The Superintendent may, with the
agreement of an issuer, seek the opinion of an engineer, appraiser,
business valuator, accountant or other expert to determine the
acceptability of a valuation opinion or other report filed pursuant to
this local policy statement and, in such circumstances, the issuer will be
liable for the fees charged by such person in connection with providing
the opinion.
December 21, 1989
<PAGE> 25
LPS 3-07
- 6 -
5.2 Requirement for valuation opinion - The Superintendent may, at the time
of reviewing an issuer's prospectus for its IPO, require a valuation
opinion in support of the value attributed to any non-cash assets.
5.3 Out of pocket costs - Where this local policy statement provides that the
value of trading shares issued or other consideration paid to a person by
an issuer for a non-cash asset must be calculated on the basis of the out
of pocket costs incurred by the person in respect of the non-cash asset,
those out of pocket costs must
(a) be reasonable,
(b) have contributed or be reasonably expected to contribute to the
future operations of the issuer,
(c) be supported by an audited statement of costs, and
(d) in respect of a resource property, be restricted to acquisition
costs and such other costs as are necessary to secure a preliminary
evaluation of the resource property and to lead to the
identification of exploration targets.
5.4 Confirmation of fair value - The onus will be on an issuer, if questioned,
to satisfy the Superintendent that fair value was received for costs or
expenditures associated with a non-arm's length transaction.
PART 6 ISSUANCE OF TRADING SHARES
6.1 Minimum price and maximum aggregate value - Although in most cases trading
shares will be paid for in cash, trading shares may be issued for
consideration other than cash. Subject to sections 6.2 through 6.6, an
issuer may issue trading shares at a minimum price of $.25 per share up to
an aggregate value equal to:
(a) the amount of cash paid in as share capital; plus
(b) the fair market value of any non-cash assets contributed as share
capital; plus
(c) the issuer's retained earnings, if any; less
(d) where the issuer has an accumulated deficit, that portion of the
accumulated deficit that does not directly relate to the issuer's
stated business purpose at the time of its IPO.
December 21, 1989
<PAGE> 26
LPS 3-07
- 7 -
6.2 Interest in operating subsidiary - Where an issuer has an operating
subsidiary, or is proposing to issue trading shares in order to acquire an
operating subsidiary, and the value of that operating subsidiary is not
supported by a current valuation opinion, the principles of this Part will
apply to the operating subsidiary for the purpose of determining the
number of trading shares that may be issued by the issuer in respect of
its interest in the operating subsidiary.
6.3 Value assigned to non-cash assets - For the purpose of section 6.1(b),
where non-cash assets are contributed to an issuer by a person in a
non-arm's length transaction, the fair market value attributed to the
non-cash assets must be either
(a) supported by a valuation opinion, or
(b) limited to an amount equal to the out of pocket costs incurred by
the person in respect of the non-cash assets, determined in
accordance with section 5.3.
6.4 Purchase of interest in mineral Property-A natural resource issuer that,
in an arm's length transaction, agrees to issue trading shares as
consideration for a mineral property or an option on a mineral property,
the value of which is not supported by a current valuation opinion, will
generally be required to meet the following conditions:
(a) The consideration must consist of not more than 200,000 trading
shares issuable in no fewer than four blocks, each block consisting
of not more than 50,000 trading shares.
(b) one block of shares may be issued prior to the date the issuer's
shares are listed, posted and called for trading on the Exchange.
(c) The remaining blocks of shares may be issued in stages upon the
filing with the Exchange of engineering reports, acceptable to the
Exchange, recommending further work on the mineral property.
6.5 Accumulated deficit related to issuer's stated business purpose - For the
purpose of section 6.1(d), that portion of the issuer's accumulated
deficit that directly relates to the issuer's stated business purpose at
the time of its IPO includes
December 21, 1989
<PAGE> 27
LPS 3-07
- 8 -
(a) for a natural resource issuer, expenses incurred
(i) in exploring and developing the resource properties upon which
the issuer's IPO proceeds are to be spent, and
(ii) in exploring and developing other resource properties,
provided that these expenses do not exceed the expenses
referred to in paragraph (i), and
(b) for an industrial issuer, expenses incurred in respect of the
project or business to be financed by the issuer's IPO proceeds.
6.6 Exclusion of amounts by Superintendent - The Superintendent may require
that an amount be excluded from the determination of the number of trading
shares that may be issued under this Part if in the circumstances he
considers that to include any such amount would be inappropriate or
unconscionable. For example, the Superintendent would question the
appropriateness of issuing trading shares for non-cash assets unrelated to
the issuer's stated business purpose at the time of its IPO or for
excessive administrative expenses.
PART 7 ISSUANCE OF PERFORMANCE SHARES
7.1 Issuance to principals - Performance shares may be issued for cash to the
principals of an issuer
(a) to provide the principals with a measure of control to facilitate
the development of the issuer in an orderly fashion,
(b) to provide an incentive for the principals to diligently support the
affairs of the issuer, and
(c) to provide an incentive for the principals to contribute management
services or fundamental assets to the issuer.
7.2 Natural resource issuer - A natural resource issuer may issue to its
principals up to a total of 750,000 performance shares, at a minimum price
of $.01 per share.
7.3 Industrial issuer - An industrial issuer may issue performance shares to
its principals, at a minimum price of $.01 per share, provided that the
resulting performance share percentage does not exceed 65%.
December 21, 1989
<PAGE> 28
LPS - 307
- 9 -
7.4 Escrow requirement - Performance shares are required to be escrowed. It
should be noted that the higher the performance share percentage, the more
difficult it becomes to obtain a release of the performance shares from
escrow. The table attached as Appendix B to this local policy statement
provides some examples of the operation of the release provisions for
industrial issuers set out in Part 9 of this local policy statement.
7.5 Escrow agreement - Prior to or at the time of acquiring performance
shares, principals must execute an escrow agreement. The certificates
representing the performance shares must be registered in the names of the
holders of the shares and deposited with the escrow agent in accordance
with the terms of the escrow agreement. Only a trust company carrying on
business in British Columbia or a company approved by the Superintendent
may act as an escrow agent.
7.6 Limitations on rights of holders of performance shares - The escrow
agreement provides that the holders of performance shares waive any rights
attached to those shares to receive dividends or to participate in the
assets and property of the issuer on a winding up or dissolution. Holders
of performance shares do retain the right to vote those shares, except on
a resolution respecting their cancellation.
7.7 Rights on ceasing to be a principal - The escrow agreement requires that
the parties to it set out in the agreement any rights or obligations of a
person who ceases to be a principal, dies or becomes bankrupt to retain,
transfer or surrender to the issuer for cancellation any performance
shares then held by the person.
7.8 Undertaking of holding company Where performance shares are to be issued
to a non-reporting or closely-held company, wherever situate, rather than
to an individual, the company must, prior to or at the time of acquiring
the performance shares, execute an undertaking in the form attached as
Appendix C to this local policy statement. In the undertaking, the
company agrees not to effect or permit any transfer of ownership of shares
of the company nor to issue further shares of any class in the company
without the consent of the Superintendent or the Exchange, so long as the
company continues to hold any of the issuer's performance shares. An
application for consent should be made in the same manner as an
application for consent to a transfer of performance shares pursuant to
Part 8 of this local policy statement.
December 21, 1989
<PAGE> 29
LPS 3-07
- 10 -
PART 8 TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW
8.1 Permitted transferees - Performance shares may be transferred only to
(a) other principals, including incoming principals,
(b) the issuer of the performance shares, or
(c) an offeror under a formal bid (as defined in section 74 of the Act).
8.2 Request for consent to transfer - In order to transfer performance shares,
the holder of performance shares must deliver to the Superintendent or the
Exchange a written request for consent to the transfer. The request for
consent to the transfer must include:
(a) the name of the escrow agent and the reference date of the escrow
agreement,
(b) an explanation of the reason for the transfer,
(c) a description of the consideration to be paid for the performance
shares,
(d) where the performance shares are to be transferred to a principal,
confirmation that the transferee is a principal or will become a
principal on or before the date of the proposed transfer, and
(e) a description of the exemptions in the Act or the Regulation, if
any, being relied upon to make the transfer.
8.3 Documents to be filed with request for consent to transfer - The request
for consent to the transfer must be accompanied by:
(a) a copy of the transfer agreement,
(b) an acknowledgement and agreement to be bound in the form attached as
Schedule A to the escrow agreement, executed by the transferee,
(c) where the performance shares are to be transferred to a
non-reporting or closely held company, wherever situate, rather
than to an individual, an undertaking by the company in the
form attached as Appendix C to this local policy statement,
December 21, 1989
<PAGE> 30
LPS 3-07
- 11 -
(d) where applicable, evidence that the proposed change of control has
been approved by the shareholders of the issuer, and
(e) the appropriate application fee.
8.4 Letter of consent or objection - Upon receiving a request for consent to
a transfer and accompanying documents that comply with sections 8.2 and
8.3, the Superintendent or the Exchange will issue to the applicant a
letter that either consents or objects to the transfer. A letter
consenting to the transfer will be copied to the escrow agent.
8.5 No transfer during period between Prospectus receipt and listing - The
Superintendent will generally refuse to consent to a transfer of
performance shares during the period between the date of the receipt for
the issuer's prospectus for its IPO and the date the issuer's securities
are listed, posted and called for trading on the Exchange.
PART 9 RELEASE OF PERFORMANCE SHARES FROM ESCROW
9.1 Release of shares of natural resource issuer - Holders of performance
shares of a natural resource issuer will be entitled to the pro-rata
release of those performance shares on the basis of 15% of the original
number of performance shares for every $100,000 expended on exploration
and development of a resource property by
(a) the issuer, or
(b) a person other than the issuer in order to earn an interest in the
resource property, but only in respect of that proportion of the
expenditure equal to the issuer's remaining proportionate Interest
in the resource property after the person's interest has been
earned,
provided that
(c) no more than 50% of the original number of performance shares may be
released in any 12 month period, and
(d) no expenditure on exploration and development made prior to the date
of the receipt for the issuer's prospectus for its IPO may be
included.
December 21, 1989
<PAGE> 31
LPS 3-07
- 12 -
9.2 Reduction in release for natural resource issuer-Where administrative
expenses exceed 33% of total expenditures during the period on which the
calculation in section 9.1 is based,
(a) the pro-rata release factor of 15% will be reduced to 7.5%, and
(b) the percentage of the original number of performance shares
available for release in any 12 month period will be reduced to 25%.
9.3 Release of shares of industrial issuer - Holders of performance shares of
an industrial issuer will be entitled to the pro-rata release of a number
of performance shares equal to the amount of cumulative cash flow, not
previously applied towards release, divided by the earn-out price.
9.4 Adjustment of release calculation - On a consolidation, subdivision,
amalgamation or reclassification of the issuer's shares, the release
calculation must be adjusted so that the proportion of the outstanding
performance shares available for release is unaffected by the
consolidation, subdivision, amalgamation or reclassification.
9.5 Requirements for release - No performance shares may be released from
escrow unless, at the time of the application for release,
(a) the issuer is meeting its current obligations in the ordinary course
of business as they generally become due, as evidenced by a
statutory declaration of the president or chief financial officer of
the issuer,
(b) the issuer's shares are listed, posted and called for trading on all
stock exchanges having jurisdiction over it, as evidenced by letters
from those stock exchanges,
(c) the issuer is not in default of any requirement of the Act or the
Regulation, as evidenced by a certificate issued by the Commission,
and
December 21, 1989
<PAGE> 32
LPS 3-07
- 13 -
(d) the issuer is in good standing with respect to its filing of returns
with the Registrar of Companies under the Company Act or, if the
issuer is incorporated, organized or continued in a jurisdiction
other than British Columbia, with the registrar of companies or
similar authority in that jurisdiction, as evidenced by a
certificate issued by the Registrar of Companies or by that similar
authority.
9.6 Annual release based on annual audited financial Statements - Performance
shares may be released only once during an issuer's financial year. The
release calculation must be based on the issuer's annual audited financial
statements for the year or years during which the release requirements
were met in respect of the performance shares to be released.
9.7 Request for consent to release - In order to obtain a release of
performance shares, the issuer must deliver to the Superintendent or the
Exchange a written request for consent to the release. The request for
consent to the release must include the name of the escrow agent and the
reference date of the escrow agreement.
9.8 Documents to be filed with request for consent to release - The request
for consent to the release must be accompanied by:
(a) written evidence of compliance with the requirements of section 9.5,
(b) annual audited financial statements of the issuer for the financial
year or years during which the release requirements were met in
respect of the performance shares to be released,
(c) where expenditures on a resource property were made by a person
other than the issuer, an audited statement of costs,
(d) a calculation, prepared by the issuer's auditor, of the number of
performance shares to be released, and
(e) the appropriate application fee.
December 21, 1989
<PAGE> 33
LPS 3-07
- 14 -
9.9 Letter of consent or objection - Upon receiving a request for consent to a
release and accompanying documents that comply with sections 9.7 and 9.8,
the Superintendent or the Exchange will issue to the issuer a letter that
either consents or objects to the release. A letter consenting to the
release will be copied to the escrow agent.
9.10 Request by bolder of performance shares for consent to release - A holder
of performance shares may apply to, the Superintendent or the Exchange for
release where the issuer is unable or unwilling to do so. If the president
or chief financial officer of the issuer refuses to provide the statutory
declaration referred to in section 9.5(a), the Superintendent or the
Exchange may waive that requirement.
PART 10 SURRENDER OF PERFORMANCE SHARES FOR CANCELLATION
10.1 Performance shares must be surrendered to the issuer for cancellation
(a) at the time of a major reorganization of the issuer, if required as
a condition of the consent to the reorganization by the
Superintendent or the Exchange,
(b) where the issuer's shares have been subject to a cease trade order
issued under the Act for a period of 2 consecutive years, or
(c) 10 years from, the later of the date of issue of the performance
shares and the date of the receipt for the issuer's prospectus for
its IPO.
PART 11 OTHER CONSIDERATION
11.1 Natural resource issuer - Where a natural resource issuer proposes to
acquire from a person a resource property or an option on a resource
property, the value of which is not supported by a valuation opinion, the
following principles apply:
(a) in an arm's length transaction, the issuer may pay the person cash
consideration.
December 21, 1989
<PAGE> 34
LPS 3-07
- 15 -
(b) In an arm's length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource
property commences commercial production. Such additional
consideration may, depending on the circumstances, consist of cash
consideration, reasonable payments from net profits, securities, or
any combination of these.
(c) In a non-arm's length transaction, the issuer may pay the person
cash consideration up to the amount of the out of pocket costs
incurred by the person in respect of the resource property,
determined in accordance with section 5.3.
(d) In a non-arms length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource
property commences commercial production, where the person has
carried out extensive exploration with results that indicate that
the resource property appears to have substantial merit. The extent
of the person's effort, skill and risk in developing the resource
property will be taken into account by the Superintendent in
determining whether additional consideration is justified. Such
additional consideration may, depending on the circumstances,
consist of cash consideration, reasonable payments from net profits,
securities, or any combination of these. A 15% net profits interest
would normally be considered reasonable.
11.2 Industrial issuer - Where an industrial issuer proposes to acquire from a
person non-cash assets, the value of which are not supported by a
valuation opinion, the following principles apply:
(a) In an arm's length transaction, the issuer may pay the person cash
consideration, a royalty or a combination of these.
(b) In a non-arm's length transaction, the issuer may pay the person
cash consideration up to the amount of the out of pocket costs
incurred by the person in respect of the non-cash assets, determined
in accordance with section 5.3.
DATED at Vancouver, British Columbia, this 21st day of December 1989.
/s/ Douglas M. Hyndman
--------------------------------------
Douglas M. Hyndman
Chairman
December 21, 1989
<PAGE> 35
SCHEDULE C TO ESCROW AGREEMENT
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF SHAREHOLDER HELD IN ESCROW
- ------------------- --------------
<S> <C>
CHARLES S. UNDERHILL 120,000
ROBIN T. FORSHAW 60,724
</TABLE>
<PAGE> 1
Exhibit 3r
PERFORMANCE SHARES ESCROW AGREEMENT
THIS AGREEMENT is dated for reference the 17th day of
August, 1995 and made
AMONG:
MONTREAL TRUST COMPANY OF CANADA, of Montreal Trust Company of
Canada, 510 Burrard Street, Vancouver, British Columbia, V6C
3B9
(the "Escrow Agent")
AND:
MINCO MINING AND METALS CORPORATION, a British Columbia
company, having its registered and records office at Suite
1750, 1185 West Georgia Street, Vancouver, British Columbia,
V6E 4E6;
(the "Issuer")
AND:
EACH SHAREHOLDER, as defined in this Agreement;
(collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire
shares of the Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent
in respect of the shares upon the acquisition of the shares by the Shareholder;
NOW THEREFORE in consideration of the covenants contained in
this agreement and other good and valuable consideration (the receipt and
sufficiency of which is acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this agreement:
(a) "Acknowledgement" means the acknowledgement and agreement to
be bound in the form attached as Schedule "A" to this
agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c. 83;
<PAGE> 2
-2-
(c) "Exchange" means the Vancouver Stock Exchange;
(d) "IPO" means the initial public offering of common shares of
the Issuer under a prospectus which has been filed with, and
for which a receipt has been obtained from, the Superintendent
under section 42 of the Act;
(e) "Local Policy Statement 3-07" means the Local Policy Statement
3-07 in effect as of the date of reference of this agreement
and attached as Schedule "B" to this agreement;
(f) "Shareholder" means a holder of shares of the Issuer who
executes this agreement or an Acknowledgement;
(g) "Shares" means the shares of the Shareholder described in
Schedule "C" to this agreement, as amended from time to time
in accordance with section 9;
(h) "Superintendent" means the Superintendent of Brokers appointed
under the Act; and
(i) "Superintendent or the Exchange" means the Superintendent, if
the shares of the Issuer are not listed on the Exchange, or
the Exchange, if the shares of the Issuer are listed on the
Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow
Agent and shall deliver the certificates representing the Shares to the Escrow
Agent as soon as practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may
exercise all voting rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares
(a) to vote the Shares on a resolution to cancel any of the
Shares,
(b) to receive dividends, and
<PAGE> 3
-3-
(c) to participate in the assets and property of the Issuer on a
winding up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer
shall abstain from voting on a directors' resolution to cancel any of the
Shares.
6. TRANSFER WITHIN ESCROW
(a) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the
consent of the Superintendent or the Exchange.
(b) The Escrow Agent shall not effect a transfer of the Shares
within escrow unless the Escrow Agent has received
(i) a copy of an Acknowledgement executed by the person
to whom the Shares are to be transferred, and
(ii) a letter from the Superintendent or the Exchange
consenting to the transfer.
(c) Upon the death or bankruptcy of a Shareholder, the Escrow
Agent shall hold the Shares subject to this agreement for the
person that is legally entitled to become the registered owner
of the Shares.
(d) In the event the Shareholder ceases to be a principal or a
promoter of the Issuer, he shall be entitled to retain all of
the Shares and shall not be obligated to sell, transfer or
otherwise assign the Shares to anyone.
7. RELEASE FROM ESCROW
(a) The Shareholder irrevocably directs the Escrow Agent to retain
the Shares until the Shares are released from escrow pursuant
to subsection (2) or surrendered for cancellation pursuant to
section 8.
(b) The Escrow Agent shall not release the Shares from escrow
unless the Escrow Agent has received a letter from the
Superintendent or the Exchange consenting to the release.
<PAGE> 4
-4-
(c) The approval of the Superintendent or the Exchange to a
release from escrow of any of the Shares shall terminate this
agreement only in respect of the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation
and the Escrow Agent shall deliver the certificates representing the Shares to
the Issuer
(a) at the time of a major reorganization of the Issuer, if
required as a condition of the consent to the reorganization
by the Superintendent or the Exchange,
(b) where the Issuer's shares have been subject to a cease trade
order issued under the Act for a period of 2 consecutive
years,
(c) any shares not released from the escrow hereby created before
the expiration of five years from the date the Exchange
accepts this agreement for filing shall be surrendered by the
shareholder for cancellation forthwith and the Company and the
Escrow Agent hereby agree to take all such actions as may be
necessary to expeditiously effect such cancellation,
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(a) Subject to subsection (2), this agreement may be amended only
by a written agreement among the Parties and with the written
consent of the Superintendent or the Exchange.
(b) Schedule "C" to this agreement shall be amended upon
(i) a transfer of Shares pursuant to section 6,
(ii) a release of Shares from escrow pursuant to section
7, or
(iii) a surrender of Shares for cancellation pursuant to
section 8,
and the Escrow Agent shall note the amendment on the Schedule
"C" in its possession.
<PAGE> 5
-5-
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally,
release, indemnify and save harmless the Escrow Agent from all costs, charges,
claims, demands, damages, losses and expenses resulting from the Escrow Agent's
compliance in good faith with this agreement.
11. RESIGNATION OF ESCROW AGENT
(a) If the Escrow Agent wishes to resign as escrow agent in
respect of the Shares, the Escrow Agent shall give notice to
the Issuer.
(b) If the Issuer wishes the Escrow Agent to resign as escrow
agent in respect of the Shares, the Issuer shall give notice
to the Escrow Agent.
(c) A notice referred to in subsection (1) or (2) shall be in
writing and delivered to
(i) the Issuer at Suite 1750, 1185 West Georgia Street,
Vancouver, British Columbia, V6E 4E6; or
(ii) the Escrow Agent at 830 - 625 Howe Street, Vancouver,
British Columbia, V6C 3B8
and the notice shall be deemed to have been received on the
date of delivery. The Issuer or the Escrow Agent may change
its address for notice by giving notice to the other party in
accordance with this subsection.
(d) A copy of a notice referred to in subsection (1) or (2) shall
concurrently be delivered to the Superintendent or the
Exchange.
(e) The resignation of the Escrow Agent shall be effective and the
Escrow Agent shall cease to be bound by this agreement on the
date that is 180 days after the date of receipt of the notice
referred to in subsection (1) or (2) or on such other date as
the Escrow Agent and the Issuer may agree upon (the
"resignation date").
(f) The Issuer shall, before the resignation date and with the
written consent of the Superintendent or the Exchange, appoint
another escrow agent and that appointment shall be binding on
the Issuer and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and
perform any acts necessary to carry out the intent of this agreement.
<PAGE> 6
-6-
13. TIME
Time is of the essence of this agreement.
14. GOVERNING LAWS
This agreement shall be construed in accordance with and
governed by the laws of British Columbia and the laws of Canada applicable in
British Columbia.
15. COUNTERPARTS
This agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that
expression is deemed to include the plural or the body corporate where required
by the context.
17. ENUREMENT
This agreement enures to the benefit of and is binding on the
Parties and their heirs, executors, administrators, successors and permitted
assigns.
The Parties have executed and delivered this agreement as of
the date of reference of this agreement.
THE COMMON SEAL of MONTREAL )
TRUST COMPANY OF CANADA was )
hereto affixed in the presence of: )
)
) c/s
)
/s/illegible )
____________________________________ )
Authorized Signatory )
)
/s/L. Buchley )
____________________________________ )
Authorized Signatory )
)
<PAGE> 7
-7-
THE COMMON SEAL of MINCO )
MINING AND METALS )
CORPORATION was hereto affixed in the )
presence of: )
) c/s
)
/s/PETER P. TSAPARAS )
____________________________________ )
Authorized Signatory )
)
/s/COLIN MCALEENAN )
____________________________________ )
Authorized Signatory )
)
SIGNED, SEALED and DELIVERED by )
PETER P. TSAPARAS in the presence of: )
)
)
NAOMI ROCHUS ) /s/PETER P. TSAPARAS
____________________________________ ) ______________________________
Name ) PETER P. TSAPARAS
)
316-125 W. 19TH ST. N. VcR. BC )
____________________________________ )
Address )
)
BUSINESS WOMAN )
____________________________________ )
Occupation )
)
SIGNED, SEALED and DELIVERED by )
HANS WICK in the presence of: )
)
)
MANUEL BEER ) /s/HANS WICK
____________________________________ ) ______________________________
Name ) HANS WICK
)
8032 ZURICH, SWITZERLAND )
____________________________________ )
Address )
)
RETIRED )
____________________________________ )
Occupation )
)
<PAGE> 8
-8-
SIGNED, SEALED and DELIVERED by )
FOTIOS KANDIANIS in the )
presence of: )
)
)
/s/A. ANGELIDIS ) /s/FOTIOS KANDIANIS
____________________________________ ) ______________________________
Name ) FOTIOS KANDIANIS
)
8 PLIADON ST ATHENS 17561 GREECE )
____________________________________ )
Address )
)
ENGINEER )
____________________________________ )
Occupation )
)
SIGNED, SEALED and DELIVERED by
PETROS S.E. TSAPARAS in the
presence of:
)
)
/s/COLIN MCALEENAN ) /s/PETROS S.E. TSAPARAS
____________________________________ ) ______________________________
Name ) PETROS S.E. TSAPARAS
)
2596 HARRIER DR. COQUITLAM B.C. )
____________________________________ )
Address )
)
GEOLOGIST )
____________________________________ )
Occupation )
)
SIGNED, SEALED and DELIVERED by
COLIN McALEENAN in the
presence of:
)
)
/s/PETROS TSAPARAS ) /s/COLIN McALEENAN
____________________________________ ) ______________________________
Name ) COLIN McALEENAN
)
4112 PUGET DR. VANCOUVER, B.C. )
____________________________________ )
Address )
)
ENGINEER )
____________________________________ )
Occupation )
)
<PAGE> 9
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Superintendent of Brokers or Vancouver Stock Exchange
#1100 - 865 Hornby Street 609 Granville Street
Vancouver, B. C. Vancouver, B. C.
V6Z 2H4 V7Y 1H1
(if the shares are not (if the shares are listed
listed on the Vancouver on the Vancouver Stock
Stock Exchange) Exchange)
I acknowledge that
(a) I have entered into an agreement with ____________________, under which
___________ shares of MINCO MINING AND METALS CORPORATION (the
"Shares") will be transferred to me upon receipt of regulatory
approval, and
(b) the Shares are held in escrow subject to an escrow agreement dated for
reference _______, 19_ (the "Escrow Agreement"), a copy of which is
attached as Schedule "A" to this acknowledgement.
In consideration of $1.00 and other good and valuable consideration (the receipt
and sufficiency of which is acknowledged) I agree, effective upon receipt of
regulatory approval of the transfer to me of the Shares, to be bound by the
Escrow Agreement in respect of the Shares as if I were an original signatory to
the Escrow Agreement.
Dated at ___________________, on ____________________, 19____
SIGNED, SEALED and DELIVERED by )
*TRANSFEREE in the presence of: )
)
)
_____________________________________ )
Name ) ________________________
) * transferee
)
)
_____________________________________ )
Address )
)
)
_____________________________________ )
Occupation )
<PAGE> 10
SCHEDULE "B" TO ESCROW AGREEMENT
--------------------------------
[LOGO]
Province of
British Columbia BRITISH COLUMBIA SECURITIES COMMISSION
OFFICE OF THE
CHAIRMAN
- -------------------------------------------------------------------------------
LOCAL POLICY STATEMENT 3-07
POLICY GUIDELINES RESPECTING TRADING SHARES,
PERFORMANCE SHARES AND OTHER CONSIDERATION
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
PART TITLE PAGE
- ---- ----- ----
1. IMPLEMENTATION 1
2. APPLICATION 1
2.1 Pre-prospectus
2.2 Reactivations and reorganizations
3. TRANSITION 2
3.1 Agreements made under former policy statement
3.2 Option of conforming with new policy statement
4. DEFINITIONS 2
4.1 Defined terms
4.2 Terms defined in legislation
5. GENERAL MATTERS 5
5.1 Review of opinions and reports
5.2 Requirement for valuation opinion
5.3 Out of pocket costs
5.4 Confirmation of fair value
6. ISSUANCE OF TRADING SHARES 6
6.1 Minimum price and maximum aggregate value
6.2 Interest in operating subsidiary
6.3 Value assigned to non-cash assets
6.4 Purchase of interest in mineral property
6.5 Accumulated deficit related to issuer's stated business
6.6 Exclusion of amounts by Superintendent
<PAGE> 11
PART TITLE PAGE
- ---- ----- ----
7. ISSUANCE OF PERFORMANCE SHARES 8
7.1 Issuance to principals
7.2 Natural resource issuer
7.3 Industrial issuer
7.4 Escrow requirement
7.5 Escrow agreement
7.6 Limitations on rights of holders of performance shares
7.7 Rights on ceasing to be a principal
7.8 Undertaking of holding company
8. TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW 10
8.1 Permitted transferees
8.2 Request for consent to transfer
8.3 Documents to be filed with request for
consent to transfer
8.4 Letter of consent or objection
8.5 No transfer during period between prospectus
receipt and listing
9. RELEASE OF PERFORMANCE SHARES FROM ESCROW 11
9.1 Release of shares of natural resource issuer
9.2 Reduction in release for natural resource issuer
9.3 Release of shares of industrial issuer
9.4 Adjustment of release calculation
9.5 Requirements for release
9.6 Annual release based on annual audited
financial statements
9.7 Request for consent to release
9.8 Documents to be filed with request for
consent to release
9.9 Letter of consent or objection
9.10 Request by holder of performance shares for
consent to release
10. SURRENDER OF PERFORMANCE SHARES FOR CANCELLATION 14
<PAGE> 12
PART TITLE PAGE
- ---- ----- ----
11. OTHER CONSIDERATION 14
11.1 Natural resource issuer
11.2 Industrial issuer
Appendix A Escrow Agreement
Appendix B Examples of earn-out prices for performance
shares issued by an industrial issuer
Appendix C Undertaking Required from Non-Reporting or
Closely Held Company
<PAGE> 13
LPS 3-07
PART 1 IMPLEMENTATION
1.1 The following local policy statements are hereby rescinded and this
local policy statement substituted therefor, effective March 1, 1990:
(a) Local Policy Statement 3-07, dated February 6, 1987 (the
"Former Policy Statement"), and
(b) Local Policy Statements 3-08, 3-09 and 3-10, each dated
February 1, 1987.
PART 2 APPLICATION
2.1 Pre-prospectus--This local policy statement sets out guidelines for
issuance of shares and payment of consideration for assets by an issuer
intending to do an initial public offering and obtain a listing on the
Vancouver Stock Exchange. This local policy statement addresses
(a) the issuance of trading shares, which are common shares issued as
consideration for cash or assets contributed to the issuer and, in
certain cases, expenses incurred to advance the business of the
issuer,
(b) the issuance of and escrow restrictions imposed on performance
shares, which are common shares issued to directors, officers,
promoters and other principals of the issuer to provide them with
both a reasonable assurance of control during the formative stages
of the issuer's development and an incentive to support the issuer,
and
(c) the payment of other consideration by the issuer for assets or
services.
2.2 Reactivations and reorganizations--This local policy statement applies,
with the necessary changes, to
(a) the reactivation of an issuer by way of a prospectus, carried out
in accordance with Local Policy Statement 3-35 and the policies of
the Vancouver Stock Exchange, and
December 21, 1989
<PAGE> 14
LPS 3-07
-2-
(b) a major reorganization of an issuer, including a reverse take over,
carried out in accordance with the policies of the British Columbia
Securities Commission and the Vancouver Stock Exchange.
PART 3 TRANSITION
3.1 Agreements made under former policy statement--Subject to section 3.2,
shares issued in accordance with the Former Policy Statement will
continue to be governed by any agreements made in accordance with the
Former Policy Statement. Such shares, however, will be subject to the
transfer restrictions and procedures set out in Part 8 and the release
criteria and procedures set out in sections 9.5 through 9.10 of this
local policy statement.
3.2 Option of conforming with new policy statement--An issuer that has
issued shares in accordance with the Former Policy Statement may
reorganize its capital to fully conform with this local policy
statement. Before doing so, the issuer must obtain the approval of its
shareholders and the written consent of the Superintendent of Brokers,
if the issuer's shares are not listed on the Vancouver Stock Exchange,
or the Vancouver Stock Exchange, if the issuer's shares are listed on
that exchange. Both the approval and consent must be obtained by March
1, 1991.
PART 4 DEFINITIONS
4.1 Defined terms--In this local policy statement:
"Act" means the Securities Act, S.B.C. 1985, c. 83;
"arm's length transaction" means a transaction other than a non-arm's
length transaction;
"cash flow" means net income or loss before tax, adjusted to add back
the following expenses:
(a) depreciation,
(b) amortization of goodwill and deferred research and development
costs, excluding general and administrative costs,
<PAGE> 15
LPS 3-07
-3-
(c) expensed research and development costs, excluding general and
administrative costs, and
(d) any other amounts permitted or required by the Superintendent:
"cumulative cash flow" means, at any time, the aggregate cash flow of an issuer
up to that time from a date no earlier than the issuer's financial year end
immediately preceding the date of its IPO, net of any negative cash flow;
"earn-out factor" means the number obtained by squaring the performance share
percentage, expressed as a decimal, and multiplying by four;
"earn-out price" means the IPO price multiplied by the earn-out factor;
"escrow agreement" means an agreement in the form attached as Appendix A to this
local policy statement;
"Exchange" means the Vancouver Stock Exchange;
"industrial issuer" means an issuer other than a natural resource issuer;
"IPO" means the initial public offering of common shares of an issuer under a
prospectus which has been filed with, and for which a receipt has been obtained
from, the Superintendent under section 42 of the Act;
"IPO price" means the price per share paid by the public on an issuer's IPO;
"non-arm's length transaction" means a transaction between the issuer and a
person that, at any time from the date of the transaction until the date of
completion of the issuer's IPO, is
(a) an insider, associate, affiliate or principal of the issuer,
(b) a person that
(i) has a control person, insider or promoter that is a
control person, insider or promoter of the issuer; or
<PAGE> 16
LPS-3-07
-4-
(ii) has a control person, insider or promoter that is an associate or
affiliate of a control person, insider or promoter of the issuer
except where the person's insiders that are described in paragraphs (i)
and (ii) hold in total less than 10% of the voting securities of the
person, or
(c) determined by the Superintendent not to be at arm's length to the
issuer;
"performance shares" means common shares of an issuer issued in accordance with
Part 7 of this local policy statement, so long as they are held in escrow in
accordance with this local policy statement;
"performance share percentage" means the percentage, determined on the date the
issuer's shares are listed, posted and called for trading on the Exchange, that
the issued performance shares of the issuer are of the total issued and
outstanding voting securities of the issuer;
"principal" means, in relation to an issuer,
(a) a promoter of the issuer,
(b) a director of the issuer or of an operating subsidiary of the issuer,
(c) a full time management employee of the issuer, or of an operating
subsidiary of the issuer, whose direct or indirect employment is with
the issuer or the subsidiary,
(d) a person who has provided key services or contributed a fundamental
asset to the issuer and has elected to be treated as a principal, or
(e) a company all the voting securities of which are owned by one or more of
the persons referred to in subsections (a) through (d);
"Regulation" means the Securities Regulation, B.C. Reg. 270/86;
<PAGE> 17
LPS 3-07
-5-
"Superintendent or the Exchange" means the Superintendent, if the
issuer's shares are not listed on the Exchange, and the Exchange, if the
issuer's shares are listed on the Exchange;
"trading shares" means shares of the class of common shares issued on an
issuer's IPO, excluding performance shares issued in accordance with
Part 7 of this local policy statement;
"valuation opinion" means, in respect of
(a) a natural resource issuer, a written opinion prepared by a
qualified expert as to the fair market value of a resource
property, determined either through the computation of present
value or some other recognized method of valuation acceptable to
the Superintendent, and
(b) an industrial issuer, a written opinion prepared in accordance with
generally applied valuation approaches by a Chartered Business
Valuator, or another expert acceptable to the Superintendent, as
to the highest price available for the issuer's business, assets or
shares in an open and unrestricted market between informed, prudent
parties, acting at arm's length and under no compulsion to act,
expressed in terms of money or money's worth.
4.2 TERMS DEFINED IN LEGISLATION - Subject to section 4.1, terms defined in
the Act, the Regulation and the Interpretation Act, R.S.B.C. 1979, c.
206 and used in this local policy statement have the same meaning as in
the Act, the Regulation and the Interpretation Act.
PART 5 GENERAL MATTERS
5.1 REVIEW OF OPINIONS AND REPORTS - The Superintendent may, with the
agreement of an issuer, seek the opinion of an engineer, appraiser,
business valuator, accountant or other expert to determine the
acceptability of a valuation opinion or other report filed pursuant to
this local policy statement and, in such circumstances, the issuer will
be liable for the fees charged by such person in connection with
providing the opinion.
<PAGE> 18
LPS 3-07
-6-
5.2 REQUIREMENT FOR VALUATION OPINION - The Superintendent may, at the time of
reviewing an issuer's prospectus for its IPO, require a valuation opinion
in support of the value attributed to any non-cash assets.
5.3 OUT OF POCKET COSTS - Where this local policy statement provides that the
value of trading shares issued or other consideration paid to a person by
an issuer for a non-cash asset must be calculated on the basis of the out
of pocket costs incurred by the person in respect of the non-cash asset,
those out of pocket costs must
(a) be reasonable,
(b) have contributed or be reasonably expected to contribute to the future
operations of the issuer,
(c) be supported by an audited statement of costs, and
(d) in respect of a resource property, be restricted to acquisition costs
and such other costs as are necessary to secure a preliminary
evaluation of the resource property and to lead to the identification
of exploration targets.
5.4 CONFIRMATION OF FAIR VALUE - The onus will be on an issuer, if questioned,
to satisfy the Superintendent that fair value was received for costs or
expenditures associated with a non-arm's length transaction.
PART 6 ISSUANCE OF TRADING SHARES
6.1 MINIMUM PRICE AND MAXIMUM AGGREGATE VALUE - Although in most cases trading
shares will be paid for in cash, trading shares may be issued for
consideration other than cash. Subject to sections 6.2 through 6.6, an
issuer may issue trading shares at a minimum price of $.25 per share up to
an aggregate value equal to:
(a) the amount of cash paid in as share capital; plus
(b) the fair market value of any non-cash assets contributed as share
capital; plus
(c) the issuer's retained earnings, if any; less
(d) where the issuer has an accumulated deficit, that portion of the
accumulated deficit that does not directly relate to the issuer's
stated business purpose at the time of its IPO.
<PAGE> 19
LPS 3-07
-7-
6.2 INTEREST IN OPERATING SUBSIDIARY -- Where an issuer has an
operating subsidiary, or is proposing to issue trading shares
in order to acquire an operating subsidiary, and the value of
that operating subsidiary is not supported by a current
valuation opinion, the principles of this Part will apply to
the operating subsidiary for the purpose of determining the
number of trading shares that may be issued by the issuer in
respect of its interest in the operating subsidiary.
6.3 VALUE ASSIGNED TO NON-CASH ASSETS -- For the purpose of section
6.1(b), where non-cash assets are contributed to an issuer by a
person in a non-arm's length transaction, the fair market value
attributed to the non-cash assets must be either
(a) supported by a valuation opinion, or
(b) limited to an amount equal to the out of pocket
costs incurred by the person in respect of the
non-cash assets, determined in accordance with
section 5.3.
6.4 PURCHASE OF INTEREST IN MINERAL PROPERTY -- A natural resource
issuer that, in an arm's length transaction, agrees to issue
trading shares as consideration for a mineral property or an
option on a mineral property, the value of which is not
supported by a current valuation opinion, will generally be
required to meet the following conditions:
(a) The consideration must consist of not more than 200,000
trading shares issuable in no fewer than four blocks, each
block consisting of not more than 50,000 trading shares.
(b) One block of shares may be issued prior to the date the
issuer's shares are listed, posted and called for trading
on the Exchange.
(c) The remaining blocks of shares may be issued in stages
upon the filing with the Exchange of engineering reports,
acceptable to the Exchange, recommending further work on
the mineral property.
6.5 ACCUMULATED DEFICIT RELATED TO ISSUER'S STATED BUSINESS
PURPOSE -- For the purpose of section 6.1(d), that portion of
the issuer's accumulated deficit that directly relates to the
issuer's stated business purpose at the time of its IPO includes
<PAGE> 20
LPS 3-07
-8-
(a) for a natural resource issuer, expenses incurred
(i) in exploring and developing the resource
properties upon which the issuer's IPO
proceeds are to be spent, and
(ii) in exploring and developing other resource
properties, provided that these expenses do
not exceed the expenses referred to in paragraph
(i), and
(b) for an industrial issuer, expenses incurred in respect
of the project or business to be financed by the issuer's
IPO proceeds.
6.6 EXCLUSION OF AMOUNTS BY SUPERINTENDENT -- The Superintendent may
require that an amount be excluded from the determination of the
number of trading shares that may be issued under this Part if in
the circumstances he considers that to include any such amount
would be inappropriate or unconscionable. For example, the
Superintendent would question the appropriateness of issuing
trading shares for non-cash assets unrelated to the issuer's
stated business purpose at the time of its IPO or for excessive
administrative expenses.
PART 7 ISSUANCE OF PERFORMANCE SHARES
7.1 ISSUANCE TO PRINCIPALS -- Performance shares may be issued for cash
to the principals of an issuer
(a) to provide the principals with a measure of control to
facilitate the development of the issuer in an orderly
fashion,
(b) to provide an incentive for the principals to diligently
support the affairs of the issuer, and
(c) to provide an incentive for the principals to contribute
management services or fundamental assets to the issuer.
7.2 NATURAL RESOURCE ISSUER -- A natural resource issuer may issue to
its principals up to a total of 750,000 performance shares, at a
minimum price of $.01 per share.
7.3 INDUSTRIAL ISSUER -- An industrial issuer may issue performance
shares to its principals, at a minimum price of $.01 per share,
provided that the resulting performance share percentage does not
exceed 65%.
<PAGE> 21
LPS 3-07
-9-
7.4 ESCROW REQUIREMENT -- Performance shares are required to be
escrowed. It should be noted that the higher the performance
share percentage, the more difficult it becomes to obtain a
release of the performance shares from escrow. The table attached
as Appendix B to this local policy statement provides some
examples of the operation of the release provisions for industrial
issuers set out in Part 9 of this local policy statement.
7.5 ESCROW AGREEMENT -- Prior to or at the time of acquiring performance
shares, principals must execute an escrow agreement. The
certificates representing the performance shares must be registered
in the names of the holders of the shares and deposited with the
escrow agent in accordance with the terms of the escrow agreement.
Only a trust company carrying on business in British Columbia or a
company approved by the Superintendent may act as an escrow agent.
7.6 LIMITATIONS ON RIGHTS OF HOLDERS OF PERFORMANCE SHARES -- The escrow
agreement requires that the parties to it set out in the agreement
any rights or obligations of a person who ceases to be a principal,
dies or becomes bankrupt to retain, transfer or surrender to the
issuer for cancellation any performance shares then held by the
person.
7.7 RIGHTS ON CEASING TO BE A PRINCIPAL -- The escrow agreement
requires that the parties to it set out in the agreement any rights
or obligations of a person who ceases to be a principal, dies or
becomes bankrupt to retain, transfer or surrender to the issuer for
cancellation any performance shares then held by the person.
7.8 UNDERTAKING OF HOLDING COMPANY -- Where performance shares are to
be issued to a non-reporting or closely held company, wherever
situate, rather than to an individual, the company must, prior to or
at the time of acquiring the performance shares, execute an
undertaking in the form attached as Appendix C to this local policy
statement. In the undertaking, the company agrees not to effect or
permit any transfer of ownership of shares of the company nor to
issue further shares of any class in the company without the consent
of the Superintendent or the Exchange, so long as the company
continues to hold any of the issuer's performance shares. An
application for consent should be made in the same manner as an
application for consent to a transfer of performance shares pursuant
to Part 8 of this local policy statement.
<PAGE> 22
-10- LPS 3-07
PART 8 TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW
8.1 Permitted transferees - Performance shares may be transferred only to
(a) other principals, including incoming principals,
(b) the issuer of the performance shares, or
(c) an offeror under a formal bid (as defined in section 74 of the Act).
8.2 Request for consent to transfer - In order to transfer performance shares,
the holder of performance shares must deliver to the Superintendent or the
Exchange a written request for consent to the transfer. The request for
consent to the transfer must include:
(a) the name of the escrow agent and the reference date of the escrow
agreement,
(b) an explanation of the reason for the transfer,
(c) a description of the consideration to be paid for the performance
shares,
(d) where the performance shares are to be transferred to a principal,
confirmation that the transferee is a principal or will become a
principal on or before the date of the proposed transfer, and
(e) a description of the exemptions in the Act or the Regulation, if any,
being relied upon to make the transfer.
8.3 Documents to be filed with request for consent to transfer - The request
for consent to the transfer must be accompanied by:
(a) a copy of the transfer agreement,
(b) an acknowledgement and agreement to be bound in the form attached as
Schedule A to the escrow agreement, executed by the transferee,
(c) where the performance shares are to be transferred to a non-reporting
or closely held company, wherever situate, rather than to an
individual, an undertaking by the company in the form attached as
Appendix C to this local policy statement,
<PAGE> 23
LPS 3-07 -11-
(d) where applicable, evidence that the proposed change of control has
been approved by the shareholders of the issuer, and
(e) the appropriate application fee.
8.4 Letter of consent or objection - Upon receiving a request for consent to a
transfer and accompanying documents that comply with sections 8.2 and 8.3,
the Superintendent or the Exchange will issue to the applicant a letter
that either consents or objects to the transfer. A letter consenting to the
transfer will be copied to the escrow agent.
8.5 No transfer during period between prospectus receipt and listing - The
Superintendent will generally refuse to consent to a transfer of
performance shares during the period between the date of the receipt for
the issuer's prospectus for its IPO and the date the issuer's securities
are listed, posted and called for trading on the Exchange.
PART 9 RELEASE OF PERFORMANCE SHARES FROM ESCROW
9.1 Release of shares of natural resource issuer - Holders of performance
shares of a natural resource issuer will be entitled to the pro-rata
release of those performance shares on the basis of 15% of the original
number of performance shares for every $100,000 expended on exploration and
development of a resource property by
(a) the issuer, or
(b) a person other than the issuer in order to earn an interest in the
resource property, but only in respect of that proportion of the
expenditure equal to the issuer's remaining proportionate interest in
the resource property after the person's interest has been earned,
provided that
(c) no more than 50% of the original number of performance shares may be
released in any 12 month period, and
(d) no expenditure on exploration and development made prior to the date
of the receipt for the issuer's prospectus for its IPO may be
included.
December 21, 1989
<PAGE> 24
-12- LPS 3-07
9.2 Reduction in release for natural resource issuer - Where administrative
expenses exceed 33% of total expenditures during the period on which the
calculation in section 9.1 is based,
(a) the pro-rata release factor of 15% will be reduced to 7.5%, and
(b) the percentage of the original number of performance shares available
for release in any 12 month period will be reduced to 25%.
9.3 Release of shares of industrial issuer - Holders of performance shares of
an industrial issuer will be entitled to the pro-rata release of a number
of performance shares equal to the amount of cumulative cash low, not
previously applied towards release, divided by the earn-out price.
9.4 Adjustment of release calculation - On a consolidation, subdivision,
amalgamation or reclassification of the issuer's shares, the release
calculation must be adjusted so that the proportion of the outstanding
performance shares available for release is unaffected by the
consolidation, subdivision, amalgamation or reclassification.
9.5 Requirements for release - No performance shares may be released from
escrow unless, at the time of the application for release,
(a) the issuer is meeting its current obligations in the ordinary course
of business as they generally become due, as evidenced by a statutory
declaration of the president or chief financial officer of the issuer,
(b) the issuer's shares are listed, posted and called for trading on all
stock exchanges having jurisdiction over it, as evidenced by letters
from those stock exchanges,
(c) the issuer is not in default of any requirement of the Act or the
Regulation, as evidenced by a certificate issued by the Commission,
and
<PAGE> 25
LPS 3-07 -13-
(d) the issuer is in good standing with respect to its filing of returns
with the Registrar of Companies under the Company Act or, if the
issuer is incorporated, organized or continued in a jurisdiction other
than British Columbia, with the registrar of companies or similar
authority in that jurisdiction, as evidenced by a certificate issued
by the Registrar of Companies or by that similar authority.
9.6 Annual release based on annual audited financial statements - Performance
shares may be released only once during an issuer's financial year. The
release calculation must be based on the issuer's annual audited financial
statements for the year or years during which the release requirements were
met in respect of the performance shares to be released.
9.7 Request for consent to release - In order to obtain a release of
performance shares, the issuer must deliver to the Superintendent or the
Exchange a written request for consent to the release. The request for
consent to the release must include the name of the escrow agent and the
reference date of the escrow agreement.
9.8 Documents to be filed with request for consent to release - The request for
consent to the release must be accompanied by:
(a) written evidence of compliance with the requirements of section 9.5,
(b) annual audited financial statements of the issuer for the financial
year or years during which the release requirements were met in
respect of the performance shares to be released,
(c) where expenditures on a resource property were made by a person other
than the issuer, an audited statement of costs,
(d) a calculation, prepared by the issuer's auditor, of the number of
performance shares to be released, and
(e) the appropriate application fee.
<PAGE> 26
-14- LPS 3-07
9.9 Letter of consent or objection - Upon receiving a request for consent to a
release and accompanying documents that comply with sections 9.7 and 9.8,
the Superintendent or the Exchange will issue to the issuer a letter that
either consents or objects to the release. A letter consenting to the
release will be copied to the escrow agent.
9.10 Request by holder of performance shares for consent to release - A holder
of performance shares may apply to the Superintendent or the Exchange for
release where the issuer is unable or unwilling to do so. If the president
or chief financial officer of the issuer refuses to provide the statutory
declaration referred to in section 9.5(a), the Superintendent or the
Exchange may waive that requirement.
PART 10 SURRENDER OF PERFORMANCE SHARES FOR CANCELLATION
10.1 Performance shares must be surrendered to the issuer for cancellation
(a) at the time of a major reorganization of the issuer, if required as a
condition of the consent to the reorganization by the Superintendent
or the Exchange,
(b) where the issuer's shares have been subject to a cease trade order
issued under the Act for a period of 2 consecutive years, or
(c) 10 years from the later of the date of issue of the performance shares
and the date of the receipt for the issuer's prospectus for its IPO.
PART 11 OTHER CONSIDERATION
11.1 Natural resource issuer - Where a natural resource issuer proposes to
acquire from a person a resource property or an option on a resource
property, the value of which is not supported by a valuation opinion, the
following principles apply:
(a) In an arm's length transaction, the issuer may pay the person cash
consideration.
<PAGE> 27
LPS 3-07 -15-
(b) In an arm's length transaction, the issuer may agree to pay the person
additional consideration at such time as the resource property
commences commercial production. Such additional consideration may,
depending on the circumstances, consist of cash consideration,
reasonable payments from net profits, securities, or any combination
of these.
(c) In a non-arm's length transaction, the issues may pay the person cash
consideration up to the amount of the out of pocket costs incurred by
the person in respect of the resource property, determined in
accordance with section 5.3.
(d) In a non-arm's length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource property
commences commercial production, where the person has carried out
extensive exploration with results that indicate that the resource
property appears to have substantial merit. The extent of the person's
effort, skill and risk in developing the resource property will be
taken into account by the Superintendent in determining whether
additional consideration is justified. Such additional consideration
may, depending on the circumstances, consist of cash consideration,
reasonable payments from net profits, securities, or any combination
of these. A 15% net profits interest would normally be considered
reasonable.
11.2 Industrial issuer - Where an industrial issuer proposes to acquire from a
person non-cash assets, the value of which are not supported by a valuation
opinion, the following principles apply:
(a) In an arm's length transaction, the issuer may pay the person cash
consideration, a royalty or a combination of these.
(b) In a non-arm's length transaction, the issuer may pay the person cash
consideration up to the amount of the out of pocket costs incurred by
the person in respect of the non-cash assets, determined in accordance
with section 5.3.
DATED at Vancouver, British Columbia, this 21st day of December 1989.
/s/ DOUGLAS M. HYNDMAN
Douglas M. Hyndman
Chairman
<PAGE> 28
LPS 3-07
APPENDIX A TO LOCAL POLICY STATEMENT 3-07
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference ________________, 19___ and made
AMONG:
(the "Escrow Agent");
AND:
(the "Issuer");
AND: EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares of the
Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of
the shares upon the acquisition of the shares by the Shareholder;
NOW THEREFORE in consideration of the covenants contained in this agreement and
other good and valuable consideration (the receipt and sufficiency of which is
acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this agreement:
(a) "ACKNOWLEDGEMENT" means the acknowledgement and agreement to be bound in the
form attached as Schedule A to this agreement;
(b) "ACT" means the Securities Act, S.B.C. 1985, c. 83;
(c) "EXCHANGE" means the Vancouver Stock Exchange;
<PAGE> 29
LPS 3-07
-2-
(d) "IPO" means the initial public offering of common shares of the Issuer under
a prospectus which has been filed with, and for which a receipt has been
obtained from, the Superintendent under section 42 of the Act;
(e) "LOCAL POLICY STATEMENT 3-07" means the Local Policy Statement 3-07 in
effect as of the date of reference of this agreement and attached as
Schedule B to this agreement;
(f) "SHAREHOLDER" means a holder of shares of the Issuer who executes this
agreement or an Acknowledgement;
(g) "SHARES" means the shares of the Shareholder described in Schedule C to this
agreement, as amended from time to time in accordance with section 9;
(h) "SUPERINTENDENT" means the Superintendent of Brokers appointed under the
Act; and
(i) "SUPERINTENDENT OR THE EXCHANGE" means the Superintendent, if the shares of
the Issuer are not listed on the Exchange, or the Exchange, if the shares of
the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon
as practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise all voting
rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares
(a) to vote the Shares on a resolution to cancel any of the Shares,
(b) to receive dividends, and
December 21, 1989
<PAGE> 30
LPS 3-07
-3-
(c) to participate in the assets and property of the Issuer on a winding up or
dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall abstain from
voting on a directors' resolution to cancel any of the Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in accordance
with Local Policy Statement 3-07 and with the consent of the Superintendent
or the Exchange.
(2) The Escrow Agent shall not effect a transfer of the Shares within escrow
unless the Escrow Agent has received
(a) a copy of an Acknowledgement executed by the person to whom the Shares
are to be transferred, and
(b) a letter from the Superintendent or the Exchange consenting to the
transfer.
(3) Upon the death or bankruptcy of a Shareholder, the Escrow Agent shall hold
the Shares subject to this agreement for the person that is legally
entitled to become the registered owner of the Shares.
(4) [SET OUT IN THIS SUBSECTION THE RIGHTS AND OBLIGATIONS OF A SHAREHOLDER
WHO CEASES TO BE A PRINCIPAL, AS THAT TERM IS DEFINED IN LOCAL POLICY
STATEMENT 3-07, DIES, OR BECOMES BANKRUPT, TO RETAIN, TRANSFER OR
SURRENDER TO THE ISSUER FOR CANCELLATION ANY SHARES HELD BY THE
SHAREHOLDER.]
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain the Shares
until the Shares are released from escrow pursuant to subsection (2) or
surrendered for cancellation pursuant to section 8.
December 21, 1989
<PAGE> 31
-4-
(2) The Escrow Agent shall not release the Shares from escrow unless the
Escrow Agent has received a letter from the Superintendent or the
Exchange consenting to the release.
(3) The approval of the Superintendent or the Exchange to a release from
escrow of any of the Shares shall terminate this agreement only in
respect of the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow
Agent shall deliver the certificates representing the Shares to the Issuer
(a) at the time of a major reorganization of the Issuer, if required
as a condition of the consent to the reorganization by the
Superintendent or the Exchange,
(b) where the Issuer's shares have been subject to a cease trade
order-issued under the Act for a period of 2 consecutive years,
(c) 10 years from the later of the date of issue of the Shares and
the date of the receipt for the Issuer's prospectus on its IPO,
or
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2), this agreement may be amended only by a
written agreement among the Parties and with the written consent of the
Superintendent or the Exchange.
(2) Schedule C to this agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6,
(b) a release of Shares from escrow pursuant to section 7, or
<PAGE> 32
-5-
(c) a surrender of Shares for cancellation pursuant to section 8,
and the Escrow Agent shall note the amendment on the Schedule C in its
possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release, indemnify and
save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agent's compliance in
good faith with this agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in respect of the
Shares, the Escrow Agent shall give notice to the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow agent in
respect of the Shares, the Issuer shall give notice to the Escrow Agent.
(3) A notice referred to in subsection (1) or (2) shall be in writing and
delivered to
(a) the Issuer at _________________________________, or
(b) the Escrow Agent at _______________________________
and the notice shall be deemed to have been received on the date of
delivery. The Issuer or the Escrow Agent may change its address for
notice by giving notice to the other party in accordance with this
subsection.
(4) A copy of a notice referred to in subsection (1) or shall concurrently
be delivered to the Superintendent or the Exchange.
(5) The resignation of the Escrow Agent shall be effective and the Escrow
Agent shall cease to be bound by this agreement on the date that is 180
days after the date of receipt of the notice referred to in subsection
(1) or (2) or on such other date as the Escrow Agent and the Issuer may
agree upon (the "resignation date").
<PAGE> 33
-6-
(6) The Issuer shall, before the resignation date and with the written
consent of the Superintendent or the Exchange, appoint another escrow agent and
that appointment shall be binding on the Issuer and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this agreement.
13. TIME
Time is of the essence of this agreement.
14. GOVERNING LAWS
This agreement shall be construed in accordance with and governed by the laws
of British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which shall constitute one agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
17. ENUREMENT
This Agreement enures to the benefit of and is binding on the Parties and their
heirs, executors, administrators, successors and permitted assigns.
<PAGE> 34
LPS 3-07
-7-
The Parties have executed and delivered this agreements as of the date of
reference of this agreement.
The Corporate/Common Seal of )
[Escrow Agent] was affixed )
in the presence of: )
)
_______________________________ ) c/s
Authorized signatory )
)
_______________________________ )
Authorized signatory )
The Corporate/Common Seal of )
[Issuer] was affixed )
in the presence of: )
)
_______________________________ ) c/s
Authorized signatory )
)
_______________________________ )
Authorized signatory )
Where the Shareholder is an individual:
Signed, sealed and delivered by )
[Shareholder] in the presence of:)
)
_______________________________ )
Name )
)
_______________________________ )
Address ) _________________________________
) [Shareholder]
_______________________________ )
)
)
_______________________________ )
Occupation
December 21, 1989
<PAGE> 35
LPS 3-07
- 8 -
Where the Shareholder is a company:
The Corporate/Common Seal of )
[Shareholder] was affixed )
in the presence of; )
)
_______________________________ ) c/s
Authorized signatory )
)
_______________________________ )
Authorized signatory )
December 21, 1987
<PAGE> 36
LPS 3-07
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Superintendent of Brokers or Vancouver Stock Exchange
#1100 - 865 Hornby Street 609 Granville Street
Vancouver, B.C. Vancouver, B.C.
V6Z 2H4 V7Y 1H1
(if the shares are not (if the shares are listed
listed on the Vancouver on the Vancouver Stock
Stock Exchange) Exchange)
I acknowledge that
(a) I have entered into an agreement with ______________________________
under which _____________ shares of ________________ (the "Shares")
will be transferred to me upon receipt of regulatory approval,
and
(b) the Shares are held in escrow subject to an escrow agreement dated
for reference ______________________, 19__ (the "Escrow Agreement"),
a copy of which is attached as Schedule A to this acknowledgement.
In consideration of $1.00 and other good and valuable consideration (the
receipt and sufficiency of which is acknowledged) I agree, effective upon
receipt of regulatory approval of the transfer to me of the Shares, to be
bound by the Escrow Agreement in respect of the Shares as if I were an
original signatory to the Escrow Agreement.
Dated at __________________________________ on _________________ 19___.
Where the transferee is an individual:
Signed, sealed and delivered by )
[transferee] in the presence of: )
)
________________________________ )
Name )
)
________________________________ ) __________________________________
Address ) [transferee]
)
________________________________ )
)
)
________________________________ )
Occupation
December 21, 1989
<PAGE> 37
LPS 3-07
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed )
in the presence of: )
)
________________________________ ) c/s
Authorized signatory )
)
________________________________ )
Authorized signatory )
December 21, 1989
<PAGE> 38
LPS 3-07
SCHEDULE C TO ESCROW AGREEMENT
- --------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
- --------------------------------------------------------------------------------
DECEMBER 21, 1989
<PAGE> 39
LPS 3-07
APPENDIX B TO LOCAL POLICY STATEMENT 3-07
EXAMPLES OF EARN-OUT PRICES FOR PERFORMANCE SHARES
ISSUED BY AN INDUSTRIAL ISSUER
--------------------------------------------------
<TABLE>
<CAPTION>
EARN-OUT PRICES IN DOLLARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PERFORMANCE SHARE
PERCENTAGE 5% 25% 45% 65%
- --------------------------------------------------------------------------------
EARN-OUT FACTOR .01x .25x .81x 1.69x
- --------------------------------------------------------------------------------
I
P $0.40 .004 .10 .324 .676
O
$0.60 .006 .15 .486 1.014
P
R $0.80 .008 .20 .648 1.352
I
C $1.00 .010 .25 .810 1.690
E
- --------------------------------------------------------------------------------
</TABLE>
The earn-out price represents the amount of cash flow that must be generated to
release one performance share from escrow. The following definitions are
applicable to the calculation.
Earn-out Price:
The IPO price multiplied by the earn-out factor.
IPO Price:
The price per share paid by the public on the issuer's IPO.
Earn-out Factor:
The number obtained by squaring the performance share percentage,
expressed as a decimal, and multiplying the result by four.
Performance Share Percentage:
The percentage, determined on the date the issuer's shares are listed,
posted and called for trading on the Exchange, that the issued
performance shares of the issuer are of the total issued and outstanding
voting securities of the issuer.
December 21, 1989
<PAGE> 40
LPS 3-07
APPENDIX C TO LOCAL POLICY STATEMENT 3-07
UNDERTAKING REQUIRED FROM NON-REPORTING
OR CLOSELY HELD COMPANY
---------------------------------------
To: Superintendent of Brokers or Vancouver Stock Exchange
#1100 - 865 Hornby Street 609 Granville Street
Vancouver, B.C. Vancouver, B.C.
V6Z 2H4 V7Y 1H1
(if the Issuer's shares (if the Issuer's shares
are not listed on the are listed on the
Vancouver Stock Exchange) Vancouver Stock Exchange)
_____________________________ (the "Company") undertakes, for the duration of
the time that the Company is the registered owner of escrowed shares of
_____________________________ (the "Issuer"),
(a) to effect or permit transfer of ownership in the shares of the Company,
or
(b) to allot and issue further shares of any class of shares of the Company
only upon receipt of the written consent of the Superintendent of Brokers, if
the Issuer's shares are not listed on the Vancouver Stock Exchange (the
"Exchange"), or the Exchange, if the Issuer's shares are listed on the Exchange.
Dated at ____________________________________ on ________________________ 19___.
The Corporate/Common Seal of )
[Company] was affixed )
in the presence of: )
)
_______________________________________ )
Authorized signatory ) c/s
)
_______________________________________ )
Authorized signatory )
December 21, 1989
<PAGE> 41
SCHEDULE "C" TO ESCROW AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND ADDRESS NUMBER OF SHARES
OF SHAREHOLDER HELD IN ESCROW
- --------------------------------------------------------------------------------
<S> <C>
PETER P. TSAPARAS 262,500
9289 Gold Hurst Terrace
Burnaby, B.C.
V5A 4P3
HANS WICK 90,000
Apt. 316 - 125 West 19th Street
North Vancouver, B.C.
FOTIOS KANDIANIS 60,000
59 Karaiskaki Street
15341 Agia Paraskevi
PETROS S.E. TSAPARAS 60,000
4112 Puget Drive
Vancouver, B.C.
V6L 2V8
COLIN McALEENAN 90,000
2596 Harrier Drive
Port Coquitlam, B.C.
V3E 2V8 -------
TOTAL: 562,500
=======
</TABLE>
<PAGE> 1
Exhibit 3s
ELLIS FOSTER
CHARTERED ACCOUNTANTS
1630 West 1st Avenue
Vancouver, B. C. , Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 734-1502
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Registration Statement on Form 20F of our report
dated January 27, 1997 relating to the consolidated balance sheets of Minco
Mining & Metals Corporation as at December 31, 1996 and 1995 and the
consolidated statements of operations and deficit and changes in financial
position for the periods then ended.
Vancouver, Canada /s/ Ellis Foster
May 6, 1997 Chartered Accountants
- --------------------------------------------------------------------------------
E A partnership of incorporated professionals
F An independently owned and operated member of Moore Stephens North
America, Inc., a member of Moore Stephens International Limited
Members in principal cities throughout the world
<PAGE> 2
Exhibit 3s
ELLIS FOSTER
CHARTERED ACCOUNTANTS
1630 West 1st Avenue
Vancouver, B. C. , Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 734-1502
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Registration Statement on Form 20F of our report
dated February 12, 1996 relating to the balance sheets of Minco Mining & Metals
Corporation as at December 31, 1995 , 1994, 1993 and 1992 and the statements of
operations and deficit and changes in financial position for the years then
ended.
Vancouver, Canada /s/ Ellis Foster
May 6, 1997 Chartered Accountants
- --------------------------------------------------------------------------------
E A partnership of incorporated professionals
F An independently owned and operated member of Moore Stephens North
America, Inc., a member of Moore Stephens International Limited
Members in principal cities throughout the world
<PAGE> 1
Exhibit 3t
A.C.A. HOWE INTERNATIONAL LIMITED
MINING AND GEOLOGICAL CONSULTANTS
350 Bay Street, 7th Floor, Toronto, Ontario, M5H 2S6
Telephone: (416) 368-7041 Facsimile: (416) 368-2579
May 6, 1997
Consent of Independent Geological Consultants
We hereby consent to the references to our firm in the Form 20F Registration
being filed by Minco Mining & Metals Corporation as well as references to and
extracts from the following reports prepared by our firm:
1. Evaluation Report on the Crystal Valley, Stone Lake and Emperor's
Delight Gold Projects, Hebei Province, the People's Republic of China,
dated March 13, 1995; and
2. Valuation Report of the Emperor's Delight Joint Venture Property, Hebei
Province, The People's Republic of China, dated November 13, 1995;
3. Update of Work Performed on the Emperor's Delight, Crystal Valley and
Stone Lake Properties dated December 9, 1996.
A. C. A. HOWE INTERNATIONAL LIMITED
/s/ W. E. Ewert
Per: W. E Ewert, P. Geo.
<PAGE> 1
Exhibit 3u
H. A. SIMONS, LTD.
10333 SOUTHPORT ROAD S.W. SUITE 350
CALGARY, ALBERTA CANADA T2W 3X6
403-258-4200
FAX 403-258-4218
May 6, 1997 0310/L882-2
VIA FACSIMILE
(604) 688-8030
CONSENT OF INDEPENDENT GEOLOGICAL CONSULTANTS
We hereby consent to the references to our firm in the Form 20F Registration
being filed by Minco Mining & Metals Corporation as well as references to and
extracts from the following reports prepared by our firm:
1. Chapuzi Gold Occurrence Report for Minco Mining and Metals Corporation
dated December, 1996;
2. Technical Site Visit to Smelters and Mine Facilities of Baiyin
Non-Ferrous Metals Corporation, Ganzu Province, People's Republic of
China, dated December, 1995;
3. Proposed Development Strategy for the Changba Lijiagou Underground Mine
dated December 9, 1996.
H. A. Simons, Ltd.
/s/ Tom Healy
T.H.A. (Tom) Healy, P.Eng.
Principal Engineer, Mining
THAH:pmi
<PAGE> 1
Exhibit 3v
XRAL LABORATORIES - A DIVISION OF SGS CANADA INC.
1885 Leslie Street
Toronto, Ontario
Canada M3B 3J4
telephone: (416) 445-5735
facsimile: (416) 445-4152
Consent of Independent Laboratories
We hereby consent to the references to our firm in the Form 20F Registration
being filed by Minco Mining & Metals Corporation as well as to references to and
extracts from assay and metallurgical test work and reports prepared by our
firm.
XRAL Laboratories
/s/ Hugh de Souza
Dr. Hugh de Souza
General Manager
<PAGE> 1
Exhibit 3w
CESL ENGINEERING
Suite 400 - 1200 West 73rd Ave. Vancouver, B.C. Canada V6P 8G5 / Tel (604)
267-3050 / Fax (604) 267-3051
May 7, 1997
Minco Mining & Metals Corporation
Suite 1200
543 Granville Street
Vancouver, B.C.
V6C 1X8
Attention: Dale Wallster
Reference to CESL Laboratories in your form 20F
Please be advised that the reference to CESL Laboratories is more properly
called Cominco Engineering Services Ltd. environmental laboratory.
We consent to the references in your form 20F with the understanding that the
laboratory provided the facility for the bottle roll tests and coordinated the
assay results from those tests done by other assay facilities. The assay results
from those tests were forwarded to H.A. Simons for their use. Any conclusions
reached are a result of those tests or the assays are the responsibility of H.A.
Simons or others.
Yours Truly,
/s/ J. A. B. Rae
J.A.B. Rae
President
JABR/rab
COMINCO ENGINEERING SERVICES, LTD.
