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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
METALLINE MINING COMPANY
(Exact name of registrant as specific in its charter)
Nevada 91-1766677
(State of Incorporation) (I.R.S. Employer
Identification No.)
1330 Margaret Avenue
Coeur d'Alene, Idaho 83814
(Address of executive offices, including postal code)
Registrant's telephone number: (208) 665-2002
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
(509) 624-1475
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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<PAGE> 2
ITEM 1. DESCRIPTION OF BUSINESS.
Background
Metalline Mining Company (the "Company") is a development stage
enterprise formed under the laws of the State of Nevada, on August 20,
1993, to engage in the business of mining.
Current Operations
The Company is engaged in the business of mining. The Company
currently owns one mining property located in Mexico known as the
Sierra Mojada Property. The Company conducts its operations in Mexico
through its wholly owned subsidiary corporation, Minera Metalin S.A. de
C.V. ("Minera Metalin").
The Sierra Mojada Property
The Mexican government owns the mineral rights. The exclusive
right to explore and exploit the mineral rights is granted by issuance
of a concession to a company or individual that denounces the area
desired for exploration or exploitation. After the concession has been
issued an annual fee is paid to the government and annual Proof of
Labor must be filed to maintain the title to the concession. The
annual fee is determined on the basis of the area of the concession and
the type of activity on the concession. The concession can be held for
6 years under the exploration fee, after 6 years the exploitation fee
is paid.
The Sierra Mojada Property is comprised of eight concessions
totaling 7,060 hectares (17,446 acres). The concessions were acquired
by purchase agreements from the titled owners. The Company controls
100% of the concessions. Minera Metalin has purchased title to the
Sierra Mojada, Mojada 3 and Esmeralda concessions. A summary of the
concessions is as follows:
Concession Title No. Hectares
Sierra Mojada 198513 4767.3154
Mojada 3 199246 1689.2173
Esmeralda 188765 117.5025
Esmeralda 1 187776 97.6839
Unification Mineros Nortenos 169343 336.7905
La Blanca 188326 33.5044
Fortuna 160461 13.9582
Vulcano 83507 4.4904
---------
Total 7060.4626
=========
The Company is obligated to make payments to the sellers of the
Esmeralda I, Fortuna, U.M. Nortenos and La Blanca concessions as
follows:
<PAGE> 3
For submission via EDGAR the following chart has been divided into two
parts. Part I is as follows:
Purchase Schedule
Esmeralda I Fortuna Esmeralda
Date Amount Date Amount Date Amount
960823 17,692 961129 10,000 961129 20,000
970529 20,000
970823 17,692 971129 10,000 971129 30,000
980529 30,000
980823 26,538 981129 25,000 981129 50,000
990529 100,000
990823 26,538 991129 30,000
000823 35,384
010823 53,076
TOTAL 176,920 75,000 250,000
Part II
U.M. Nortenos La Blanca Total
Annual
Date Amount Date Amount Payments
960823 47,692
970902 27,500 970902 10,000 115,192
980302 27,500 980302 5,000
980902 82,500 980902 5,000 251,538
990302 82,500 990302 10,000
990902 110,000 990902 10,000 369,038
000302 10,000
000830 3,270,000 000902 10,000 3,325,384
010302 10,000
010902 50,000 113,076
TOTAL 3,600,000 120,000 4,221,921
All amounts are U.S. Dollars.
For submission via EDGAR the preceding chart was divided into two
parts.
The Company is current on its annual payments.
Location and Access
The Sierra Mojada Mining District is located in the west central
part of the state of Coahuila, Mexico, near the Coahuila-Chihuahua
state border some 200 kilometers south of the Big Bend of the Rio
Grande River. The principal mining area extends for some 5 kilometers
in an east-west direction along the base of the precipitous, 1,000
meter high, Sierra Mojada Range.
<PAGE> 4
Vehicle access from Torreon is by 200 kilometers on paved road to
the Penoles chemical plant at Laguna del Rey and then another 50
kilometers of gravel road to Sierra Mojada. There is a well
maintained, 1200 meter, gravel airstrip. The District has high voltage
electric power and is served by a rail line, which was constructed from
Escalon to the district in 1891 and later connected to Monclova.
This part of Mexico is remote, arid and sparsely populated; the
region is known as the "zone of silence".
History
The initial discovery of silver ore in the Sierra Mojada Property
was made in 1879. Over the next 12 years numerous small mines
developed along an oxidized silver lead ore body known as the "lead
manto" (a bed, layer or strata). The lead manto was mined continuously
for 3 kilometers and discontinuously for another 2 kilometers. Ore was
selectively mined and hauled by wagon to Escalon on the railroad main
line from El Paso to Mexico City; from there it went to smelters in
Mexico and the United States.
In September of 1891 the Mexican Northern Railroad completed its
spur line from Escalon to the district. Rail access stimulated
development and the period from 1891 to the late 1920's was the peak of
productivity of the district. The main lead manto was nearly mined out
by 1905, the same year that the discovery of the first silver-copper
ore body was made. Additional discoveries of silver, silver-copper,
and silver-copper-zinc-lead ores provided production through the
1930's. Between 1922 and 1931 additional lead manto silver-lead ore
was discovered and mined to the southwest for some 1,400 meters under
the Sierra Mojada range, this manto was eventually mined for more than
2 kilometers.
By the mid 1920's many of the mines were under control of Penoles
Corporation ("Penoles") and ASARCO Corporation ("ASARCO"). ASARCO
ceased mining in the district in the late 1930's. Both companies still
owned properties during the 1940's and Penoles mined until the late
1950's when the Mineros Nortenos Cooperative acquired the Penoles
properties. The Mineros Nortenos Cooperative ("Mineros Nortenos") has
operated the San Salvador, Encantada and Fronteriza mines since 1957
and direct shipped high-grade oxide zinc and lead-silver ore to
smelters in Mexico.
The lead manto produced 3 to 3.5 million tonnes prior to 1905 with
another 1.5 million tonnes of similar ore coming from other ore bodies
to the west and to the southwest.
Mineros Nortenos has mined about 600,000 tonnes of predominantly
oxide zinc ore with grades of 20 to 50% zinc. Some of this ore was
oxide silver-lead and silver, copper, zinc and lead sulfide at grades
of 1 to 4 kilogram silver per tonne, 1 to 5% copper, 10 to 30% zinc and
30 to 70% lead. Production records from 1978 to 1981 for the San
Salvador mine average 33.5% zinc.
<PAGE> 5
The Sierra Mojada Property has produced in excess of 10 million
tonnes of high-grade ore that graded in excess of 30% lead, 20% zinc,
1% copper and 1 kg (31 ounces) silver per tonne that was shipped
directly to the smelter. The district has never had a mill to
concentrate ore. All of the mining was done selectively for ore of
sufficient grade to direct ship; mill grade ore was left unmined. More
than 50 kilometers of underground workings are spread through the 5
kilometer by 2 kilometer area from which more than 45 mines have
produced ore. The deepest workings have ore grade mineralization and
provide some of the best targets for reserve development. In spite of
the amount of historic work, when a map of all of the historic workings
is viewed there is much more unexplored area in the 5 by 2 kilometer
area than has been explored and the vertical extent greater than 100
meters is totally unexplored.
The sediments are predominantly carbonate with some sandstone and
shale and the attitudes are near horizontal. The mines are dry and the
rocks are competent, there is very little unstable ground and the ore
thickness is amenable to high volume mechanized mining methods. Sierra
Mojada has ideal mining conditions and grades for low cost production.
Based upon the foregoing, the Company is of the opinion that the
magnitude of the Sierra Mojada mineral system and its exploration
potential is capable of providing new reserves for many more years of
mining. Because, however, the reserves are located below the surface
of the earth, there is no assurance as to the quantity or quality of
the undeveloped reserves.
Geology
The Sierra Mojada District is located on the southern margin of
the Sabinas Basin, a large rift basin in northeastern Mexico, which
formed during Late Jurassic and Cretaceous tectonic extension.
Beginning in Latest Jurassic the Sabinas basin began to form with
the basin being dropped down to the north relative to the Coahuila
Peninsula that was being uplifted to the south. The Sierra Mojada fault
is, possibly, one of the faults that contributed to the rift basin
forming process, which occurred over a time span in excess of 80
million years. During basin formation the Sierra Mojada fault, if
present, would have been a normal fault due to crustal extension. The
most recent motion on the Sierra Mojada fault is post mineral and
reverse. The reverse motion most likely occurred as a result of Late
Cretaceous Laramide tectonic compression.
Stratigraphy
Upper Jurassic and Lower Cretaceous marine carbonate, sandstone
and shale, the La Casita and Taraises Formations, are overlain by Lower
Cretaceous red beds, the San Marcos Formation, composed of
conglomerate, sandstone, siltstone, shale, tuff and mineralized
carbonate sediments. The San Marcos is overlain by a marine carbonate
sequence of Early and Middle Cretaceous age, the Cupido, La Pena,
Aurora and Georgetown Formations (refer to district cross section).
<PAGE> 6
Mineralization
Sierra Mojada has two mineral systems separated by the east west
trending Sierra Mojada Fault. North of the fault the mineralization is
chemical sedimentary disseminated to massive silver, copper, zinc and
lead sulfide deposited in the Taraises Formation. South of the fault
the mineralization is deposited in the Aurora Formation and consists of
oxide zinc and lead mantos and solution cavern filling, karst and
interformational breccia. Surrounding and extending beyond the
solution cavern stopes there are mantos known as the red zinc mantos.
These are pervasive, red, high iron, oxide zinc beds.
These two mineral systems have been brought into proximity to each
other by post mineral reverse motion on the Sierra Mojada Fault that
faults the San Marcos and Taraises Formations against Aurora. The San
Marcos and Taraises Formations are 25 million years older than the
Aurora Formation.
The mineral systems have been mined in an east-west direction for
over 5 kilometers, in a north-south direction in excess of 2 kilometers
and for a vertical extent of 100 meters.
The Sierra Mojada mineral systems are chemical sedimentary and
brine related. The ore minerals are in chemical equilibrium with the
host rocks, which are limestone, dolomite, carbonate shale and
sandstone. There is no alteration, silicification or skarn
mineralization.
Mineralization has been episodically deposited in certain beds,
resulting in a vertical repetition of mineralized beds and ore bodies
in the Taraises Formation and in the Aurora Formation. This
Intermittent or episodic deposition of mineralization has occurred over
at least the 25 million years represented by these two formations and
it is possible that this process was ongoing during deposition of the
other units above the basement rocks. The thickness and character of
the rock units below the existing workings is unknown and will have to
be determined by drilling. With the evidence of the repetitive nature
of the mineralization the potential for additional discovery at depth
is high.
Exploration and Development.
The Company has spent the last 3 years collecting historic data on
the district, geologic mapping and sampling of the surface and the
underground mines and has completed a reverse circulation drilling
program consisting of 24 holes and a total of 6630 meters of drilling.
The drill program was the first step in developing ore reserves at
Sierra Mojada. Fifteen of the holes were drilled on a grid of about 30
meters by 60 meters on the Encantada North zone, north of the Sierra
Mojada fault, to evaluate the silver, copper, zinc and lead
mineralization of the Encantada North target. Nine holes were drilled
in the San Salvador, Encantada and Fronteriza mines to test the oxide
zinc mineral system south of the Sierra Mojada fault. These holes were
spaced at about 100 to 200 meter intervals over a 1500 meter extent in
the three mines. The results confirm and expand the mineralization of
<PAGE> 7
the Encantada North and the oxide zinc mantos. Multiple intersections
of ore grade mineralization over thick intervals were obtained, with
some intersects of exceptional grade and thickness. The results of the
drill program have been released in news releases dating from February
through September 1999 and are available from the Company.
Exploration and evaluation of the mineral systems of the district
and the Company's total land position to define the limits of the known
mineralization and for discovery of new mineralization will continue
and accelerate.
The oxide zinc system in the San Salvador, Encantada and
Fronteriza mines and the Encantada North silver, copper, zinc, lead
zone will move to development stage for drilling, sampling and defining
of an ore reserve. This will involve surface and underground drilling
and channel sampling in sufficient detail to determine the tonnage and
grade of an ore reserve and perform a feasibility study, including
metallurgical studies, to determine if the reserves are commercially
viable.
Costs of these programs at this time have not been estimated, but
will be estimated as each stage of the exploration and development
programs are planned and budgeted. All costs through feasibility will
be paid by North Limited under the Joint Venture agreement with North.
Additional financing by the Company will be required to complete its
land payment obligations and for corporate overhead.
Joint Venture Agreement
Minera Metalin has signed a Joint Venture Letter Agreement with
Minera North S. de R.L. de C.V. a wholly owned subsidiary of North
Limited of Melbourne Australia, a major international mining company.
The letter agreement is to be followed with a formal Joint Venture
Agreement. The agreement allows North to acquire a 60% participating
interest in Sierra Mojada by exploring and completing a feasibility
study (which shall be of a standard acceptable to international banks
as enabling them to lend funds to the project) over a "Earn In Period"
of not more than 5 years. If a decision is made to proceed with the
development of any mine, North shall arrange financing for the
development on behalf of both parties.
Timetable
Definition of a 2 million tonne sulfide reserve and completion of
a feasibility study is estimated to take 1.5 to 2 years. Construction
and development of a 1000 tonne per day mine and mill will require an
additional 2 years.
Defining a 20 million tonne oxide reserve would require 2 to 3
years of drilling, an additional 1 to 2 years for completing a
feasibility study and about 5 years to develop the mine and build a
hydrometallurgical plant.
<PAGE> 8
There is potential for long-term reserve expansion within the
known extent of the mineral systems. There is potential to discover
ore deposits in unexplored portions of the land position and at depth
in unexplored stratigraphy. There is however, no assurance that the
Company will have the monetary resources to continue to explore for,
develop, or retrieve any of the minerals located in the Sierra Mojada
Property.
RISK FACTORS
1. Exploration Stage Mining Company with No History of Operation.
The Company is in its exploration stage, has no operating history and
is subject to all the risks inherent in a new business enterprise. The
likelihood of success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with a new business, and the competitive and
regulatory environment in which the Company will operate. See
"Business."
2. No Commercially Mineable Ore Body. No commercially mineable
ore body has been delineated on the properties, nor have any reserves
been identified. See "Business."
3. Risks Inherent in the Mining Industry. The Company is subject
to all of the risks inherent in the mining industry including, without
limitation, the following: competition from a large number of
companies, many of which are significantly larger than the Company, in
the acquisition, exploration, and development of mining properties; the
concession holder must pay fees and perform labor on the concessions to
maintain the concessions title; exploration for minerals is highly
speculative and involves substantial risks, even when conducted on
properties known to contain significant quantities of mineralization,
and most exploration projects do not result in the discovery of
commercially mineable deposits of ore; operations are subject to a
variety of existing laws and regulations relating to exploration and
development, permitting procedures, safety precautions, property
reclamation, employee health and safety, air quality standards,
pollution and other environmental protection controls; a large number
of factors beyond the control of the Company, including fluctuations in
metal prices, inflation, and other economic conditions, will affect the
economic feasibility of mining; mining activities are subject to
substantial operating hazards some of which are not insurable or may
not be insured due to economic considerations; and, the availability of
water, which is essential to milling operations.
4. Nature of the Industry. Exploration, development and mining
of mineral properties is highly speculative and involves unique and
greater risks than are generally associated with other businesses. The
Company's operations will be subject to all the operating hazards and
risks normally incident to the exploration, development and mining of
mineral properties, including risks enumerated above and below.
<PAGE> 9
5. Fluctuating Price for Metals. The Company's operations will
be greatly influenced by the prices of silver, copper, lead, zinc and
other metals. These prices fluctuate widely and are affected by
numerous factors beyond the Company's control, including expectations
for inflation, the strength of the United States dollar, global and
regional demand and political and economic conditions and production
costs in major metal producing regions of the world.
6. Mining Concessions. The Company holds mining concessions in
Mexico. Concessions require work and financial expenditures to retain
their validity. See "Business."
7. Environmental Controls. Compliance with statutory
environmental quality requirements may necessitate significant capital
outlays, may materially affect the earning power of the Company, or may
cause material changes in the Company's intended activities. No
assurance can be given that environmental standards imposed by either
federal or state governments will not be changed or become more
stringent, thereby possibly materially adversely affecting the proposed
activities of the Company.
8. Governmental Regulation and Environmental Controls. The
Company's activities are subject to extensive Mexican laws and
regulations controlling not only the exploration for and development of
mineral properties, but also the possible effect of such activities
upon the environment. In its mining operations, the Company will use
certain equipment which will subject the Company to Mexican safety and
health regulations. While the Company intends to act in compliance
with all such regulations, any adverse ruling under any regulations,
any imposition of a fine, or any imposition of more stringent
regulations could require the Company to make additional capital
expenditures that could impair its operations.
9. Availability of Water Shortages of Supplies and Materials.
Water is essential in all phases of the exploration and development of
mineral properties. It is used in such processes as exploration,
drilling, leaching, placer mining, dredging, testing, and hydraulic
mining. Any water that may be found will be subject to acquisition
pursuant to appropriate governing laws. The Company has definitely not
determined the availability of water at Sierra Mojada, except to note
that adequate water supplies are generally developed by drilling, but
has not determined the cost of acquisition. Both the lack of available
water and the cost of acquisition may make an otherwise viable project
economically impossible to complete. The mineral industry has
experienced from time to time shortages of certain supplies and
materials necessary in the exploration for and evaluation of mineral
deposits. The prices at which such supplies and materials are
available have also greatly increased. There is a possibility that
planned operations may be subject to delays due to such shortages and
that further price escalations will increase the costs of the Company.
10. Uninsured Risks. The Company may not be insured against all
losses or liabilities which may arise from operations, either because
such insurance is unavailable or because the Company has elected not to
purchase such insurance due to high premium costs or other reasons.
<PAGE> 10
11. Need for Subsequent Funding. The Company has an immediate
need for additional funds in order to finance its proposed business
operations. The Company's continued operations therefore will depend
upon the availability of cash flow, if any, from its operations or its
ability to raise additional funds through bank borrowings or equity or
debt financing. There is no assurance that the Company will be able to
obtain additional funding when needed, or that such funding, if
available, can be obtained on terms acceptable to the Company. If the
Company cannot obtain needed funds, it may be forced to curtail or
cease its activities.
12. Need for Additional Key Personnel. At the present, the
Company employs three full time and two part-time employees. The
success of the Company's proposed business will depend, in part, upon
the ability to attract and retain qualified employees. The Company
believes that it will be able to attract competent employees, but no
assurance can be given that the Company will be successful in this
regard. If the Company is unable to engage and retain the necessary
personnel, its business would be materially and adversely affected.
13. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officers and Directors who will exercise control over the day to
day affairs of the Company. While the Company may solicit business
through its Officers, there can be no assurance as to the volume of
business, if any, which the Company may succeed in obtaining, nor that
its proposed operations will prove to be profitable. As of the date
hereof, the Company does not have any commitments regarding its
proposed operations and there can be no assurance that any commitments
will be forthcoming. See "Business" and "Management."
14. Issuance of Additional Shares. Approximately 42,734,905
shares of Common Stock or 85.47% of the 50,000,000 authorized shares of
Common Stock of the Company will remain unissued even if all shares
offered hereby are sold. The Board of Directors has the power to issue
such shares, subject to shareholder approval, in some instances. The
Company may also issue additional shares of Common Stock pursuant to a
plan and agreement of merger with a private corporation. Although the
Company presently has no commitments, contracts or intentions to issue
any additional shares to other persons, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. Any additional issuance by the
Company following the offering, from its authorized but unissued
shares, would have the effect of further diluting the interest of
investors in this offering. See "Description of Securities - Shares
Eligible for Future Sale."
15. Non-Arms's Length Transaction. The number of shares of
Common Stock issued to present shareholders of the Company for cash was
arbitrarily determined and may not be considered the product of arm's
length transactions. See "Principal Shareholders."
<PAGE> 11
16. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company may
indemnify any Director, Officer, agent and/or employee as to those
liabilities and on those terms and conditions as are specified in the
Nevada Business Corporation Act. Further, the Company may purchase and
maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against the
liability insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such
Officers, Directors, agents and employees for losses incurred by the
Company as a result of their actions. Further, the Company has been
advised that in the opinion of the Securities and Exchange Commission,
indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable.
17. Competition. The Company believes that it will have
competitors and potential competitors, many of whom may have
considerably greater financial and other resources than the Company.
18. Public Market for Securities. At present, the Company's
common stock is traded under the symbol MMGG on the OTC Bulletin Board
operated by the National Association of Securities Dealers, Inc. This
market is a thinly traded market and lacks the liquidity of other
public markets with which some investors may have more experience.
19. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
The shareholders purchasing in this offering may be further diluted in
their percentage ownership of the Company in the event additional
shares are issued by the Company in the future. Cumulative voting in
the election of Directors is not provided for. Accordingly, the
holders of a majority of the shares of Common Stock, present in person
or by proxy, will be able to elect all of the Company's Board of
Directors. See "Description of the Securities."
20. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. Investors who anticipate the need of an immediate income from
their investment in the Company's Common Stock should refrain from the
purchase of the securities being offered hereby. See "Dividend
Policy."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has inadequate cash to maintain operations during the
next twelve months. In order to meet its cash requirements the Company
will have to raise additional capital through the sale of securities or
loans. As of the date hereof, the Company has not made sales of
additional securities and there is no assurance that it will be able to
raise additional capital through the sale of securities in the future.
Further, the Company has not initiated any negotiations for loans to
the Company and there is no assurance that the Company will be able to
raise additional capital in the future through loans. In the event
that the Company is unable to raise additional capital, it may have to
suspend or cease operations.
<PAGE> 12
The Company does not intend to purchase a plant or significant
equipment.
The Company will hire employees on an as needed basis, however,
the Company does not expect any significant changes in the number of
employees.
Results of Operations - Inception (August 20, 1993) through September
30, 1999.
The Company is in the development stage. From inception until May
1996, the Company was essentially dormant having as its only asset
unpatented mining claims located in the State of Montana ("Kadex
Property"). Since May 1996, the focus of the Company has been the
Sierra Mojada Project in Mexico. The President and Vice President of
the Company both have extensive experience in mining, exploration and
development.
Liquidity and Capital Resources.
The Company has insufficient funds to carry on operations during
the next twelve months. In order to maintain operations, the Company
will have to raise additional capital through loans or through the sale
of securities. If the Company is unable to raise additional capital,
it may have to cease operations. The Company's plan of operation,
subject to maintaining sufficient funds, calls for continued geologic
mapping of the surface and underground workings, sampling and drilling
to explore for additional mineralization and to develop an ore reserve
and compilation of the data into a computer data base for reserve
calculation.
Currently the Company is spending approximately $20,000 per month
in general overhead. Over the next six months the Company has budgeted
$100,000 for Sierra Mojada programs, $40,000 for property payments and
$220,000 for working capital and costs of future financing.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company does not own any real or personal property other than
the following eight mining concessions:
Concession Title No. Hectares
Sierra Mojada 198513 4767.3154
Mojada 3 199246 1689.2173
Esmeralda 188765 117.5025
Esmeralda 1 187776 97.6839
Unification Mineros Nortenos 169343 336.7905
La Blanca 188326 33.5044
Fortuna 160461 13.9582
Vulcano 83507 4.4904
---------
Total 7060.4626
=========
<PAGE> 13
The Company's corporate offices are located at 1330 East Margaret
Avenue, Coeur d'Alene, Idaho 83815 and its telephone number is (208)
665-2002 and FAX is (208) 665-0041. Minera Metalin has its operations,
consisting of offices, residences, shops, and warehouse buildings,
located at Calle Mina #1, La Esmeralda, Coahuila, Mexico and its
telephone and FAX number is 52 177 52100.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
Name Number of Number of
of owner Shares Position Shares
Merlin Bingham 935,000 President, CEO and 12.87%
Chairman of the Board of
Directors
Daniel Gorski 766,600 Vice President of 10.55%
Operations and
member of the
Board of Directors
John Ryan 238,900 Vice President of 3.29%
Finance, Secretary
and member of the Board
of Directors
Mario Ayub Touche 50,000 Member of the Board of 0.69%
of Directors
Jim Czirr 490,100 Member of the Board of 6.75%
Directors
Wayne Schoonmaker 0 Treasurer 0.00%
All officers and 2,480,600 34.14%
directors as a
group (5 persons)
Britannia Holdings 550,000 7.57%
King's House
The Grange
St. Peter Port
Guernsey
Channel Islands
<PAGE> 14
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Merlin Bingham 66 President and Chairman of the Board of
Directors
Daniel Gorski 62 Vice President of Operations and a
member of the Board of Directors
John Ryan 37 Vice President of Finance, Secretary and
a member of the Board of Directors
Mario Ayub Touche 50 Member of the Board of Directors and
Jim Czirr 45 Member of the Board of Directors and
Consultant
Wayne Schoonmaker Treasurer
All directors hold office until the next annual meeting of
shareholders which is tentatively scheduled for February 3, 2000, or
until their successors have been elected and qualified. The Company's
officers are elected by the Board of Directors at the annual meeting
and hold office until their death, or until they resign, or have been
removed from office.
Officer and Director Biographies:
Merlin Bingham, President and Chairman of the Board of Directors
Since October 1996, Mr. Bingham has been the President and
Chairman of the Board of Directors of the Company. From 1963 to 1983
Mr. Bingham worked in exploration for mining and oil companies in the
western U.S. and Alaska, Zambia, the United Arab Emirates, Ecuador and
Mexico. Since 1983, Mr. Bingham has been a consulting geologist. Mr.
Bingham received a B.S. degree in Mineralogy from the University of
Utah in 1963.
Daniel Gorski, Vice President of Operations and a member of the Board
of Directors
Since June 1996, Mr. Gorski has been the Vice President of
Operations and a member of the Board of Directors of the Company. Mr
Gorski has been a consulting geologist and mine manager since 1974
working in the western U.S. and Mexico. From January 1992 to June 1996,
Mr. Gorski was employed as a contract geologist, working in Mexico,
employed by USMX, Inc., an exploration and mining company located in
Denver, Colorado. Mr. Gorski received a B.S. degree in Geology from
Ross State College, Alpine Texas and a M.A. in Geology from the
University of Texas in 1970.
<PAGE> 15
John P. Ryan, Vice President of Finance, Secretary and a member of the
Board of Directors
Since October 1996, Mr. Ryan has been Vice President of Finance,
Secretary and a member of the Board of Directors of the Company. From
October 1996 to August 1998, he served as Treasurer. From 1985 until
1989, Mr. Ryan served as an officer in the United States Navy aboard
U.S.S. Valdez as Communications and Electronics Officer. He held a
"Top Secret" clearance and is currently on inactive Naval Reserve
status. Since receiving his law degree, Mr. Ryan has been active in
the mining and securities industries and as a consultant to other
mining companies. Since, April 1997, Mr. Ryan has been a member of the
Board of Directors and Executive Vice President and Secretary of Royal
Silver Mines, Inc. Royal Silver Mines, Inc. is located in Coeur
d'Alene, Idaho and is engaged in the mining business. Royal Silver's
common stock is traded over-the-counter on the Bulletin Board operated
by the National Association of Securities Dealers, Inc. under the
symbol "RSMI." Mr. Ryan received a B.S. degree in Mining Engineering
in 1985 from the University of Idaho and a Juris Doctor degree from
Boston College Law School in 1992.
Mario Ayub Touche, Member of the Board of Directors
Since June 5, 1997, Mr. Touche has been a member of the Board of
Directors and a consultant to the Company. Mr. Touche has over 20
years of experience in mining and exploration and has been the
President of the National Association of Small and Medium Miners of
Mexico ("FENAMMPAC").
Jim Czirr - Director and Financial Consultant
Since June 1998, Mr. Czirr has been a member of the Board of
Directors and a financial consultant to the company since December
1997. Mr. Czirr has over 20 years experience as a financial and public
relations consultant in the areas of business strategies, marketing,
incentive programs, finance and capital formation and has extensive
experience in the brokerage business and in oil and gas limited
partnerships.
Wayne Schoonmaker - Treasurer
Since August 1998, Mr. Schoonmaker has been a member of the Board
of Director of the Company. From 1981 to 1993, Mr. Schoonmaker was
Financial Manager of the Northwest Mining Department of ASARCO and from
1978 to 1981, he was Chief Accountant at ASARCO's Troy Unit in Montana,
where he was responsible for the installation and implementation of the
accounting system for the start-up of the Troy Mine. From July 1978 to
December 1978, Mr. Schoonmaker was Assistant Treasurer of the Bunker
Hill Mining Company, and from 1964 to 1978, he was Assistant
Corporation Secretary of Hecla Mining Company. Mr. Schoonmaker
received a Bachelor of Science degree in Accounting from the University
of Montana in 1962 and an MBA from the University of Idaho in 1987.
Mr. Schoonmaker is a Certified Public Accountant in the states of Idaho
and Montana.
<PAGE> 16
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company from January 1, 1996 through December 31, 1998, for each
officer and director of the Company. This information includes the
dollar value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Names Other Under Restricted Other
Executive Annual Options/ Shares or Annual
Officer and Compen- SARs Restricted LTIP Compen-
Principal Year Salary Bonus sation Granted Share Payouts sation
Position Ended (US$) (US$) (US$) (#) Units (US$) (US$) (US$)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Merlin 1998 72,000 0 0 0 0 0 0
Bingham 1997 33,000 0 0 0 0 0 0
President 1996 21,000 0 0 0 0 0 0
Daniel 1998 78,000 0 0 0 0 0 0
Gorski 1997 54,000 0 0 0 0 0 0
Vice 1996 42,000 0 0 0 0 0 0
President
John P. 1998 29,000 0 0 0 0 0 0
Ryan 1997 21,000 0 0 0 0 0 0
Secretary/1996 14,000 0 0 0 0 0 0
Treasurer
Mario Ayub1998 0 0 0 0 0 0 0
Touche 1997 0 0 0 0 50,000 0 0
Director 1996 0 0 0 0 0 0 0
Jim Czirr 1998 0 0 36,000 100,000 0 0 0
Director 1997 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
Wayne 1998 0 0 7,500 0 0 0 0
Schoonmaker 97 0 0 0 0 0 0 0
Treasurer 1996 0 0 0 0 0 0 0
</TABLE>
The Company anticipates paying the following salaries in 1999,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Merlin Bingham President 1999 $ 72,000
Daniel Gorski Vice President 1999 $ 72,000
John P. Ryan Vice President
and Secretary 1999 $ 0
Mario Ayub Touche Director 1999 $ 0
Jim Czirr Director 1999 $ 36,000 [1]
Wayne Schoonmaker Treasurer 1999 $ 18,000
[1] Does not include a warrant to purchase up to 100,000 shares of
Common Stock at an exercise price of $1.00 per share.
<PAGE> 17
There are no other stock option plans, retirement, pension, or
profit sharing plans for the benefit of the Company's officers and
directors.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
<S> <C> <C> <C> <C> <C>
James Czirr 300,000 0 $0.10 -0- 12/31/05
</TABLE>
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
In general, the Directors do not receive any compensation for
serving as members of the Board of Directors. The Board has not
implemented a plan to award options to any Directors. There are no
contractual arrangements with any member of the Board of Directors
other than with James Czirr. Mr. Czirr has entered into a consulting
agreement with the Company whereby Mr. Czirr supplies financial and
business consulting services and is compensated in stock and options.
See "Certain Relationships and Related Transaction."
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company was formed on November 8, 1993, by Mr. Carman Ridland
of Las Vegas, Nevada as a spin-off from its predecessor Precious Metal
Mines, Inc. ("PMM").
The Company issued 960,800 of its $0.01 par value shares to PMM,
for 16 unpatented mining claims located near Philipsburg, Montana
comprising the Kadex property group.
PMM distributed the 960,800 shares of Cadgie Co. to its
shareholders, one share of Cadgie Co. for each share of PMM held by
holders of record as of August 31, 1993.
On August 31, 1994, the directors of Cadgie Co. declared a 1:5
reverse stock split of the outstanding Cadgie Co. shares, thus reducing
the number of outstanding shares from 960,800 to 192,160 shares.
<PAGE> 18
On August 4, 1995, the directors of Cadgie Co. declared a 3:1
forward stock split of the outstanding Cadgie Co. shares, thus
increasing the number of outstanding shares from 192,160 to 576,480.
During November 1995, Metalline Mining Company's directors
approved an issue of 45,000 shares of Common Stock to Mr. Ryan for
services rendered at $0.01 per share.
In January 1996, Carman Ridland in a private sale, sold a
controlling interest in the corporation to Howard Crosby. On January
12, 1996, Mr. Ridland transferred control of Cadgie Co. to Mr. Howard
Crosby and Mr. Robert Jorgensen.
<PAGE> 18
In May 1996, Messrs. Crosby and Jorgensen were made aware of
certain potentially valuable mining properties and concessions located
at Sierra Mojada, Coahuila, Mexico. Messrs. Crosby and Jorgensen
transferred control of Cadgie Co. to Messrs. Bingham, Gorski and Ryan
so that Cadgie Co. could focus on the opportunity presented at Sierra
Mojada.
In June 1996, the Company completed a private placement of common
stock resulting in net proceeds of $25,000. The Company issued 250,000
common shares in connection with this private placement. The Company
also issued 900,000 shares to Messrs. Bingham, Gorski and Ryan who had
formed a partnership to advance development of the mining concession
located in Coahuila, Mexico. The partnership had an informal joint
venture agreement with Dakota covering the mining concessions. By
acquiring the partnership interest, the Company was able to negotiate
and sign a formal joint venture agreement with Dakota in July 1996.
During June 1996, the Company issued 900,000 shares of Common
Stock for the assignment of mineral rights in the Sierra Mojada Project
in Coahuila, Mexico valued at $0.01.
In August 1996, the Company changed its name to Metalline Mining
Company and increased the authorized capital to 50,000,000 shares.
In October 1996, the Company completed a private placement of
common stock resulting in net proceeds of $125,500. The Company issued
1,255,000 shares in connection with this placement. The Company also
issued 120,000 shares to Mr. Gorski in payment for his services for the
months of September and October. The Company issued 20,000 shares of
Common Stock to Mr. Ryan as payment for services in those same months.
Further, the Company issued 150,000 shares of common stock for computer
equipment.
During February 1997, the Company borrowed $30,000 from
shareholders and issued 24,900 shares of Common Stock as a loan
incentive.
In March 1997, the Company completed an issuance of Common Stock
resulting in net proceeds of $17,500.
<PAGE> 19
In April 1997, the Company issued to Royal Silver Mines, Inc.,
200,000 shares of Common Stock resulting in proceeds of $70,000. The
Company issued 133,800 shares of Common Stock were issued for services
and expenses. A total of 24,900 shares of Common Stock were issued as
loan incentives (interest) for $30,000 in loans from shareholders.
These shares were issued at $0.30 per share. A total of 77,600 shares
of Common Stock were issued in exchange for wages during the months of
January, February and March 1997 at $0.35 per share. A total of 31,300
shares of Common Stock were issued to cover expenses incurred by
shareholders at $0.35 per share.
On June 5, 1997, the Company issued 50,000 shares of Common Stock
to Mario Ayub Touche in consideration of services rendered.
In December 1997, the Company entered into a consulting agreement
with James Czirr, a member of the Board of Directors. Pursuant to the
consulting agreement, Mr. Czirr supplies financial and business
consulting services and is compensated in stock and options.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation
and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "MMGG." The Company's shares began
trading November 19, 1996. Summary trading by quarter for the 1998,
and 1997 fiscal years and the second quarter of 1999 are as follows:
Fiscal Quarter High Bid[1] Low Bid[1]
1999
Second Quarter 2 1/16 3/4
First Quarter 1 3/32 7/16
1998
Fourth Quarter 1 1/8 3/8
Third Quarter 1 1/2 7/8
Second Quarter 1 9/16 1 1/8
First Quarter 2 1/8 1 1/4
1997
Fourth Quarter 2 3/8 1 3/4
Third Quarter 2 1/4 1 5/8
Second Quarter 1 7/8 5/8
First Quarter 13/16 5/8
[1] These quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commissions and may not represent actual
transactions.
<PAGE> 20
As of September 30, 1999, the Company has 120 holders of record of
its Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 7,265,095 shares of Common Stock issued and
outstanding as of October 18, 1999. Of the 7,265,095 shares of the
Company's Common Stock outstanding, 2,658,639 shares are freely
tradeable and 4,606,456 shares can only be resold in compliance with
Reg. 144 adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
On August 24, 1993, the Company issued 960,800 of its $0.01 par
value shares to Precious Metal Mines, Inc. ("PMM"), for 16 unpatented
mining claims located near Philipsburg, Montana comprising the Kadex
property group. The foregoing shares were issued pursuant to Section
4(2) of the Securities Act of 1933 (the "Act").
On August 31, 1994, the directors of Cadgie Co. declared a 1:5
reverse stock split of the outstanding Cadgie Co. shares, thus reducing
the number of outstanding shares from 960,800 to 192,160 shares.
On August 4, 1995, the directors of Cadgie Co. declared a 3:1
forward stock split of the outstanding Cadgie Co. shares, thus
increasing the number of outstanding shares from 192,160 to 576,480.
During November 1995, Cadgie Co. directors approved an issue of
45,000 shares of Common Stock to Mr. Ryan for services rendered at
$0.01 per share. The foregoing shares were issued pursuant to Section
4(2) of the Act.
<PAGE> 21
In June 1996, the Company completed a private placement of common
stock resulting in net proceeds of $25,000. The Company issued 250,000
common shares in connection with this private placement. The Company
also issued 900,000 shares to Messrs. Bingham, Gorski and Ryan who had
formed a partnership to advance development of the mining concession
located in Coahuila, Mexico. The partnership had an informal joint
venture agreement with Dakota covering the mining concessions. By
acquiring the partnership interest, the Company was able to negotiate
and sign a formal joint venture agreement with Dakota in July 1996.
The foregoing shares were issued pursuant to Section 4(2) of the Act.
During June 1996, the Company issued 900,000 shares of Common
Stock for the assignment of mineral rights in the Sierra Mojada Project
in Coahuila, Mexico valued at $0.01. The foregoing shares were issued
pursuant to Section 4(2) of the Act.
In October 1996, the Company completed a private placement of
common stock resulting in net proceeds of $125,500. The Company issued
1,255,000 shares in connection with this placement. The Company also
issued 120,000 shares to Mr. Gorski in payment for his services for the
months of September and October. The Company issued 20,000 shares of
Common Stock to Mr. Ryan as payment for services in those same months.
Further, the Company issued 150,000 shares of common stock for computer
equipment. The foregoing shares were issued pursuant to Section 4(2)
of the Act.
During February 1997, the Company borrowed $30,000 from
shareholders and issued 24,900 shares of Common Stock as a loan
incentive. The foregoing shares were issued pursuant to Section 4(2)
of the Act.
In March 1997, the Company completed an issuance of Common Stock
resulting in net proceeds of $17,500. The foregoing shares were issued
pursuant to Section 4(2) of the Act.
In April 1997, the Company issued to Royal Silver Mines, Inc.,
200,000 shares of Common Stock resulting in proceeds of $70,000. The
Company issued 133,800 shares of Common Stock were issued for services
and expenses. A total of 24,900 shares of Common Stock were issued as
loan incentives (interest) for $30,000 in loans from shareholders.
These shares were issued at $0.30 per share. A total of 77,600 shares
of Common Stock were issued in exchange for wages during the months of
January, February and March 1997 at $0.35 per share. A total of 31,300
shares of Common Stock were issued to cover expenses incurred by
shareholders at $0.35 per share. The foregoing shares were issued
pursuant to Section 4(2) of the Act.
On June 5, 1997, the Company issued 50,000 shares of Common Stock
in consideration of services rendered. The foregoing shares were
issued pursuant to Section 4(2) of the Act.
In 1997 and 1998, the Company issued warrants to eight persons.
Each warrant entitles the holder to acquire one share of common stock
at exercise prices ranging from $0.35 to $2.13. A total of 1,046,500
warrants are outstanding. None of the warrants have been exercised.
The warrants were issued pursuant to Section 4(2) of the Act.
<PAGE> 22
Between August 14, 1998 and November 23, 1998, the Company sold
565,000 shares of common stock to eight persons/entities in
consideration of $_565,000. The foregoing shares were sold pursuant to
Section 4(2) of the Securities Act of 1933.
Between March 8, 1999 and June 11, 1999, the Company sold 662,500
shares of common stock to eight persons/entities in consideration of
$662,500. The foregoing shares were sold pursuant to Section 4(2) of
the Securities Act of 1933.
ITEM 11. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 50,000,000
shares of $0.01 par value Common Stock. As of September 30, 1999,
7,265,095 shares are issued and outstanding of which 2,658,639 are
freely tradeable.
In general, under Reg. 144, an affiliate of the Company (officers,
directors, and owners of more than ten percent (10%) of the outstanding
shares of Common Stock are affiliates of the Company) may sell in
ordinary market transactions through a broker or with a market maker,
within any three (3) month period a number of shares which does not
exceed the greater of one percent (1%) of the number of outstanding
shares of Common Stock or the average of the weekly trading volume of
the Common Stock during the four calendar weeks prior to such sale.
Sales under Reg. 144 require the filing of Form 144 with the Securities
and Exchange Commission. If the shares of Common Stock have been held
for more than two (2) years by a person who is not an affiliate, there
is no limitation on the manner of sale or the volume of shares that may
be sold and no Form 144 is required. Sales under Reg. 144 may have a
depressive effect on the market price of the Company's Common Stock.
All shares have equal voting rights and are not assessable.
Voting rights are not cumulative and, therefore, the holders of more
than 50% of the Common Stock could, if they chose to do so, elect all
of the directors of the Company.
Upon liquidation, dissolution, or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is contemplated
in the foreseeable future.
<PAGE> 23
Warrants
Currently, the Company has outstanding warrants to acquire up to
1,046,500 shares of common stock at exercise prices ranging from $0.35
to $2.13 per share. Each warrant permits the holder thereof to acquire
one share of common stock. The warrant expiration periods range from
February 28, 2001 to September 15, 2005.
Transfer Agent
The transfer agent for the Company's Common Stock is Idaho Stock
Transfer Co., 421 Coeur d'Alene Avenue, Coeur d'Alene, Idaho 83814.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities which they may incur in such
capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the Company's
Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
The Company's Articles of Incorporation and Bylaws do not contain
any provisions for indemnification as described above.
ITEM 13. FINANCIAL STATEMENTS.
Financial Statements begin on following page.
<PAGE> 24
METALLINE MINING COMPANY
(A Development Stage Company)
October 31, 1998
CONTENTS
Independent Auditor's Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-6
Notes to the Financial Statements F-7
<PAGE> 25
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Metalline Mining Company
(A Development Stage Company)
Spokane, Washington
We have audited the accompanying balance sheets of Metalline Mining
Company (a development stage company) as of October 31, 1998 and 1997,
and the related statements of operations, shareholders' equity, and
cash flows for the years then ended, and from inception (November 8,
1993) through October 31, 1998. 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 the audits
to obtain reasonable assurance about 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. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Metalline
Mining Company as of October 31, 1998 and 1997, and the results of
their operations and their cash flows for the years then ended and from
inception (November 8, 1993) through October 31, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7
to the financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
June 24, 1999
F-1
<PAGE> 26
METALLINE MINING COMPANY
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, October 31,
1998 1997
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 313,322 $ 623,013
Accounts receivable 2,849 -
Prepaid expenses 26,460 1,468
----------- ---------
Total Current Assets 342,631 624,481
MINERAL PROPERTIES 772,642 111,996
----------- ---------
PROPERTY AND EQUIPMENT
Plant, property, and equipment 132,166 58,038
Less: Accumulated depreciation (37,489) (15,690)
----------- ---------
Total Property and Equipment 94,677 42,348
----------- ---------
TOTAL ASSETS $ 1,209,950 $ 778,825
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 40,400 $ 26,648
Deposits payable - 406,500
Accrued liabilities 20,165 -
----------- ---------
Total Current Liabilities 60,565 433,148
----------- ---------
COMMITMENTS AND CONTINGENCIES - -
----------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
50,000,000 shares authorized,
6,090,739 shares issued and
outstanding, at October 31, 1998;
4,450,439 shares issued and
outstanding at October 31, 1997 60,908 44,505
Additional paid-in capital 2,757,694 941,352
Stock subscriptions receivable (300,000) -
Deficit accumulated during
development stage (1,369,217) (640,180)
----------- ---------
Total Stockholders' Equity 1,149,385 345,677
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,209,950 $ 778,825
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 27
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended Inception
October 31 (11/08/93)
1998 1997 to 10/31/98
<S> <C> <C> <C>
REVENUES $ - $ - $ -
---------- ---------- ------------
GENERAL AND
ADMINISTRATIVE EXPENSES
Salaries 97,753 84,677 196,730
Office 40,497 8,308 57,863
Professional services 384,751 351,203 750,135
Property expenses 174,608 98,249 288,288
Depreciation 21,798 12,690 37,906
Marketing and research 9,629 19,081 28,710
---------- ---------- ------------
Total Expenses 729,036 574,208 1,359,632
OTHER EXPENSES
Interest - 8,711 9,585
---------- ---------- ------------
NET LOSS $ (729,036) $ (582,919) $ (1,369,217)
========== ========== ============
NET LOSS PER
COMMON SHARE $ (0.13) $ (0.16) $ (0.58)
========== ========== ============
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 5,442,739 3,632,954 2,370,924
========== ========== ============
</TABLE>
The accompanying notes are an intregal part of these financial
statements.
F-3
<PAGE> 28
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Issuance in August 1993 (prior
to inception) common stock
without value 960,800 $ 9,608 $ (9,608)
Reverse stock split of 5:1,
reducing common stock to
192,160 shares (768,640) (7,686) 7,686
Net loss for the year ending
October 31, 1994 - - -
--------- --------- ---------
Balances at October 31, 1994 192,160 1,922 (1,922)
Stock split of 3:1, increasing
common stock to 576,480 shares 384,320 3,843 (3,843)
Net loss for the year ending
October 31, 1995 - - -
--------- --------- ---------
Balances at October 31, 1995 576,480 5,765 (5,765)
Issuance in November 1995 of
shares for cash of $0.01
per share 45,000 450 -
Issuance in November 1995 of
shares for cash at $ 1.00
per share 15,859 159 15,700
Issuance in June 1996 of
shares for cash at $0. 10
per share 1,305,000 13,050 117,450
Issuance in June 1996 of
shares at $0.01 per share
in exchange for assignment
of mineral property rights
valued at $9,000 900,000 9,000 -
Issuance in Oct. 1996 of shares
for CAD computer equipment
at $0. 10 per share 150,000 1,500 13,500
Issuance in Oct. 1996 of
shares for services at
$0.10 per share 140,000 1,400 12,600
Net loss for the year ending
October 31, 1996 - - -
--------- --------- ---------
Balances at October 31, 1996 3,132,339 31,324 153,485
Issuance in Feb. and April
1997 of shares for services at
$0.30 and $0.35 per share 133,800 1,338 44,245
Issuance in March and April
1997 of shares for cash at
$0.35 per share 250,000 2,500 85,000
--------- --------- ---------
Balance carried forward 3,516,139 $ 35,162 $ 282,730
--------- --------- ---------
The accompanying notes are an intregal part of these financial
statements.
F-4a
<PAGE> 29
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Development Stage Total
Issuance in August 1993 (prior
to inception) common stock
without value $ - $ -
Reverse stock split of 5:1,
reducing common stock to
192,160 shares - -
Net loss for the year ending
October 31, 1994 (8,831) (8,831)
--------- ---------
Balances at October 31, 1994 (8,831) (8,831)
Stock split of 3:1, increasing
common stock to 576,480 shares - -
Net loss for the year ending
October 31, 1995 (7,761) (7,761)
--------- ---------
Balances at October 31, 1995 (16,592) (16,592)
Issuance in November 1995 of
shares for cash of $0.01
per share - 450
Issuance in November 1995 of
shares for cash at $ 1.00
per share - 15,859
Issuance in June 1996 of
shares for cash at $0.10
per share - 130,500
Issuance in June 1996 of
shares at $0.01 per share
in exchange for assignment
of mineral property rights
valued at $9,000 - 9,000
Issuance in Oct. 1996 of shares
for CAD computer equipment
at $0. 10 per share - 15,000
Issuance in Oct. 1996 of
shares for services at
$0.10 per share - 14,000
Net loss for the year ending
October 31, 1996 (40,670) (40,670)
--------- ---------
Balances at October 31, 1996 (57,262) 127,547
Issuance in Feb. and April
1997 of shares for services at
$0.30 and $0.35 per share - 45,583
Issuance in March and April
1997 of shares for cash at
$0.35 per share - 87,500
--------- ---------
Balance carried forward $ (57,262) $ 260,630
--------- ---------
The accompanying notes are an intregal part of these financial
statements.
F-4b
<PAGE> 30
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Balance brought forward 3,516,139 $ 35,162 $ 282,730
Issuance in May and June 1997 of
shares for cash at $0.35 per share 181,600 1,816 61,744
Issuance in May and June 1997 of
shares for services at $0.35 per
share 62,500 625 21,250
Issuance in August 1997 of shares
for payment of loan at $0.315 per
share 100,200 1,002 30,528
Issuance in August 1997 of shares
for cash at $0.90 per share 420,000 4,200 373,800
Issuance in August 1997 of shares
for services at $1.00 per share 95,000 950 94,050
Issuance in October 1997 of shares
for cash at $1.00 per share 75,000 750 74,250
Issuance of option (for 300,000
shares at $2.25 per share) for cash - - 3,000
Net loss for year ending
October 31, 1997 - - -
--------- -------- -----------
Balances at October 31, 1997 4,450,439 44,505 941,352
Issuance in November and December
1997 of shares for cash at $1.00
per share 403,500 4,035 399,465
Issuance of option (for 1,200,000
shares at $0.90 per share)
for cash - - 120,000
Issuance in November and December
1997 of shares for services at
$0.35 and $1.00 per share 41,800 418 21,882
Issuance in February 1998 of shares
for mine data base at $1.625 per
share 200,000 2,000 323,000
Issuance in February and March 1998
of shares for cash at $ 1.00 and
$0.87 per share 345,000 3,450 338,495
Issuance in June and July 1998 of
shares for cash at $1.00 per share 95,000 950 94,050
Issuance in September and October
1998 of shares for cash and
receivable at $1.00 per share 555,000 5,550 519,450
Net loss for year ending
October 31, 1998 - - -
--------- -------- -----------
Balances at October 31, 1998 6,090,739 $ 60,908 $ 2,757,694
--------- -------- -----------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 31
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Subscriptions Development
Receivable Stage Total
<S> <C> <C> <C>
Balance brought forward $ - $ (57,262) $ 260,630
Issuance in May and June 1997 of
shares for cash at $0.35 per share - - 63,560
Issuance in May and June 1997 of
shares for services at $0.35 per
share - - 21,875
Issuance in August 1997 of shares
for payment of loan at $0.315 per
share - - 31,530
Issuance in August 1997 of shares
for cash at $0.90 per share - - 378,000
Issuance in August 1997 of shares
for services at $1.00 per share - - 95,000
Issuance in October 1997 of shares
for cash at $1.00 per share - - 75,000
Issuance of option (for 300,000
shares at $2.25 per share) for cash - - 3,000
Net loss for year ending
October 31, 1997 - (528,919) (582,919)
---------- ------------ -----------
Balances at October 31, 1997 - (640,181) 345,676
Issuance in November and December
1997 of shares for cash at $1.00
per share - - 403,500
Issuance of option (for 1,200,000
shares at $0.90 per share)
for cash - - 120,000
Issuance in November and December
1997 of shares for services at
$0.35 and $1.00 per share - - 22,300
Issuance in February 1998 of shares
for mine data base at $1.625 per
share - - 325,000
Issuance in February and March 1998
of shares for cash at $ 1.00 and
$0.87 per share - - 341,945
Issuance in June and July 1998 of
shares for cash at $1.00 per share - - 95,000
Issuance in September and October
1998 of shares for cash and
receivable at $1.00 per share (300,000) - 225,000
Net loss for year ending
October 31, 1998 - (729,036) (729,036)
---------- ------------ -----------
Balances at October 31, 1998 $ (300,000) $ (1,369,217) $ 1,149,385
========= ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 32
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Inception
Years Ending (11/08/93)
October 31, to
1998 1997 10/31/98
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (729,036) $ (582,919) $ (1,369,217)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation/amortization 21,798 12,690 37,906
Changes in assets and liabilities:
Accounts receivable (2,849) - (2,849)
Prepaid expenses (24,992) (1,468) (26,460)
Accounts payable 13,752 26,648 40,400
Accrued liabilities 20,165 - 20,165
Stock given in exchange for
wages/services 22,300 162,458 198,758
---------- ---------- ------------
Net cash used by operating
activities (678,862) (382,591) (1,101,297)
---------- ---------- ------------
Cash flows from investing activities:
Equipment purchases (74,127) (43,038) (117,164)
Mining property acquisitions (335,647) (87,611) (424,643)
---------- ---------- ------------
Net cash used by investing
activities (409,774) (130,649) (541,807)
---------- ---------- ------------
Cash flows from financing activities:
Stock given in exchange for loan - 31,530 31,530
Proceeds from sales of
common stock 1,015,445 604,060 1,766,314
Proceeds from sales of options 120,000 3,000 123,000
Deposits for sale of stock (356,500) 406,500 50,000
Payments on shareholders' loans - (287) (14,418)
---------- ---------- ------------
Net cash provided by financing
activities: 778,945 1,044,803 1,956,426
---------- ---------- ------------
Net increase (decrease) in cash
and cash equivalents (309,691) 531,563 313,322
Cash beginning of period 623,013 91,450 -
---------- ---------- ------------
Cash at end of period $ 313,322 $ 623,013 $ 313,322
========== ========== ============
Supplemental cash flow disclosures:
Income taxes paid $ - $ - $ -
Interest paid $ - $ 8,711 $ 9,585
Non-cash financing activities:
Common stock issued for services $ 22,300 $ 162,458 $ 198,758
Common stock issued for mineral
properties $ 325,000 $ - $ 348,000
Common stock issued for equipment $ - $ - $ 15,000
Common stock issued for payment
of debt $ 80,000 $ - $ 80,000
Common stock issued for
subscription receivable $ 300,000 $ - $ 300,000
</TABLE>
The accompanying notes are an intregal part of these financial
statements.
F-6
<PAGE> 33
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Metalline Mining Company ("the Company") was incorporated in the state
of Nevada on November 8, 1993 as the Cadgie Company for the purpose of
acquiring and developing mineral properties. The Cadgie Company was a
spin-off from its predecessor Precious Metal Mines, Inc. The Articles
of Incorporation of Cadgie Company were executed on August 20, 1993.
On June 28, 1996, at a special directors meeting, the Company's name
was changed to Metalline Mining Company.
The cost of mineral properties of $772,642 and $111,996, respectively,
as of October 31, 1998 and 1997 are related to exploration properties.
The Company has not determined whether the exploration properties
contain ore reserves that are economically recoverable. The ultimate
realization of the Company's investment in exploration properties is
dependent upon the success of future property sales, the existence of
economically recoverable reserves, the ability of the Company to obtain
financing or make other arrangements for development, and upon future
profitable production. The ultimate realization of the Company's
investment in exploration properties cannot be determined at this time,
and accordingly, no provision for any asset impairment that may result,
in the event the Company is not successful in developing or selling
these properties, has been made in the accompanying financial
statements.
The Company is actively seeking additional capital and management
believes its properties can ultimately be sold or developed to enable
the Company to continue its operations. However, there are inherent
uncertainties in mining operations and management cannot provide
assurances that it will be successful in this endeavor. Furthermore,
the Company is in the development stage, as it has not realized any
revenues from its planned operations. See Note 7.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Loss Per Share
Loss per share was computed by dividing the net loss by the weighted
average number of shares outstanding during the period presented. The
weighted average number of shares was calculated by taking the number
of shares outstanding and weighting them by the amount of time they
were outstanding.
F-7
<PAGE> 34
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Development Stage
The Company is in the development stage and has not commenced the sale
of any products.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Mineral Properties
Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and
leases are expensed as incurred. When a property reaches the production
stage, the related capitalized costs will be amortized, using the units
of production method on the basis of periodic estimates of ore
reserves. Mineral properties are periodically assessed for impairment
of value and any losses are charged to operations at the time of
impairment.
Provision For Taxes
At October 31, 1998 and 1997 the Company had net operating loss
carryforwards of approximately $1,370,000 and $640,000 respectively,
that may be offset against future taxable income. No tax benefit has
been reported in the financial statements, as the Company believes
there is a 50% or greater chance the net operating loss carryforwards
will expire unused. Accordingly, the potential tax benefits of the net
operating loss carryforwards are offset by a valuation allowance of the
same amount.
Concentration of Risk
The Company maintains its cash and cash equivalents in primarily one
commercial bank in Coeur d'Alene, Idaho. Accounts are guaranteed by
the Federal Deposit Insurance Corporation (FDIC) up to $100,000. As of
October 31, 1998, the Company exceeded the insured amount by $199,183.
F-8
<PAGE> 35
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statments
October 31, 1998
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Impairment of Long-Lived Assets." This
standard became effective for years beginning after December 15, 1995
and changes the Company's method of determining impairment of
long-lived assets. In complying with this standard, the Company has
reviewed its long-lived assets at October, 1998 and concluded that no
events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable.
In October 1995, the Financial Accounting Standards Board issued a
statement titled "Accounting for Stock-Based Compensation " (FAS 123).
The statement became effective for fiscal years beginning after
December 15, 1995. FAS 123 encourages, but does not require, companies
to recognize compensation expense for grants of stock, stock options,
and other equity instruments to employees based on fair value.
Transactions in equity instruments with non-employees for goods or
services must be accounted for on the fair value method. The Company
has adopted the fair value accounting prescribed by FAS 123.
NOTE 3 - MINERAL PROPERTIES
Sierra Mojada Mining Concession
In June of 1996, USMX (now named Dakota) and the Company entered into
a joint venture agreement, whereby the Company could acquire a 65%
interest in a mining concession named the Sierra Mojada Project,
located in Coahuila, Mexico. Under the terms of the agreement, the
Company was to contribute two million dollars ($2,000,000) in work
commitments over the following seven years.
After the execution of the USMX agreement, Dakota's interest (35%) in
the joint venture was sold to an entity, which subsequently defaulted
on its joint venture obligations. This action in 1998 triggered the
elimination of the joint venture and resulted in the Company assuming
100% control of the Sierra Mojada concession without the need to spend
$2,000,000 to vest its interest.
F-9
<PAGE> 36
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 3 - MINERAL PROPERTIES (Continued)
Sierra Mojada Exploration Concessions
In the twelve-month period of August 23, 1996 to September 2, 1997, the
Company executed five separate agreements for the acquisition of
exploration concessions in the same mining region as the Sierra Mojada
Project in Mexico. Each agreement enables the Company to explore the
underlying property by paying stipulated annual payments, which shall
be applied in full toward the contracted purchase price of the related
concession.
Under the terms of the agreements, the Company is obligated to pay the
following amounts over the following four years:
Year 1 $ 278,077
Year 2 290,769
Year 3 3,336,154
Year 4 50,000
-----------
$ 3,955,000
===========
At October 31, 1998, the Company had paid $243,846 toward the purchase
price of these exploration concessions.
Other Mining Properties
The Company has a 100% interest in 16 unpatented load-mining claims
known as the Kadex, located in the Flint Creek District, Granite
County, Montana. These properties are carried at no value.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance and
repairs that do not increase the useful life of the assets are expensed
as incurred. Depreciation of property and equipment is determined using
the double-declining balance method over the expected useful lives of
the assets of five years.
NOTE 5 - COMMON STOCK
The Company (Cadgie Co.) was formed in August of 1993 and incorporated
in November 1993 by Mr. Carman Ridland of Las Vegas, Nevada as a spin-
off from its predecessor firm Precious Metal Mines, Inc.
F-10
<PAGE> 37
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 5 - COMMON STOCK (Continued)
The Company issued 960,800 of its $0.01 par value shares to Precious
Metal Mines, Inc. for 16 unpatented mining claims located near
Philipsburg, Montana comprising the Kadex property group.
Precious Metal Mines, Inc. distributed the 960,800 shares of Cadgie
Company to its shareholders. One share of Cadgie Co. was exchanged for
each share of Precious Metal Mines, Inc. held by holders of record as
of August 31, 1993.
On August 31, 1994, the directors of Cadgie Co. declared a 1:5 reverse
stock split of the outstanding Cadgie Co. shares, thus reducing the
number of outstanding shares from 960,800 to 192,160 shares.
On August 4, 1995 the directors of Cadgie Co. declared a 3:1 forward
stock split of the outstanding Cadgie Co. shares, thus increasing the
number of outstanding shares from 192,160 to 576,480.
In January 1996, Mr. Carmen Ridland, in a private sale, sold a
controlling interest in the corporation to Mr. Howard Crosby. On
January 12, 1996, Mr. Ridland transferred control of Cadgie Co. to Mr.
Crosby and Mr. Robert Jorgensen.
In June 1996, the Company completed a private placement of common stock
resulting in net proceeds of $25,000. The Company also issued 900,000
shares to Messrs. Ryan, Bingham, and Gorski, who had formed a
partnership to advance development of the mining concession located in
Coahuila, Mexico. The partnership had an informal joint venture
agreement with USMX, Inc. covering the mining concessions. By
acquiring the partnership interest, the Company was able to negotiate
and sign a formal joint venture agreement with USMX in July 1996. (See
Note 3)
In August 1996, the Company changed its name to Metalline Mining
Company.
In March 1997, the Company completed an issuance of common stock
resulting in net proceeds of $17,500.
In April 1997, the Company issued to Royal Silver Mines, Inc., 200,000
shares of common stock resulting in proceeds of $70,000.
During the six months ended October 31, 1997, the Company sold 676,600
shares of common stock for cash, raising $516,560.
In November and December 1997, the Company sold 403,500 shares of
common stock for cash thereby raising $403,500.
F-11
<PAGE> 38
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 5 - COMMON STOCK (Continued)
An additional $881,945 was raised between February and October 1998 as
the Company sold 915,000 more shares of its common stock.
Non-cash stock transactions
During November 1995, Metalline Mining Company's directors approved an
issue of 45,000 shares of common stock to Mr. John Ryan for services
rendered at $0.01 per share.
During June 1996, Metalline Mining Company issued 900,000 shares of
common stock for the assignment of mineral rights in the Sierra Mojada
Project in Coahuila, Mexico valued at $0.01 per share.
During October 1996, Metalline Mining Company issued 150,000 shares of
common stock for computer equipment. Also during October 1996,
Metalline Mining Company issued 120,000 shares of common stock to Mr.
Dan Gorski and an additional 20,000 shares of common stock to Mr. John
Ryan for services rendered.
During February 1997, the Company borrowed $30,000 from shareholders
and issued 24,900 shares of common stock as a loan incentive.
During April 1997, 133,800 shares of common stock were issued for
services and expenses. A total of 24,900 shares of common stock were
issued as loan incentives (interest) for $30,000 in loans from
shareholders. These shares were issued at $0.30 per share. A total of
77,600 shares of common stock were issued in exchange for wages during
the months of January, February, and March of 1997 at $0.35 per share.
A total of 31,300 shares of common stock were issued to cover expenses
incurred by shareholders at $0.35 per share.
In August 1997, 95,000 shares of common stock were issued for services
at a deemed value of $1.00 per share. Also in August 1997, 100,200
share of common stock were issued to discharge shareholder debt. See
Note 6.
In February 1998, 200,000 shares of common stock were issued for a mine
database. The shares were valued at $1.625 per share, resulting in a
transaction valued at $325,000.
In September 1998, 80,000 shares of common stock were issued for
payment of shareholder debt. The shares were valued at $1.00 per
share, resulting in a transaction valued at $80,000.
F-12
<PAGE> 39
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 6 - NOTES PAYABLE TO SHAREHOLDERS
During the month of February 1997, the Company received $30,000 in the
form of three 90-day notes issued for $10,000 each. A total of 24,900
shares of common stock valued at $0.30 per share were issued as
interest on these notes. In August 1997, these notes and related
interest accrued were discharged by the Company's issuance of 100,200
shares of common stock to the noteholders in a transaction valued at
$31,530.
NOTE 7 - GOING CONCERN
As shown in the financial statements, the Company incurred a net loss
of $729,036 for the year ended October 31, 1998 and an accumulated
deficit of $1,369,217 since inception (November 8, 1993). At October
31, 1998, there has been a significant change in the Company's
liquidity. Cash to accumulated deficits has decreased from a ratio of
0.98 as of October 31, 1997 to 0.23 as of October 31, 1998. These
factors indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets,
or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue existence. The
Company's management believes that significant and imminent private
placements will generate sufficient cash for the Company to operate for
the next few years.
NOTE 8 OPTIONS
In October 1997, in exchange for the receipt of $3,000 in cash, the
Company sold an option to acquire 300,000 shares of the Company's
common stock at $2.25 per share. The option is assignable and expires
in five years.
In December 1997 upon the receipt of $120,000 in cash, the Company sold
an option to acquire 1,200,000 shares of its common stock at $0.90 per
share. The option, which expired in November 1998, was extended for
two more years.
As of October 31, 1998, no options had been exercised.
NOTE 9 DEPOSITS PAYABLE
On occasion, the Company receives funds from the private placement sale
of its common stock in the month before the related shares are actually
issued. In such instances, the Company records the funds received as
deposits payable in recognition of the fact that stock may not be
issued until the appropriate contractual documentation is completed.
F-13
<PAGE> 40
METALLINE MINING COMPANY
A Development Stage Company
Notes to the Financial Statements
October 31, 1998
NOTE 9 DEPOSITS PAYABLE (Continued)
Deposits payable totaled $-0- and $406,500 at October 31, 1998 and 1997
respectively. In the months following these dates, the related shares
were issued and the deposits payable were accordingly reduced.
NOTE 10 COMMITMENTS AND CONTINGENCIES
The Company rents commercial office space in Coeur d'Alene, Idaho for
$325.00 per month on a month to month tenancy. A portion of this space
is sub-leased to another tenant which pays half of the cost of rent and
utilities.
The Company also receives rent-free office space in Coeur d'Alene from
its president. The value of the space is not considered materially
significant for financial reporting purposes.
The Company is a defendant in a lawsuit filed by some of its
shareholders for alleged violations of securities laws. The suit asks
for actual damages. The Company believes the suit is completely
without merit and intends to vigorously defend its position.
NOTE 11 YEAR 2000 ISSUES
The Company has modified its business technologies to be ready for the
year 2000. Critical data processing systems have been reviewed and the
Company does not expect a significant effect on internal operations.
However, like other companies, Metalline Mining Company could be
adversely affected if the computer systems its suppliers or customers
use do not properly process and calculate date-related information and
data for the period surrounding and including January 1, 2000. This is
commonly known as the "Year 2000" issue. Additionally, this issue
could impact non-computer systems and devices such as production
equipment, elevators, etc. At this time, because of the complexities
involved in the issue, management cannot provide assurances that the
Year 2000 issue will not have an impact on the Company's operations.
F-14
<PAGE> 41
METALLINE MINING COMPANY
(A Development Stage Company)
BALANCE SHEET - UNAUDITED
July 31, 1998 and October 31, 1998
ASSETS
<TABLE>
<CAPTION>
July 31 October 31
1999 1998
<S> <C> <C>
CURRENT ASETS
Cash $ 448,343 $ 313,322
Accounts Receivable 2,849 2,849
Prepaid Expenses 25,129 26,460
----------- -----------
Total current assets 476,321 342,631
----------- -----------
PROPERTY & EQUIPMENT, at cost
Equipment 132,166 132,166
Less accumulated depreciation (56,119) (37,489)
----------- -----------
76,047 94,677
Mining property 965,242 772,642
----------- -----------
965,242 772,642
----------- -----------
OTHER ASSETS 0 0
----------- -----------
Total $ 1,517,610 $ 1,209,950
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,202 $ 40,400
Accrued Liabilities 19,036 20,165
----------- -----------
Total current liabilities 47,238 60,556
----------- -----------
LONG TERM LIABILITIES 0 0
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value; authorized
50,000,000 shares; 7,058,739 issued and
outstanding at July 31, 1999 and
6,090,739 shares issued and outstanding
at October 31, 1998 70,588 60,908
Additional paid-in capital 3,716,014 2,757,694
Stock subscriptions receivable 0 (300,000)
Deficit accumulated during development
stage (2,316,230) (1,369,217)
----------- -----------
Total Stockholders' Equity 1,470,372 1,149,385
----------- -----------
Total Liabilities and Stockholders'
Equity $ 1,517,610 $ 1,209,950
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
1
<PAGE> 42
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENT OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
(11/08/93) 3 Months 9 Months 3 Months 9 Months
To Ended Ended Ended Ended
07/31/99 07/31/99 07/31/99 07/31/98 07/31/98
<S> <C> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0 $ 0
---------- --------- --------- --------- ---------
GENERAL AND ADMINISTRATIVE
EXPENSES
Salaries 232,650 54,000 162,000 16,500 16,500
Administration 117,326 30,495 70,023 20,669 65,242
Professional services 963,475 38,518 76,706 67,988 254,646
Property expenses 803,415 33,373 515,127 104,500 291,838
Depreciation 56,536 6,210 18,630 7,494 22,418
Marketing and research 135,003 38,840 106,292 7,644 24,215
---------- --------- --------- --------- ---------
2,308,405 201,436 948,778 224,795 674,859
Loss from operations (2,308,405) (201,436) (948,778) (224,795) (674,859)
OTHER INCOME AND
EXPENSES
Interest income 1,764 1,764 1,764 0 0
Interest expenses (9,589) 0 0 0 0
---------- --------- --------- --------- ---------
NET LOSS (2,316,405) (199,672) (947,014) (224,795) (674,859)
========== ========= ========= ========= =========
Loss per share (0.03) (0.14) (0.04) (0.14)
Weighted average common
shares outstanding 6,814,739 6,574,739 5,488,289 4,993,139
</TABLE>
The accompanying notes are an integral part of these financial
statements.
2
<PAGE> 43
METALLINE MINING COMPANY
A Development Stage Company
STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
Inception
(11/08/93) 9 Months 9 Months
to Ended Ended
07/31/99 07/31/99 07/98
<S> <C> <C> <C>
Operating Activities:
Net loss $ (2,316,230) $ (947,014) $ (674,859)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation 56,536 18,630 22,418
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (2,649) 0 (1,873)
(Increase) decrease in prepaid
expenses (25,129) 1,331 (20,882)
Increase (decrease) in accounts
payable 28,202 (12,198) (26,648)
Increase (decrease in accrued
liabilities 19,036 (1,128) 18,052
Stock in exchange for
wages/services 198,758
------------ ---------- ----------
Net cash used in operating
activities (2,041,676) (940,379) (683,792)
------------ ---------- ----------
Investing activities:
Purchase of Equipment (117,165) 0 (57,413)
Mining property acquisitions (617,243) (192,600) (399,878)
------------ ---------- ----------
Net cash used in investing
activities (734,408) (192,600) (457,291)
Financing activities: ------------ ---------- ----------
Stock given in exchange for loan 31,530
Sale of common stock 2,734,315 968,000 1,307,675
Sale of options 123,000
Deposits for sale of stock 50,000 (406,500)
Payment of subscriptions receivable 300,000 300,000 0
Repayment of shareholder loans (14,418) 0 0
------------ ---------- ----------
3,224,427 1,268,000 901,175
------------ ---------- ----------
Net cash provided by financing activities
Net increase (decrease) in cash 448,343 135,021 (239,908)
Cash, beginning of period 0 313,322 623,013
------------ ---------- ----------
Cash. end of period $ 448,343 $ 448,343 $ 383,105
============ ========== ==========
Supplemental disclosure of cash flow information:
Interest paid 9,589 0 0
Income taxes paid 0 0 0
Non-cash financing activities:
Common stock issued for services 198,758 0 22,300
Common stock issued for mineral
properties 348,000 0 325,000
Common stock issued for equipment 15,000 0 0
Common stock issued for payment
of debt 80,000 0 0
Common stock issued for subscription
receivable 300,000 0 0
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
<PAGE> 44
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Issuance in August 1993 (prior
to inception) common stock
without value 960,800 $ 9,608 $ (9,608)
Reverse stock split of 5:1,
reducing common stock to
192,160 shares (768,640) (7,686) 7,686
Net loss for the year ending
October 31, 1994 - - -
--------- --------- ---------
Balances at October 31, 1994 192,160 1,922 (1,922)
Stock split of 3:1, increasing
common stock to 576,480 shares 384,320 3,843 (3,843)
Net loss for the year ending
October 31, 1995 - - -
--------- --------- ---------
Balances at October 31, 1995 576,480 5,765 (5,765)
Issuance in November 1995 of
shares for cash of $0.01
per share 45,000 450 -
Issuance in November 1995 of
shares for cash at $ 1.00
per share 15,859 159 15,700
Issuance in June 1996 of
shares for cash at $0. 10
per share 1,305,000 13,050 117,450
Issuance in June 1996 of
shares at $0.01 per share
in exchange for assignment
of mineral property rights
valued at $9,000 900,000 9,000 -
Issuance in Oct. 1996 of shares
for CAD computer equipment
at $0. 10 per share 150,000 1,500 13,500
Issuance in Oct. 1996 of
shares for services at
$0.10 per share 140,000 1,400 12,600
Net loss for the year ending
October 31, 1996 - - -
--------- --------- ---------
Balances at October 31, 1996 3,132,339 31,324 153,485
Issuance in Feb. and April
1997 of shares for services at
$0.30 and $0.35 per share 133,800 1,338 44,245
Issuance in March and April
1997 of shares for cash at
$0.35 per share 250,000 2,500 85,000
--------- --------- ---------
Balance carried forward 3,516,139 $ 35,162 $ 282,730
--------- --------- ---------
The accompanying notes are an integral part of these financial
statements.
4-a
<PAGE> 45
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Development Stage Total
<S> <C> <C>
Issuance in August 1993 (prior
to inception) common stock
without value $ - $ -
Reverse stock split of 5:1,
reducing common stock to
192,160 shares - -
Net loss for the year ending
October 31, 1994 (8,831) (8,831)
--------- ---------
Balances at October 31, 1994 (8,831) (8,831)
Stock split of 3:1, increasing
common stock to 576,480 shares - -
Net loss for the year ending
October 31, 1995 (7,761) (7,761)
--------- ---------
Balances at October 31, 1995 (16,592) (16,592)
Issuance in November 1995 of
shares for cash of $0.01
per share - 450
Issuance in November 1995 of
shares for cash at $ 1.00
per share - 15,859
Issuance in June 1996 of
shares for cash at $0.10
per share - 130,500
Issuance in June 1996 of
shares at $0.01 per share
in exchange for assignment
of mineral property rights
valued at $9,000 - 9,000
Issuance in Oct. 1996 of shares
for CAD computer equipment
at $0. 10 per share - 15,000
Issuance in Oct. 1996 of
shares for services at
$0.10 per share - 14,000
Net loss for the year ending
October 31, 1996 (40,670) (40,670)
--------- ---------
Balances at October 31, 1996 (57,262) 127,547
Issuance in Feb. and April
1997 of shares for services at
$0.30 and $0.35 per share - 45,583
Issuance in March and April
1997 of shares for cash at
$0.35 per share - 87,500
--------- ---------
Balance carried forward $ (57,262) $ 260,630
--------- ---------
</TABLE>
The accompanying notes are an intregal part of these financial
statements.
4-b
<PAGE> 46
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Balance brought forward 3,516,139 $ 35,162 $ 282,730
Issuance in May and June 1997 of
shares for cash at $0.35 per share 181,600 1,816 61,744
Issuance in May and June 1997 of
shares for services at $0.35 per
share 62,500 625 21,250
Issuance in August 1997 of shares
for payment of loan at $0.315 per
share 100,200 1,002 30,528
Issuance in August 1997 of shares
for cash at $0.90 per share 420,000 4,200 373,800
Issuance in August 1997 of shares
for services at $1.00 per share 95,000 950 94,050
Issuance in October 1997 of shares
for cash at $1.00 per share 75,000 750 74,250
Issuance of option (for 300,000
shares at $2.25 per share) for cash - - 3,000
Net loss for year ending
October 31, 1997 - - -
--------- -------- -----------
Balances at October 31, 1997 4,450,439 44,505 941,352
Issuance in November and December
1997 of shares for cash at $1.00
per share 403,500 4,035 399,465
Issuance of option (for 1,200,000
shares at $0.90 per share)
for cash - - 120,000
Issuance in November and December
1997 of shares for services at
$0.35 and $1.00 per share 41,800 418 21,882
Issuance in February 1998 of shares
for mine data base at $1.625 per
share 200,000 2,000 323,000
Issuance in February and March 1998
of shares for cash at $ 1.00 and
$0.87 per share 345,000 3,450 338,495
Issuance in June and July 1998 of
shares for cash at $1.00 per share 95,000 950 94,050
Issuance in September and October
1998 of shares for cash and
receivable at $1.00 per share 555,000 5,550 519,450
Net loss for year ending
October 31, 1998 - - -
--------- -------- -----------
Balances at October 31, 1998 6,090,739 $ 60,908 $ 2,757,694
--------- -------- -----------
The accompanying notes are an integral part of these financial
statements.
5-a
<PAGE> 47
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Subscriptions Development
Receivable Stage Total
<S> <C> <C> <C>
Balance brought forward $ - $ (57,262) $ 260,630
Issuance in May and June 1997 of
shares for cash at $0.35 per share - - 63,560
Issuance in May and June 1997 of
shares for services at $0.35 per
share - - 21,875
Issuance in August 1997 of shares
for payment of loan at $0.315 per
share - - 31,530
Issuance in August 1997 of shares
for cash at $0.90 per share - - 378,000
Issuance in August 1997 of shares
for services at $1.00 per share - - 95,000
Issuance in October 1997 of shares
for cash at $1.00 per share - - 75,000
Issuance of option (for 300,000
shares at $2.25 per share) for cash - - 3,000
Net loss for year ending
October 31, 1997 - (528,919) (582,919)
---------- ------------ -----------
Balances at October 31, 1997 - (640,181) 345,676
Issuance in November and December
1997 of shares for cash at $1.00
per share - - 403,500
Issuance of option (for 1,200,000
shares at $0.90 per share)
for cash - - 120,000
Issuance in November and December
1997 of shares for services at
$0.35 and $1.00 per share - - 22,300
Issuance in February 1998 of shares
for mine data base at $1.625 per
share - - 325,000
Issuance in February and March 1998
of shares for cash at $ 1.00 and
$0.87 per share - - 341,945
Issuance in June and July 1998 of
shares for cash at $1.00 per share - - 95,000
Issuance in September and October
1998 of shares for cash and
receivable at $1.00 per share (300,000) - 225,000
Net loss for year ending
October 31, 1998 - (729,036) (729,036)
---------- ------------ -----------
Balances at October 31, 1998 $ (300,000) $ (1,369,217) $ 1,149,385
---------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5-b
<PAGE> 48
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Number Paid-in
of Shares Amount Capital
<S> <C> <C> <C>
Balance brought forward 6,090,739 $ 60,908 $ 2,757,694
Stock subscription
Issuance in November 1998 - 10.000
shares for cash at $1 00 per share 10,000 100 9,900
Issuance in March and April 1999 -
470,000 shares for cash at $1.00
per share 470,000 4,700 465,300
Issuance in May 1999 of shares for
cash at $1.00 per share 132,500 1,325 131,175
Issuance in June 1999 of shares for
cash at $1.00 per share 72,500 725 71,775
Issuance in July 1999 of shares for
cash at $1.00 per share 283,000 2,830 280,170
Net loss for the nine months ending
July 31, 1999
--------- -------- -----------
7,058,739 70,588 3,716,014
========= ======== ===========
The accompanying notes are an integral part of these financial
statements.
6-a
<PAGE> 49
METALLINE MINING COMPANY
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
Deficit During
Subscriptions Development
Receivable Stage Total
<S> <C> <C> <C>
Balance brought forward $ (300,000) $ (1,369,217) $ 1,149,385
Stock subscription 300,000 300,000
Issuance in November 1998 - 10.000
shares for cash at $1 00 per share 10,000
Issuance in March and April 1999 -
470,000 shares for cash at $1.00
per share 470,000
Issuance in May 1999 of shares for
cash at $1.00 per share 132,500
Issuance in June 1999 of shares for
cash at $1.00 per share 72,500
Issuance in July 1999 of shares for
cash at $1.00 per share 283,000
Net loss for the nine months ending
July 31, 1999 (947,014) (947,014)
--------- ----------- -----------
0 (2,316,231) 1,470,371
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
6-b
<PAGE> 50
METALLINE MINING COMPANY
FOOTNOTES TO FINANCIAL STATEMENTS
JULY 31,1999
ORGANIZATION AND DESCRIPTION OF BUSINESS
Metalline Mining Company (the Company) was Incorporated in the state of
Nevada on November 8, 1993 as the Cadgie Company for the purpose of
acquiring and developing mineral properties. The Cadgie Company was a
spin-off from its predecessor Precious Metal Mines, Inc. The Articles
of Incorporation of Cadgie Company were executed on August 20, 1993. On
June 28, 1996, at a special directors meeting, the Company's name was
changed to Metalline Mining Company.
The Company's efforts have been concentrated in expenditures related to
exploration properties, principally in the Sierra Mojada Project,
located in Coahuila, Mexico. The Company has not determined whether the
exploration properties contain ore reserves that are economically
recoverable. The ultimate realization of the Company's investment in
exploration properties is dependent upon the success of future property
sales, the existence of economically recoverable reserves, the ability
of the Company to obtain financing or make other arrangements for
development, and upon future profitable production. The ultimate
realization of the Company's investment in exploration properties
cannot be determined at this time, and accordingly, no provision for
any asset impairment that may result, in the event the Company is not
successful in developing or selling these properties, has been made in
the accompanying financial statements.
The Company is actively seeking additional capital and management
believes its properties can ultimately be sold or developed to enable
the Company to continue its operations. However, there are inherent
uncertainties in mining operations and management cannot provide
assurances that it will be successful in this endeavor. Furthermore,
the Company is in the development stage, as it has not realized any
revenues from its planned operations.
The costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and
leases are expensed as incurred. When a property reaches the production
stage, the related capitalized costs will be amortized, using the units
of production method on the basis of periodic estimates of ore
reserves, Mineral properties are periodically assessed for impairment
of value and any losses are charged to operations at the time of
impairment.
7
<PAGE> 51
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures through the date of this Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(1) List of Financial Statements
Independent Auditors' Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to Financial Statements
(2) List of Exhibits.
Exhibit No. Description
3.1 Articles of Incorporation.
3.2 Bylaws.
3.3 Articles of Amendment to the Articles of Incorporation.
4.1 Specimen Stock Certificate.
10.1 Master Agreement.
10.2 Royal Silver Letter.
27 Financial Data Schedule.
99.1 James Czirr Consulting Agreement.
99.2 James Czirr Consulting Addendum.
<PAGE> 52
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
METALLINE MINING COMPANY
BY: /s/ Merlin Bingham
Merlin Bingham, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form 10-SB Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Merlin Bingham
Merlin Bingham President and Director October 12, 1999
_______________________
Daniel Gorski Vice President and _____________, 1999
Director
/s/ John P. Ryan
John P. Ryan Vice President, October 12, 1999
Secretary and
Director
_______________________ _____________, 1999
Mario Ayub Touche Director
/s/ Jim Czirr Director October 12, 1999
Jim Czirr
/s/ Wayne Schoonmaker Secretary October 12, 1999
Wayne Schoonmaker
<PAGE> 53
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF CADGIE CO.
We, the undersigned, having associated ourselves together for the
purpose of forming a corporation, under the general corporation laws
of the State of Nevada, hereby certify:
No. 1
NAME
The name of the corporation shall be:
CADGIE CO.
No. 2
LOCATION
The principal office or place of business shall be located in
Clark County at:
900 Brush Street, Suite 413
Las Vegas, Nevada 89107
No. 3
PURPOSE
The nature or object or purpose of the business of this
corporation shall be:
(a) To engage in any lawful business activity
(b) To borrow and/or lend money with or without security.
(c) To buy, or sell, or trade in commodities of every nature,
including securities, notes, bonds, mortgages, agricultural products,
mining products, minerals, metals, commodity futures contracts, titles
to or equities in land, buildings, mining claims, oil properties, oil
leases, royalty interests, and options to buy or sell any or all of the
foregoing.
(d) To have and exercise all the rights, powers, and privileges
which are now or which may hereafter be conferred upon corporations
organized under the same statute as this corporation; and to have and
exercise all such rights, powers and privileges as may be necessary,
convenient or proper to effectuate and accomplish the objectives and
purposes specified in this certificate, and said specified objectives
and purposes shall not limit or restrict in any manner the powers of
this corporation.
<PAGE> 54
No. 4
CAPITALIZATION
The total authorized capital stock of this corporation shall be
SEVEN MILLION FIVE HUNDRED THOUSAND (7,500,000) shares of COMMON STOCK,
each of which shares shall have the par value of ONE CENT ($0.01),
totaling $75,000.00.
No. 5
GOVERNING BOARD
This corporation shall be governed by at least three (3) directors and
not more than nine (9) directors, and the following three persons are
hereby appointed directors to govern the affairs of this corporation
from inception and for the first year of its existence, or until a
stockholders' meeting is called for the purpose of electing directors;
Carman Ridland
900 Brush Street, Suite 413
Las Vegas, Nevada 89107
Robert Reed
2019 Santa Rita Las Vegas,
Nevada 89104
Don Davis
3945 E. Carey Las Vegas,
Nevada 89115
The directors shall be elected at the annual meetings or any
special meeting of the stockholders called for the purpose of electing
directors, the holder of each share of stock of this corporation shall
have one vote and the majority of the stock represented at the meeting,
by the stockholders in person or by proxy, shall decide:
(1) the maximum number of directors to hold office for the ensuing
term.
(2) the persons to hold such directorships.
The Board of Directorst during a term, may decrease in number by the
resignation or death of one or more members, but the maximum number of
directors cannot be increased. The majority of the surviving directors,
in the case of a vacancy by resignation or death, may appoint a person
or persons to fill a vacancy or vacancies.
<PAGE> 55
No. 6
ASSESSABILITY OF STOCK
The shares issued by this corporation, once the par value has been
paid in full, shall not be assessable, and any shares issued for
services, or property, or considerations other than cash, shall be
deemed fully paid up and shall be forever nonassessable.
No. 7
TERM OF EXISTENCE
The term of existence of this corporation shall be perpetual.
No. 8
BY-LAWS
The directors shall have power to make such By-Laws as they may
deem proper for the management of the affairs of said corporation
according to the statute in such case made and provided.
No. 9
VOTING
Each stockholder will have one vote for each share registered in
his or her name. Cumulative voting shall not be allowed.
No. 10
SUBSCRIPTION RIGHTS
The stockholders of this corporation shall have no preferential
right or rights to subscribe to any subsequent issues of the authorized
shares of this corporation, unless certain rights or warrants for a
specific issue are authorized by the Board of Directors or the
Stockholders.
No.11
RESIDENT AGENT
The name and address of the Resident Agent is:
CARMAN RIDLAND, 900 Brush Street, Suite 413, Las Vegas
Nevada, telephone (702) 870-6421.
By signing below as an incorporator, CARMAN RIDLAND also certifies
and acknowledges his acceptance of appointment as Resident Agent of
CADGIE CO.
<PAGE> 56
No. 12
INCORPORATORS
The names and addresses of the incorporators of this corporation
are:
Carman Ridland, whose address is 900 Brush Street, Suite 413,
Las Vegas,, Nevada 89107;
Charisa McWilliams, whose address is 618 East Carson Avenue,
Las Vegas, Nevada 89101; and
Richard Morris, whose address is 745 Spanish Drive, Las Vegas,
Nevada 89110.
IN TESTIMONY WHEREOF, we hereunto set our hands and seals, the 20th
day of August, 1993.
/s/ CARMAN RIDLAND
/s/ CHARISA McWILLIAMS
/s/ RICHARD MORRIS
<PAGE>
<PAGE> 57
STATE OF NEVADA ss: COUNTY OF CLARK
I, DIANA G. WINN, a Notary Public in and for said Counti and State
aforesaid, do hereby certify that CARMAN RIDLAND, CHARISA McWILLIAMS,
and RICHARD MORRIS, whose names are subscribed to the annexed,
foregoing Articles of Incorporation, acknowledged before me that they
signed said instrument as their free and voluntary act.
Given under my hand and notarial seal, this day of _____
September, 1993.
SEAL:
DIANA D. WINN
NOTARY PUBLIC OF NEVADA
<PAGE> 58
EXHIBIT 3.2
CADGIE CO.
BY-LAWS
ARTICLE I - Offices
Section 1. Nevada Office. The principal office of the corporation in
the State of Nevada shall be located at:
900 Brush Street
Suite 413
Las Vegas, Nevada 89107
Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be located at:
10220 N. Nevada, Suite 230
Spokane, WA 99218
Section 3. Other Offices. The corporation may have one or more
offices within or without the State of Nevada, as the board of
Directors may designate, or the business of the corporation may
require.
ARTICLE II - Stockholders Meetings
Section 1. Annual Meetings. The annual meetings of the stockholders
of theis corporation shall be held on the first business day in the
month of February, and shall be held at the Nevada Office of the
corporation, or at such other place within or without the State of
Nevada as may be determined by the Board of Directors, for hte
purpose of electing directors for the ensuing nad and for the
transaction of such other business that maybe brought properly before
the meeting.
If the election of directors shall not be held on the day
designated herein for any annual meeting, or at any adjouniment
thereof, the board of Directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as
conveniently as it may be held. At such meeting the stockholder may
elect the direcotrs and transact other business with the same force
an deffect as at an annual meeting duly called and held.
Section 2. Special Meetings. Special meetings of the stockholders
may be called by the president or any two officers, and shall be
called by any officer of the corporation at the request in writing
signed by a stockholder, or stockholders owning at least forty-five
per cent (45%) of the issued and outstanding shares of common stock
of the corporation entitiled. to vote thereat, and shall be held at
the Nevada office of the corporation, or at such other place as may
be designated in the notice of the meeting.
Section 3. Notice and Pose of Meetings. Notice of the purpose and
of the time and place of every meeting of stockholders all be in
writing and signed by the presidnt or vice-president, or the
secretary, or an assistant secretary, and a copy thereof shall be
either delivered personally to, or shall be mailed, postage prepaid,
to each stockholder of record entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before such meeting.
<PAGE> 59
Such notice shall state the purpose or purposes for wich the meeting
is called and the time when, and place where it is to be held.
Section 4. Quorum. A quorum at all meetings of stockholders shall
consist of the holders of record of a majority of the shares of the
capital stock of the corporation, issued and outstanding, entitled to
vote at the meeting, present in person or by proxy, except as
otherwise provided by law or in the certificate of incorporation. In
the absence of a quorum at any meeting or any adjournment thereof, a
majority of those present in persn or by proxy and entitled to vote
may adjourn such meeting from time to time. At any such adjourned
meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
In the absence of a quorum at any meeting or any adjournment thereof,
and unless objected to by holders of twenty-five per cent (25%) of
the shares of the capital stock of the corporation, issued and
outstanding, entitled to vote at the meeting, the meeting may proceed
to conduct the business fo rwhich it is called, and the majority of
the shares of the capital stock of the corporation, issued and
outstanding entitled to vote at the meeting and present in persn or
by proxy, may decide the issues properly brought before the meeting.
Section 5. Organization. Meetings of the stockholders shall be
presided over by the president, or, if he is not present, by a vice-
president, or, if neither the president nor vice-president is
present, by a chairmand to be chosen by a majority of the
stockholders entitled to vote who are presne tin person or by proxy
at the meeting. The secretary of the corporation, or in his absence,
assistant secretary, shall act as secretary of the meting, but if
neither is present, the meeting shall choose any person present to
act as sevretary of the meeting.
At the annual meeting of stockholders the order of business shall be
as follows:
1. Call meeting to order
2. Proof of notice of meeting
3. Reading of minutes of last previous annual meeting
4. Election of directors
5. Reports of officers
6. Reports of committees
7. Miscellaneous business
Section 6. Voting. Except as otherwise provided in the by-laws of
the State of Nevada, at every meeting of the stockholders, each
stockholder of the corporation entitled to vote at such meeting shall
have one vote in person or by proxy for each share of stock having
voting rights held by him and registered in h8is name on the books of
the corporation at the time of such meeting. Any vote may be given by
the stockholder entitled thereto in person or by his proxy appointed
by an instrument in writing, subscribed by such stockholder or by his
attorney there unto authorized and delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted on after 3
years from its date unless said proxy provides for a longer period.
<PAGE> 60
Except as otherwise required by statute, by the certificate of
incorporation, or by these by-laws, all matters coming before any
meeting of the stockholders shall be decided by the vote of a
majority of the stockholders of the corporation present in person or
by proxy at such meeting and entitled to vote there at, a quorum
being present, with the exception that a quorum need not be present
if twenty-five per cent (25%) of the issued and outstanding shares of
the corporation are present and do not object to the lack of quorum.
At all elections of directors the voting may, but need not be, by
ballot and a plurality of the votes cast thereat shall elect.
Cumulative voting shall not be allowed.
Section 7. Stockholder List. A stock ledger containing the names,
alphabetically arranged, of all persons who are sotckholders of the
corporation, showing their places of residence, if know, and the
number of share held by them respectively, shall be kept and
maintained at the pricipal office of the corporation in Nevada. This
ledger shall be revised annually and at least ten (10) days proior to
any stockholders meeting, and any person who has been a stockholder
of record for a period of at least six (6) months immediately
preceding his demand, or any person holding, or thereunto authorized
in writing by the holders of, at least twenty-five per cent (25%) of
the outstanding shares, upon at least 5 days writtenn demand, shall
have the right to inspect, during usual business hours, the stock
ledger, with the exception that he may be denied such inspection
right if he refuses to ftu-nish to the corporaiton an affedavit that
such inspeciton is not desired for a purpose which is in the interest
of a business or object Ater than the business of the corporation.
Section 8. Voting Inspectors. At all elections of directors, or in
any other case in which inspectes may act, two voting inspectors
shall be appointed by the Chairman of the meeting, exceptas otherwise
provided by law. The voting inspectors shall take an subscribe an
oath faithfully to execute the duties of inspecotrs at such meeting
with strict impartiality, and, according the best of their ability,
shall take charge of the polls and, after the vote shall hvave
beentaken, shall make a certificate of the result therof. No director
or cndidate for the offic eof director shall be appointed a voting
inspecor. If there be a failure to appoint inspectors, or, ir any
inspector appointed is absen or refuses to act, or if his office
becomes vacant, the stockholders present at the meeting, by a per
capita vote, may choose temporary inspections of the number required.
ARTICLE III - Directors
Section 1. Number, term Vacancies. The property, affairs and
business of the corporation shall be managed by its board of
directors, consisting of not less than three (3) persons and not more
than nine (9). At the annual meeting each year, the stockholders
shall decide the number of persons that shall cnstitute the board fo
rthe ensuing year, and then they shall nominate condidates that need
not be stockholders, and vote to elect each director for a one-year
term. If directors are not elected on the day designated for the
purpose, the corporation shall not for that reason be dissolved;
<PAGE> 61
every director shall continure to hold office and discharge his
duties until his successor has been elected. The board may be
increased or decreased in number during any one year, but only by the
calling of a special meeting of stockholders. A plurality of the
votes cast shall decide for or against a change in the number of
directors. If a director vacates by resignation, death, or otherwise,
a majority of the remaining directors shall appoint a successor to
fill the vacancy for the balance of the term.
Section 2. Quorum. A majority of the members of the board of
directors then acting at a meeting duly assembled, shall constitute a
quorum for the transaction of business, but if at any meeting of the
board of directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting, without ftu-ther
notice, from time to item until a quorum shall have been obtained.
Section 3. Compensation. Directors shall serve without salary, but
by resolution of the board, a fixed sum and expenses, if any, for
attendace at any meeting or meetings may be allowed, provided that
nothing herein contianed shall be contrued to preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 4. Meetings. Special meetings of the board of directors
shall be held at such place as may from time to tiern be fixed by
resolution of the board of directors, or as may be specified in the
notice of meeting. Regular meetings of the board of directors shall
be held at such times as may from time to tiern be fixed by
resolution of the board of directors, and special meetings may be
held at any time upon written notice, or telegraphic notice delivered
personally to, or mailed, postage prepaid, to each director at least
7 days, and not more than 15 days, prior to the date of the meeting.
A meeting of the board of directors may be held without notice
immediately after th annual meeting of stockholders. Notice need not
be given of regular meetings of the board. Meetings may be held at
any time without notice of all the directors are present, or if any
any time before or after the meeting, those not present waive notice
of the meeting in writing. A quorum need not be assembled at any
meeting, if those not present waive notice of the convene providing
that a majority of directors in writing affinnatively ratify, confirn
and approve any resolutions.
Section 5. Committees. The board of directors may, in its
discretion, by the affirmative vote of a majority of the whole board,
appoint committees which shall have and may exercise such powers as
shall be conferred or authorized by the resolutions appointing them.
A majority of any such committee, if the committee be composed of
more than two (2) members, may determine its action and fix the time
and place of its meetings, unless the board of directors shall
otherwise provide. The board of directors shall have power at any
tiern to fill vacancies in, to change the membership of, or to
discharge any such committee.
<PAGE> 62
Section 6. Dividends. Subject always to the provisions of the law
and the certificate of Incorporation, the board of directors shall
have full power to determine whether any, and if any, what part of
any, funds legally available for the payment of dividends shall be
declared in dividends and paid to stockholders the division of the
whole or any part of such funds of the corporation shall rest wholly
within the lawful discretion of the board of directors, and it shall
not be required at any time, against such discretion, to divide or
pay any part of such funds among or to the stockholders as dividends
or otherwise; and the board of directors may fix a sum which may be
set aside or reserved over and aboe the captial paid in of the
corporation as working capital for the corporation or as a reserve
for any proper purpose, and from time to time may increase, diminish,
and vary the same in its absolute judgment and discretion.
Section 7. Removal of directors. At any special meeting of the
stockholders, duly called as provided in thses by-laws, any director
or directors, by the affirmative vote of the holders of a majority of
all the shares of stock outstanding and entitiled to either with or
without cause, and his successor or their successors may be elected
at such meeting; or the remaining directors may, to the extent
vacancies are not filled by such election, fill any vacancies created
by such removal.
Section 8. Indemnification of Directors and Officers. Each director
of officer, whether or not then in office, shall be indemnified by
the corporation against all cost and expenses reasonably incurred by
or imposed upon him in connection with or arising out of any aciton,
siut, or porceeding in which he may be involved by reason of his
being or having been director or officer of the corporation, such
expenses to include the cost of reasonable settlements (other than
amounts paid to the corporation itself) made with a view to
curtailment of costs of litigation. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a ples of nols contendere, shall not create a presumption that
the person did not act in good faith and manner reasonably believed
to be in the best interests of the corporation.
ARTICLE IV - Officers
Section 1. Number. The board of directors, as soon as may be after
the election thereof held in each year, shall elect a president, a
secretary and a treasurer, and from time to time may appoint one or
more vice-presidents and such assistant secretaries, assistant
treasurers and such other officers, agents and employees as it may
deem proper. Any two offices (but not more than two) may be held by
the same person. More than two offices other than the offices of
president and secretary may be held by the same person. The president
shall be chosen from among the directors.
Section 2. Term and Removal. The term of office of all officers
shall be one year and until their respective successors are elected
and qualify, but any officer may be removed from office, either with
or without cause, at any time by the affirmative vote of a majority
<PAGE> 63
of the members of the board of directors then in office. A vacancy in
any office arising from any cause may be filled for the unexpired
portion of the term by the board of directors.
Section 3. Powers and Duties. The officers of the corporation shaii
each have such powers and duties as generally pertain to their
respective offices, as wen as such powers and duties as from time to
time may be conferred by the board of directors. Any vice-president,
assistant secretary and assistant treasurer shall, in the order of
their respective seniorities, in the absence or disability of the
president, secretary or treasurer, respectively, perform the duties
of such officer and shall generally assist the president, secretary
and treasurer respectively.
Section 4. Voting Corporation's Securities. Unless otherwise
ordered by the board by the board of directors, the president, or, in
the event of his inability to act, the vice-president designated by
the board of directors to act in the absence of the president, shall
have full power and authority on behalf of the corporation to attend
and to act and to vote at any meetings of security holders of
corporations in which the corporation may hold securities, and at
such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities, and which as the
owner thereof the corporation might have possessed and exercised, if
present. The board of directors by resolution from time to time may
confer like powers upon any other person or persons.
ARTICLE V - Certificates of Stock
Section 1. Form and Transfers. The interest of each stockholder of
t7e corporation shall be evidenced by certificates for shares of
stock, certifying the number of shares represented thereby and in
such form not inconsistent with the certificate of incorporation as
the board of directors may from time to time prescribe.
Transfers of shares of the capital stock of the corporation shall be
made only on the books of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the secretary of the corporation, or
with transfer clerk or a transfer agent appointed as in Section 4 of
this Article provided, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all
taxes thereon. The person in whose name sharers o' stock stand on the
books of the corporation shall be deemed the owner thereof for 0
purposes as regards the corporation; proved that whenever any
transfer of shares shall be made for collateral security, and not
absolutely, such fact, if known to the secretary of the corporation
shall be so expressed in the entry of transfer. The board may, from
time to time, make such additional rules and regulations as it may
deem expedient, not inconsistent with these by-laws, concerning the
issue, transfer, and registration of certificates for shares of the
capital stock of the corporation.
The certificates of stock shall be signed by the president or a vice-
<PAGE> 64
president and by the secretary or an assistant secretary or the
treasurer or an assistant treasurer, and sealed with the seal of the
corporation. Such seal may be a facsimile, engraved or printed. Where
any such certificate is signed by a transfer agent or a transfer
clerk and by a registrar, the signatures of the president, vice-
president, secretary, assistant secretary, treasurer or assistant
treasurer upon such certificate may be facsimiles, engraved or
printed. In case any such officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to
be such before such certificate is issued, it may be issued by the
corporation with the same effect as if such officer had not ceased to
be such at the Lime of its issue.
Section 2. Closing of Transfer Books. The board of directors shall
have power to-close the stock transfer books of the corporation for a
period not exceeding 30 days before any stockholder's meeting, or the
last day on which the consent or-dissent of stockholders may be
effectively expressed for any purpose without a meeting, or the date
fixed for the payment of any dividend or the making of any
distribution, or for the delivery of evidences of right or evidences
of interest arising out of any change, conversion or exchange of
capital stock. Provided, however, that in lieu of closing the stock
transfer books as aforesaid the board of directors may in its
discretion fix a time not more than 30 days before the date of any
meetings of stockholders, or the last day on which the consent or
dissent of stockholder may be effectively expressed for any purpose
without a meeting, or the date fixed for the payment of any dividend
or for the delivery or evidences of rights or evidences of interest
arising out of any change, conversion or exchange of capital stock,
as the time as of which stockholders entitled to notice of and to
vote at such meeting or whose consent or dissent is required or may
be expressed for any purpose or entitled to receive any such
dividend, distribution, rights or interests shall be determined; and
all persons who are holders of record of voting stock at such time
and no others shall be entitled to notice of and to vote at such
meeting or to express their consent or dissent, as the case may be,
and only stockholders of record at the time so fixed shall be
entitled to receive such dividend, distributions, riahts or interest.
Section 3. Lost, Stolen, Destroyed, or Mutilated Certificates.
No certificate for shares of stock in the corporation shall be issued
in place of any certificate alleged to have been lost, destroyed or
stolen, except on production of such evidence of such loss,
destruction or theft and on delivery to the corporation, if the board
of directors shall so require, of a bond of indemnity in such amount
(not exceeding twice the value of the shares represented by such
certificate, upon such terms and secured by such surety as the board
of directors may in its discretion require.
Section 4. Transfer Agent and Registrar. The board of directors may
appoint one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates of stock
to bear the signature or signatures of any of them.
Section 5. Examination of Books by Stockholders. The board of
directors shail have power to determine, from time to time, whether
<PAGE> 65
and to what extent and at what times and places and under what
conditions and regulations the accounts and books and documents of
the corporation, or any of them, shall be open to inspection by the
stockholders; and no stockholder shall have any right to inspect any
account or book or document of the corporation.
ARTICLE VI - Fiscal Year
The fiscal year of the corporation shall begin on the first day of
November of each year and shall end on the 31st day of October next
following, unless otherwise determined by the board of directors.
<PAGE> 66
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After issuance of Stock)
CADGIE CO.
We undersigned John P. Ryan, President and Merlin Bingham,
Secretary of CADGIE CO. do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 28th day June, 1996, adopted a resolution to
amend the original articles as follows:
Article No. 4 is hereby amended to read as follows:
CAPITALIZATION
The total authorized capital stock of this corporation shall
be FIFTY MILLION (50,000,000) shares of common stock, each of
which shares shall have the par value of ONE CENT ($0.01),
totaling $500,000.
Article No. 1 is hereby amended to read as follows:
The name of the corporation shall be:
Metalline Mining Company
The number of shares of the corporation outstanding and entitled
to vote on an amendment to the Articles of Incorporation is 1,787,339
that the said change(s) and amendment hive been consented to and
approved by a majority vote of the stockholders holding at least a
majority of each class of stock outstanding and entitled to vote
thereon.
/s/ John P. Ryan, President
/s/ Merlin Bingham
State of Washington )
) ss.
County of Spokane )
On September 27, 1996, personally appeared before me. a Notary
Public, John P. Ryan and Merlin Bingham, who acknowledged that they
executed the above instrument.
/s/ Sandra B. Bath, Notary
Notary expires: 12/2/99
<PAGE> 67
EXHIBIT 4.1
NUMBER SHARES
METALLINE MINING COMPANY
Incorporated under the laws of the State of Nevada
Authorized 50,000,000 Common Shares, $0.01 par value
This Certifies that
is the owner of
Fully Paid and non-assessable Shares of Common Stock, no par value
of
METALLINE MINING COMPANY
transferable only on the books of this Corporation in person or by
attorney upon surrender of this Certificate properly endorsed.
This Certificate is not valid unless countersigned by the transfer
agent and registrar.
IN WITNESS WHEREOF, the said Corporation has caused this
Certificate to be endorsed by the facsimile signatures of its duly
authorized officers and to be sealed with the facsimile seal of the
Corporation.
Dated
____________________ Seal _________________________
Secretary President
<PAGE> 68
METALLINE MINING COMPANY
Idaho Stock Transfer Co.
Transfer Fee: ______ per certificate
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________(Cust.) Custodian for ________(Minor)
Under Uniform Gifts to Minors
Act of ____________________ (State)
Additional abbreviations may also be used though not in the above
list.
For the value received _____________ hereby sell, assign and
transfer until
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
[ ]
Please print or type name and address of assignee
________________________________________
________________________________________
________________________________________ Shares
of the Common Stock represented by the within Certificate and do
hereby irrevocably constitue and appoint
_______________________________________
_______________________________________
Attorney to transfer the said stock on the books of the within
named Corporation, with full power of substitution in the premises.
Dated _____________ 19____
SIGNATURE GUARANTEED: x__________________________________
x__________________________________
<PAGE> 69
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE
SIGNATURE(E) MUST BE BUARANTEE4D BY AN ELIGIBLE GUARANTOR
INSTITUTION (Banks, Stockbroker, Savings and Loan Association and
Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM PURSUANT TO RULE 17Ad-15 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE> 70
EXHIBIT 10.1
MASTER AGREEMENT
This agreement is entered into this ___ day of _____________,
1998.
Recitals
WHEREAS, in July, 1996, USMX, Inc., a Delaware corporation,
entered into a Joint Exploration and Development Agreement with Cadgie
Company, a Nevada corporation, relating to development and exploration
of certain mineral properties located in the municipality of Sierra
Mojades, State of Coahuila. A true and correct copy of that document
is attached hereto as Exhibit "A", and
WHEREAS, Cadgie Company is, by virtue of a corporate name change,
now known as Metalline Mining Company (hereinafter "Metalline"), and
WHEREAS, pursuant to the terms of the Joint Exploration and
Development Agreement, Metalline agreed to a schedule of Work
Expenditures to be performed by Metalline in the exploration and
development of mineral concessions owned by USMX's wholly owned Mexican
subsidiary, MXUS S.A. DE C.V. and by Metalline's wholly owned Mexican
subsidiary Minera Metalin, S.A. DE C.V. and
WHEREAS, only after the completion of certain specified work by
Metalline and notice and evidence of that completion, together with a
tentative Program and Budget, as defined in the Joint Exploration and
Development Agreement, were provided to USMX, USMX was to have had
ninety days to receive either a 2.5% Net Smelter Return Royalty on
"precious metals" together with a 1.5% Net Smelter Return Royalty on
"base metals" as further delineated in the Joint Exploration and
Development Agreement or to elect to obtain a 35% interest in a
corporation which would own the Concessions subject to the agreement,
and undertake an obligation to fund 35% of any subsequent expenditures,
and
WHEREAS, in May 1997, USMX, Inc. became the wholly owned
subsidiary of Dakota Mining Company, a Canadian federal corporation
(hereinafter "Dakota"), and
WHEREAS, on January 6, 1998, Dakota entered into an Election of
Net Smelter Return Royalty and Assignment of Interest Agreement
(hereinafter "Election Agreement"), with Metalline and Royal Silver
Mines, a Utah corporation, as set forth in greater detail in the
Election Agreement, a copy of which is attached as Exhibit B to this
Agreement, and
WHEREAS, in exchange for $100,000 cash plus 200,000 shares of
common stock of Metalline and 100,000 shares of free-trading Royal
Silver common stock, all of which Dakota received from Royal Silver,
Dakota as beneficial owner of 100% of the interests of USMX , and on
behalf of USMX and its Mexican subsidiary, MXUS, elected to receive a
2.5% Net Smelter Return royalty on "precious metals" and 1.5% net
<PAGE> 71
smelter return royalty, subject to a reduction for underlying royalties
NSR as set out in greater detail in the Election Agreement, and to
transfer its interests in certain Mexican Mining Concessions to the
wholly-owned Mexican subsidiary of Metalline, Minera Metalin, S.A. DE
C.V. and
WHEREAS, in the Election Agreement, the parties to that agreement
agreed that Royal could participate in the project at a 35% interest,
with the obligation to fund 35% of any subsequent expenditure
obligation and to pay 35% of the costs of maintaining the existing and
any future acquired concessions, and
WHEREAS the parties to the Election Agreement agreed to prepare
and sign a more detailed mutually acceptable Royalty Agreement, and
Metalline and Royal agreed to draft and sign a new Joint Venture
Agreement and Dakota agreed to cause MXUS to transfer the MXUS
concessions to Minera Metalin as soon as possible, and
WHEREAS, in May of 1998, USMX filed for reorganization under
Chapter 11 of the U. S. bankruptcy laws, and
WHEREAS, the parties wish to revise and clarify their agreements
and to insure the enforceability of this agreement, the parties hereby
agree as follows
1. Minera Metalin, S.A. DE C.V. warrants that it is a Mexican
mining corporation legally incorporated and in good standing according
to the laws of the Mexican Republic and is legally qualified to execute
this Agreement.
2. MXUS, S.A. DE C.V. warrants that it is a Mexican mining
corporation, legally incorporated and in good standing according to the
laws of the Mexican Republic and is legally qualified to execute this
Agreement.
3. Metalline Mining Company warrants that it is a Nevada
corporation legally incorporated and in good standing according to the
laws of the State of Nevada and is legally qualified to execute this
Agreement.
4. USMX warrants that it is a Delaware corporation legally
incorporated and in good standing according to the laws of the State of
Delaware and is legally qualified to execute this Agreement.
5. Dakota Mining Company warrants that it is a Canadian Federal
corporation legally incorporated and in good standing according to the
laws of Canada and is legally qualified to execute this Agreement.
6. Royal Silver Mines warrants that it is a Utah corporation,
legally incorporated and in good standing according to the laws of the
State of Utah and is legally qualified to execute this Agreement.
<PAGE> 72
7. The Joint Exploration and Development Agreement and the Joint
Exploration and the Election of Net Smelter Return Royalty and
Assignment of Interest Agreement are of no further force or effect and
are superseded by this agreement and the agreements listed below, which
agreements are hereby ratified and approved by all the parties hereto,
true and correct copies of which are attached hereto as Exhibit 1, 2
and 3, respectively:
1. Net Smelter Return Royalty Agreement;
2. Concession Purchase Agreement
3. Joint Venture Agreement.
8. This Agreement shall take effect only upon execution of this
document by all parties hereto and the execution of the Net Smelter
Return Royalty Agreement, the Concession Purchase Agreement and the
Joint Venture Agreement by the required parties to each of these
agreements.
USMX, INC. DAKOTA MINING COMPANY
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
METALLINE MINING COMPANY ROYAL SILVER MINES
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
MXUS S.A. DE C.V. MINERA METALIN, S.A. DE C.V.
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
<PAGE> 73
Net Smelter Return Royalty Agreement
This Agreement is made as of ________________ among Dakota Mining
Company ("Dakota"), a Canadian Federal Corporation and Royal Silver
Mining ("Royal"), a Utah corporation, Metalline Mining Company
("Metalline"), a Nevada corporation, USMX, Inc., a Delaware
corporation, MXUS S.A. DE C.V. ("MXUS"), a Mexican Mining Company and
Minera Metalin, S.A. DE C.V. ("Minera Metalin"), a Mexican Mining
Company:
Recitals
Dakota, USMX, Inc., MXUS, Metalline, Minera Metalin, have entered
into a Master Agreement which supersedes all prior agreements between
and among them and which agreement expressly ratifies and incorporates
this Net Smelter Return Royalty Agreement.
NOW, THEREFORE, in consideration of the payment of and transfer to
Dakota of $100,000, 200,000 shares of the common stock of Metalline, as
well as 100,000 shares of free-trading Royal Commerce stock to Dakota,
and in consideration of the Net Smelter Royalty payment provisions
called for in this agreement, and in further consideration of the sale
to Metalline's Mexican subsidiary, Minera Metalin, S.A. DE C.V., of all
rights, title and interest that Dakota and USMX and/or MXUS, S.A., DE
C.V. have in the existing exploration and mining concessions over the
following lots ("The Lots"):
Name of Lot Title No. Hectares Valid Until
Sierra Mojada 198513 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
located in the Municipality of Sierra Mojada, State of Coahuila, within
the circumscription of the Mining Agency of Sabinas, Coahuila, the
parties agree as follows:
1. Warranties of MXUS, USMX and Dakota
MXUS, USMX and Dakota each represent and warrant, to the best of
each's actual knowledge and belief that they have the legal capacity to
enter into and perform this Agreement and this Agreement is valid and
binding upon each of them in accordance with its terms. MXUS, USMX and
Dakota also each warrant, to the best of each's actual knowledge and
belief, The Lots are free of all royalties, liens, encumbrances or
limitations of ownership and that USMX and/or MXUS and/or Dakota are
not aware of any facts, such as notices from governmental agencies that
cast doubt on the ownership of The Lots; that neither MXUS nor USMX nor
Dakota is a party to any other agreement affecting the MXUS
concessions; that USMX, MXUS and Dakota will not encumber, limit,
create a lien on or diminish any rights affecting the Lots during the
term of the agreement, and that MXUS, USMX and Dakota will take all
necessary actions to assist Metalline, Minera Metalin or Royal to
remove any liens or encumbrances on The Lots.
<PAGE> 74
2. Warranty of Metalline and Minera Metalin
Minera Metalin and Metalline represent and warrant, to the best of
each's actual knowledge and belief, that each has the capacity to enter
into and perform this Agreement and this Agreement is valid and binding
upon it in accordance with its terms.
3. Warranty of Royal Silver
Royal Silver represents and warrants to the best of its actual
knowledge and belief that it has the capacity to enter into and perform
this Agreement and this Agreement is valid and binding upon it in
accordance with it terms.
4. Definitions
4.a. "Area of Interest" means the area within 10 kilometers
of The Claims.
4.b. "The Claims" means the following described existing
exploitation, exploration and mining concessions:
Type of Concession
Name of Lot Title No. Hectares Valid Until
Sierra Mojada 198513 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
Mineros Nortenos 169343 336.7900 Exploitation Mining
Concession Valid
until _____________
Esmerelda 188765 117.5025 Exploration Mining
Concession Valid
until _____________
Esmerelda 187776 97.6800 Exploration Mining
Concession Valid
until _____________
La Blanca 188326 33.50444 Exploration Mining
Concession Valid
until ____________
4.c. "Net Smelter Return" means:
(1) Except as provided in subparagraph (2) below, in
the event that the Payor sells ores, concentrates, precipitates,
cathodes, leach solutions or any other primary, intermediate or final
product or any other mineral substances (other than fine gold and/or
silver bullion, dore or other valuable mineral or element) produced
from the Properties, Net Smelter Return for the calendar quarter shall
mean the amount of Revenues (as defined below) actually received by the
Payor from the sale of such mineral substances, less to the extent paid
or incurred by the Payor, (a) the cost of transportation between the
Payor's mill and the buyer, (b) the cost of assaying, sampling,
custom-smelting and refining such products, including any independent
representative and umpire charges, and (c) taxes (other than income
taxes) imposed upon or in connection with producing, transporting and
selling such products.
<PAGE> 75
(2) If, in any quarter, the Payor produces as a final
product or has produced as a final product through a tolling/refining
contract or any other transacting that results in the Payor owning
title to fine gold and/or silver bullion, dore, or other valuable
mineral or element produced from the Properties, that payor withholds
from sale, Net Smelter Return for a calendar quarter shall mean the
amount of fine gold, Silver bullion or other valuable mineral produced
or the amount of payable gold, silver or other valuable mineral
contained in bullion produced from the Properties during the quarter
multiplied by (i) for gold, the average London Bullion Brokers daily
P.M. Gold Fixing for the calendar quarter of production and (ii) for
silver, the average London Bullion Market Association daily Silver
Fixing for the calendar quarter of production, (iii)for copper, lead,
or zinc the average daily LME closing price, and (iv) for other
valuable minerals the average or industry standard pricing, less the
following costs attributed to that production, to the extent paid or
incurred by the Payor prior to the date payment is due to the Royalty
Holder as prescribed in Section 9.a.(2) of this Exhibit, (a) the costs
of transportation from the Payor's mill to the smelter/refiner, (b) the
cost of assaying, sampling, custom-smelting and refining said bullion,
(c) taxes (other than income taxes) imposed upon or in connection with
producing, transporting and selling said fine gold and/or silver
bullion and (d) selling costs, if any, actually paid or incurred by the
Payor prior to the date payment is due the Royalty Holder as described
above.
For purposes of this Section, the average gold and
silver prices for the production quarter shall be determined by
dividing the sum of all daily prices posted during the calendar quarter
by the number of days that prices were posted.
The posted prices shall be obtained from The Wall
Street Journal, Reuters or another reliable source. If either the
London Bullion Brokers P.M. Gold Fixing or the London Bullion market
Association daily Silver Fixing ceases to be published, the Payor and
the Royalty Holder shall agree upon a similar alternative method for
determining the average spot market price for gold and/or silver, as
the case may be, which shall be used in calculating Net Smelter Return.
The Payor and the Royalty Holder acknowledge that the purpose
of this Section is to assure that Net Smelter Return is determined in
a timely manner for find gold and/or silver bullion produced, dore
bullion or other valuable minerals produced during a calendar quarter
regardless of whether an actual sale of gold, silver or other valuable
mineral to a third party is made by the Payor. The parties further
acknowledge that the Payor shall have the right to market and sell to
third parties the gold, silver and other valuable minerals produced
from the Properties in any manner it chooses, including the forward
sale of gold, silver or other valuable mineral on the commodity markets
to the extent approved by Royalty Holder as to the amount due to
Royalty Holder.
(3) In no event shall the Payor deduct the cost of
mining, milling, leaching or any other processing costs incurred by the
Payor in the determination of Net Smelter Return.
<PAGE> 76
(4) In the event smelting or refining are carried out
in facilities owned or controlled, in whole or in part, by the Payor,
then charges, costs and penalties for such smelting or refining shall
mean the amount the Payor would have incurred if such smelting or
refining were carried out at facilities not owned or controlled by the
Payor then offering comparable services for comparable products on
prevailing terms, but in no event greater than actual costs incurred by
the Payor with respect to such smelting and refining.
4.d. "Payor" shall mean the person or entity obligated to pay
a Net Smelter Return royalty to the Royalty Holder pursuant to the
terms of this Royalty Agreement
4.e. "Properties" means The Claims and all other interests in
real property, including surface rights or concessions in process, held
or acquired by Minera Metalin within the area of interest.
4.f. "Royalty Holder" shall mean the person or entity
entitled to receive a net Smelter Return Royalty pursuant to the terms
of this Royalty Agreement.
4.g. "Revenues" shall mean the total amounts received by the
Payor from the sale of mineral substances produced from the Properties
at the point of sale, less all selling costs, provided such sales are
arm's length transactions, and provided further that sales to
Affiliates of the Payor are valued at the fair market value of the
products sold. For the purposes of this Exhibit, mineral substances
may be in a primary, intermediate or final form; however, Royalty
Holder shall be given all benefit of value added beneficiation by Payor
and its Affiliates as is reasonable hereunder.
5. Net Smelter Return Royalty on Precious Metals
As a Royalty, Minera Metalin shall pay Dakota 2.5% of the Net
Smelter Return as calculated pursuant to paragraphs 4.c.(1) or 4.c.(2)
of this Agreement, whichever is applicable, for production and or sales
of precious metals by Minera Metalin from the Concessions located
within the Area of Interest. The Net Smelter Royalty on precious
metals will be paid on any precious metals produced and sold by Minera
Metalin from the Concessions or any other concessions located and
acquired by Minera Metalin within the Area of Interest, including
silver, gold, germanium, gallium and any other mineral, element or
material whose price or value equals or exceeds the value of silver on
a per ounce basis.
The above described royalty on precious metals to be paid to
Dakota shall be reduced by any actual underlying royalties to be paid
as specified in paragraph 8 below.
The Net Smelter Return Royalty on precious metals shall be paid as
long as the Concessions remain valid and there is production and sale
of precious metals by Minera Metalin from the Area of Interest.
<PAGE> 77
6. Net Smelter Return Royalty on Base Metals
As a Royalty Minera Metalin shall pay Dakota a 1.5% Net Smelter
Royalty as calculated pursuant to paragraphs 4.(c)(1) or 4.(c)(2) of
this agreement, whichever is applicable, for production and or sales of
base metals by Minera Metalin from smelter returns or invoices for
first hand sales of base metals that will be produced and sold by
Minera Metalin from the Concessions located in the Area of Interest.
This royalty on will be paid on any base metals produced and sold by
Minera Metalin from the Concessions or from any other concessions
located and acquired by Minera Metalin within the Area of Interest.
The above-described Net Smelter Royalty on base metals to be paid
to Dakota shall be reduced by any actual underlying royalties to be
paid as specified in paragraph 8 below.
The Net Smelter Return Royalty on base metals shall be paid as
long as the concessions remain valid and there is production and sale
of precious metals by Minera Metalin from the Area of Interest.
7. Term of this Agreement
The term of this Agreement will be for an indefinite period of
time and it will continue to be valid and in force as long as there
exists a valid and enforceable mining concession issued over the
concessions, or any of them.
8. Underlying Royalties
As expressly agreed between the parties, the above-mentioned Net
Smelter Royalties on precious and base metals to be paid to Dakota
shall be reduced by any actual underlying royalties to be paid which
are as follows:
<TABLE>
<CAPTION>
Dakota Dakota
Espinosa Underlying Royalty on Royalty on
Concession Title Royalty Royalty Precious Metals Base Metals
<S> <C> <C> <C> <C> <C>
Sierra Mojada 198513 .5% - 2.0% 1.0%
Mojada 3 199246 - - 2.5% 1.5%
Mineros Nortenos 169343 - 2.0% 1.0% 1.0%
Fortuna 160461 .5% - 2.0% 1.0%
Esmeralda 188765 .5% - 2.0% 1.0%
Esmeralda I 187776 .5% - 2.0% 1.0%
La Blanca Ex.6703 - - 2.5% 1.5%
</TABLE>
If in the future Minera Metalin's obligation to pay any of these
underlying royalties terminates, then, thereafter, Minera Metalin will
have to add to the Net Smelter Royalties to be paid to Dakota the
percentage that until then had been paid on said underlying royalties.
9. Payments of Net Smelter Return Royalty
Once production and sale of precious metals and/or base metals of
at least an aggregate total of one thousand tons of concentrates a
month for three months has been achieved, Minera Metalin shall have to
begin to pay royalties as specified herein:
<PAGE> 78
a. The amount of Net Smelter Return royalty due the Royalty
Holder shall be payable in the following alternative manners depending
on the Payor's method of sale or disposition of mineral substances
produced from the Properties:
(1) If the Payor produces and sells ores, concentrates,
precipitates, cathodes, leach solutions or any other primary,
intermediate product or mineral substances other than fine gold and/or
silver bullion or dore bullion, the Net Smelter Return royalty paid to
the Royalty Holder shall be calculated by multiplying the amount of Net
Smelter Return determined in Section 4.(c)(1) by the percentage of Net
Smelter Return to which the Royalty Holder is entitled under the
Agreement. Payment shall be made within 30 days after the Payor's
receipt of Revenues from such sales during a calendar quarter.
(2) If, in any quarter, the Payor produces fine gold,
silver bullion, dore or other valuable minerals, that payor elects to
withhold from sale, the Net Smelter Return royalty paid to the Royalty
Holder shall be calculated by multiplying the amount of the Net Smelter
Return determined in Section 4.(c)(2)by the percentage of Net Smelter
Return to which the Royalty Holder is entitled under the Joint
Exploration and Development Agreement. Payment shall be made within 30
days after the end of a calendar quarter. At the option of the Royalty
Holder payment may be made in kind or by check.
b. The Payor shall provide copies of all data relating to
the Net Smelter Return royalty calculation (including, but not limited
to, settlement sheets used in calculating the Royalty Holder's Net
Smelter Return royalty) to the Royalty Holder at the same time that the
Royalty Holder's Net Smelter Return royalty payments are paid.
10. Audits and Disputes
a. The Royalty Holder, upon written notice, shall have the
right to have an independent firm of certified public accountants audit
the records that relate to the calculation of the Net Smelter Return
interest within12 months after receipt of a payment described in
paragraph 9. of this agreement for a calendar quarter.
b. The Royalty Holder shall be deemed to have waived any
right it may have had to object to a payment made for any calendar
quarter, unless it provides notice in writing of such objection within
24months after receipt of final payment for the calendar quarter. If
the parties are unable to resolve the dispute within 60 days after the
receipt of such notice, the dispute shall be resolved by arbitration in
Coeur D'Alene, Idaho , pursuant to the commercial arbitration rules of
the American Arbitration Association. The resolution pursuant to such
arbitration shall be binding on the parties. Alternatively, the
parties may elect to submit the dispute to a mutually acceptable
certified public accountant, or firm or certified public accountants,
for a binding resolution thereof. Unless the parties agree to share
the costs of arbitration, the arbitrator shall determine what part of
the costs and expenses incurred in any such proceeding shall be borne
by each party participating in the arbitration.
<PAGE> 79
11. General
a. The Payor shall keep true and accurate books and records
for the purposes of this agreement. Such books and records shall be
kept on the accrual basis in accordance with generally accepted
accounting principles and practices consistently applied.
b. The Royalty Holder or its authorized representative may
enter upon all surface and subsurface portions of the Properties for
the purpose of inspecting the Properties, all improvements thereto and
operations thereon, and may inspect and copy all records and data
pertaining to the calculation of its interest, including without
limitation such records and data which are maintained electronically.
The Royalty Holder or its authorized representative shall enter the
Properties at the Royalty Holder's own risk and may not unreasonably
hinder operations on or pertaining to the Properties. The Royalty
Holder shall indemnify and hold harmless the Payor and its Affiliates
(including without limitation direct and indirect parent companies),
and its or their respective directors, officers, shareholders,
employees, agents and attorneys, from and against any Liabilities which
may be imposed upon, asserted against or incurred by any of them by
reason of injury to the Royalty Holder or any of its agents or
representatives arising out of or resulting from the Royalty Holder's
exercise of its rights herein.
c. All notices or communications hereunder shall be made
and effective in accordance with the provisions of this Royalty
Agreement.
d. The Net Smelter Return interest shall be attached to any
amendments, relocations or conversions of any concessions comprising
the Properties, or to any renewals or extensions of any mineral rights
acquired by the Payor and any Affiliates in lands embraced within any
concessions comprising the Properties and Area of Interest. The Net
Smelter Return interest shall be a real property interest that runs
with the Properties and Area of Interest and shall be applicable to any
person who produces and sells Products from the Properties.
e. All information and data provided to Royalty Holder
shall be subject to the confidentiality provisions of this Agreement.
f. Notwithstanding anything to the contrary herein, the
Payor shall have the right to mine and market amounts of precious
metals or other minerals reasonably necessary for bulk sampling,
assaying, metallurgical testing and evaluation of the minerals
potential of the Properties without initiating the obligation to make
production royalty payments hereunder.
g. The Payor shall have the right to commingle ore and
minerals from the Properties with ore from other lands outside the Area
of Interest; provided, however, that the Payor shall calculate from
representative samples the average grade of the ore and shall weigh (or
calculate by volume) the ore before commingling. If concentrates are
produced from the commingled ores by the Payor, the Payor shall also
calculate from representative samples the average recovery percentage
for all concentrates produced during the calendar quarter. In
<PAGE> 80
obtaining representative samples, calculating the average grade of the
ore and average recovery percentages, the Payor may use any procedures
accepted in the mining and processing activity being conducted and, in
the absence of fraud, its choice of such procedures shall be final and
binding on the Royalty Holder. In addition, comparable procedures may
be used by the Payor to apportion among the commingled ores penalty
charges, if any, imposed by the purchaser of such ore or concentrates.
10. Transfer of the Lots to Third Parties
Should Minera Metalin at any time in the future transfer the
concessions or the rights to exploit them or any of them, to third
parties, Minera Metalin shall have the obligation to make the acquiring
party to undertake all of the obligations contained herein and
particularly the obligation to pay Dakota the royalties called for by
this agreement, on the terms and conditions agreed to herein, to make
any other further acquiring party to assume said obligations. Any such
transfer shall not relieve Minera Metalin of its primary obligation to
have the payments called for in this agreement to be paid to Dakota.
11. Fees, Duties, Taxes and Expenses
All fees, duties, taxes and expenses incurred on the granting and
execution of this Agreement and of the respective purchase agreement
will be paid by Dakota, except for those taxes imposed on the income
obtained by Minera Metalin from royalty payments and/or advance royalty
payments, which will be paid by it.
12. Additional Obligations of Minera Metalin.
In addition to the obligations assumed by Minera Metalin at the
preceding clauses, during all the term this Agreement will be in force,
it will have also the following:
a. Maintain valid and in force the rights derived from the
mining Concessions over the Concessions and, likewise, to maintain them
free and clear from any lien, encumbrance or limitation of dominion.
b. Hold all of the other parties free and clear and
harmless and indemnify them from any claims and responsibilities that
may be asserted against them due to any acts by, or directly imputable
to, Minera Metalin.
13. Force Majeure
a. No party shall be liable to the other party and no party
shall be deemed in default hereunder for any failure or delay to
perform any of its covenants, agreements or obligations caused or
arising out of any act not reasonably within the control of such party,
excluding lack of O 80202
USA Coahuila, Mexico
Phone 208 665 2002 Phone 303 376 2724 Phone 52-177-52100
Fax 208 665 0041 Fax 303 376 2751
<PAGE> 81
MXUS Royal
MXUS, S.A. DE C.V. Royal Silver Mines, Inc.
San Francisco NB 656 - 601 10220 N. Nevada St.,
Col. Del Valle, C./P. 03100 Suite 270
Mexico, D.F. Spokane, WA 99218 USA
Phone 5 536 3014 Phone 509 466 3144
Fax 5 543 7307 Fax 509 446 3321
All Notices shall be given (i) by personal delivery to the party,
(ii) by electronic communication, with confirmation of transmission,
(iii) by registered or certified mail, return receipt requested, or
(iv) by commercial courier. All Notices shall be effective and shall
be deemed delivered (i) if by personal delivery, on the date of
delivery, if delivered during normal business hours, and if not
delivered during normal business hours, on the next business day
following delivery, and (ii) if by electronic communication, by mail,
or by commercial carrier, on the next business day after actual
receipt. Any change in the above addresses shall be communicated in
writing to the other parties when and if it occurs.
16. Applicable Laws and Courts
For everything not expressly stipulated in this Agreement, the
parties agree to be governed by the applicable laws of Mexico, Federal
District, particularly those of the Mining Law, its Regulations, the
Federal Duties Law, the Commerce Code and the Civil Code for the
Federal District and in case of dispute, the parties agree that any
such dispute except as otherwise provided herein shall be resolved by
binding arbitration in Coeur d'Alene, Idaho, pursuant to the commercial
rules of the American Arbitration Association. The decision in any
such arbitration shall be binding on all parties to this Agreement.
Unless otherwise agreed to by the parties, the arbitrator shall decide
what part of the costs and expenses of arbitration shall be borne by
each of the parties to that arbitration.
17. Full Transfer Required
The obligations to pay royalties out of production from The Lots
as specified in this Agreement shall take effect only after the
transfer of all rights, title and interest in the Lots to Minera
Metalin has been fully accomplished.
Each of the parties signs two copies of this Agreement on the ___
day of September, 1998.
METALLINE MINING COMPANY DAKOTA MINING CORPORATION
By____________________________ By_____________________________
MINERA METALIN, S.A., DE C.V. MXUS, S.A. DE C.V.
By____________________________ By____________________________
ROYAL SILVER MINES, INC. USMX
By_____________________________ By___________________________
<PAGE> 82
Concession Purchase Agreement
This Agreement is executed by MXUS, S.A. DE C.V. (hereinafter
called the "Seller"), and Minera Metalin, S.A., DE C.V. (hereinafter
called the "Purchaser"), a wholly owned subsidiary of Metalline Mining
Company, in accordance with the following provisions:
STATEMENTS
1. The Seller warrants as follows:
a) It is a Mexican mining corporation legally incorporated
according to the laws of the Mexican Republic and legally qualified to
execute agreements and to be the owner of mining concessions.
b) That its duly empowered to represent it and to execute
this Agreement.
c) That it is the legal titleholder of the rights derived
from the existing exploration mining concessions over the following
lots (the "Lots").
Name of the Lot Title No. Hectares Valid Until
Sierra Mojada 198513 4,767.3154 November 19, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
All of the Lots are located in the Municipality of Sierra Mojada,
State of Coahuila, within the circumscription of the Mining Agency of
Saltillo, Coahuila.
d) That as titleholder of the rights derived from the
existing mining concessions over The Lots, it is up to date in
fulfilling all obligations imposed on it by the Mining Law, its
regulations and all other applicable legal dispositions, including the
filing of assessment work reports and the payment of duties on mining
concessions, and all taxes thereon.
e) That the rights derived from the mining concessions
existing over The Lots are free and clear from any encumbrances, liens
or limitations of dominion, and
f) That in accordance with all of the foregoing, the Seller
is willing to sell to the Purchaser the rights derived from the mining
concessions existing over The Lots, in accordance with the terms and
conditions stipulate in this Agreement.
2. The Purchaser warrants:
a) It is a mining corporation legally incorporated
according to the laws of the Mexican Republic, legally qualified to
execute agreements and to be owner of mining concessions.
b) That its President, Mr. Merlin Bingham, is duly
empowered to represent it and to execute this Agreement, and
<PAGE> 83
c) That Metalline Mining Company, which beneficially owns
100% of MXUS, and MXUS have executed a Net Smelter Return Royalty
Agreement to which MXUS and its parent company, USMX, Inc., are
parties.
In accordance with and reliance upon the foregoing, the parties
agree as follows:
CLAUSES
A. Purchase. The Seller hereby sells to the Purchaser and the
latter purchases from the Seller the rights derived from the existing
mining concessions over the Lots in consideration of a Net Smelter
Return Royalty Agreement executed by Metalline Mining Company, Dakota
Mining Company, Minera Metalin, S.A. de C.V., MXUS, S.A. de C.V., USMX,
Inc. and Royal Silver Mines, Inc. and the payment by Minera Metalin of
$ 100.00 US to MXUS.
B. Subrogation of Rights and Obligations. With the execution
of this Agreement, the Purchaser hereby assumes all the rights and
obligations that the Seller had as titleholder of the rights derived
from the mining concessions existing over The Lots.
C. Indemnification. Seller promises to indemnify and hold
harmless the Purchaser from all losses or expenses incurred by
Purchaser, arising from any breach of Seller's warranties.
D. Fees, Duties, Taxes and Expenses. All fees, duties, taxes
and expenses incurred on the granting and execution of this Agreement
will be paid by the Purchaser, except for those taxes imposed on the
income, if any, obtained by the Seller which will be paid by Seller.
E. Delivery of The Lots. The Seller shall execute and deliver
all documents required or necessary to transfer The Lots to the
Purchaser.
F. Agreement of the parties. This agreement is binding upon the
parties thereto, and their successors, heirs assignees or
beneficiaries.
The parties agree to ratify this agreement before a notary Public
and to register it with the Public Registry of Mining in accordance
with the provisions of the Mining Law and its Regulations.
G. Applicable Laws and Courts. For everything not expressly
stipulated to in this agreement, the parties submit themselves to the
applicable laws in Mexico, Federal District, particularly to those of
the Mining law, its Regulations, the Federal Duties Law, the Commerce
Code and the Civil Code for the Federal District, waiving the
jurisdiction of any other courts to which they may be entitled by
reason of their present or future domiciles.
<PAGE> 84
This Agreement is signed in duplicate and dated, the ____ day of
March, 1999.
THE SELLER
MXUS, S.A. DE C.V.MINERA
BY: __________________________
Its ______________________
THE PURCHASER
METALIN, S.A. DE C.V.
BY: _________________________
Merlin Bingham
Its President
<PAGE> 85
JOINT VENTURE AGREEMENT
This Agreement is made as of __________________1998 among
Metalline Mining Company ("Metalline"), a Nevada corporation, its
wholly owned subsidiary Minera Metalin, a Mexican mining company and
Royal Silver Mines, Inc. ("Royal"), a Utah corporation.
RECITALS
A. Metalline beneficially owns 100% of the outstanding stock of
Minera Metalin S.A. de C.V. ("Minera Metalin").
B. Royal beneficially owns 100% of the outstanding stock of
Minera Plata Real S.A. de C.V. ("Plata Real").
C. Minera Metalin owns or controls certain concessions
("Concessions") in the Sierra Mojada District, Coahuila, Mexico, which
concessions are listed on Exhibit A.
D. Metalline and Royal desire to explore and develop the Sierra
Mojada District jointly according to the terms of this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Minera Metalin, Metalline and Royal agree as follows:
ARTICLE I
DEFINITIONS
1. Definitions
1.1 "Accounting Procedure" means the procedures set forth in
Exhibit B.
1.2 "Affiliate" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or indirectly
controls, is controlled by, or is under common control of a Joint
Venture Participant. For purposes of the preceding sentence, "control"
means possession, directly or indirectly, of the power to direct or
cause direction of management and policies through ownership of voting
securities, contract, voting trust or otherwise.
1.3 "Agreement" means this Agreement, including all written
amendments and written modifications thereof, and all schedules and
exhibits, which are incorporated herein by this reference.
1.4 "Area of Interest" means the area within 10 km from those
concessions listed on Exhibit A.
1.5 "Board" means the governing body, as provided by Mexican law,
of Minera Metalin.
1.6 "Budget" means a detailed estimate of all costs to be
incurred with respect to a Program and of contributions to be made by
the Joint Venture Participants.
<PAGE> 86
1.7 "Budgetary Period" means the budgetary period established in
a Program and Budget.
1.8 "Chief Officer" means the controlling officer, as provided by
Mexican law, of Metalin.
1.9 "Development" means all preparation for the removal and
recovery of Products, including the construction or installation of a
mine or any other improvements to be used for the mining, handling,
milling, processing or other beneficiation of Products.
1.10 "Exploration" means all activities directed toward
ascertaining the existence, location, quantity, quality or commercial
value of deposits of Products. Exploration may include all activities
undertaken through the completion of a Feasibility Study, if any, but
shall not include construction of milling or processing facilities or
commencement of commercial mining operations on the Properties.
1.11 "Feasibility Study" means a technical report to be prepared
by Metalline, or a qualified consultant, based upon the Exploration and
Development work performed by Metalline and/or Minera Metalin prior to
the date of such report, which report shall consist of the following
elements:
(a) the results of Metalline's and/or Minera Metalin's
Exploration and Development work, including analyses of Metalline's
proposal for mining, processing and beneficiation of products; proposed
mining, milling, and production rates; proposal for placement of
facilities, proposal for waste treatment and handling; the estimated
recoverable reserves of Products, and the estimated analysis of the
permitting and environmental liability implications of the proposal;
appropriate metallurgical tests to project the efficiency of proposed
extraction, recovery and, if applicable, processing techniques; and
such other analyses as deemed appropriate by Metalline and/or Minera
Metalin;
(b) general estimates of capital costs for the Development
and start-up of a mine, and, if applicable, of a mill and other
processing and ancillary facilities, which cost estimates shall
include:
(1) reasonable estimates of all material expenditures
required to purchase, construct and install all material machinery,
equipment and other facilities and infra-structure (including
contingencies) required to bring a mine into commercial production,
including an analysis of costs of equipment or supply contracts in lieu
of Development costs;
(2) reasonable estimates of material expenditures
required to perform all other related work required to commence
commercial production of Products (including reasonable estimates of
working capital requirements, if any); and
<PAGE> 87
(3) reasonable estimates of all other material direct
and indirect costs and general and administrative expenses that may be
required for an evaluation of the proposed production levels. The
capital cost estimates shall include a schedule of the timing of the
estimated material capital requirements for such proposal.
(c) a general estimate of the annual expenditures required
for the first year of Operations after completion of the capital
program described in subparagraph (b) above, and for subsequent years
of mining Operations, including estimates of annual production,
administrative, operating and maintenance expenditures, taxes (other
than income taxes), working capital funding requirements, royalties,
material equipment leasing or material supply contract expenditures,
expansion or modification capital requirements, work commitments, and
all other anticipated material costs of Operations. This analysis shall
also include a general estimate of the number of employees required to
conduct Operations;
(d) a review of the nature, extent and rated capacity of the
mining, equipment and proposed production schedule; and
(e) such other information as Metalline and/or Minera
Metalin deem appropriate.
(f) Metalline and/or Minera Metalin will use reasonable
efforts to assure that any Feasibility Study is in a form typically
relied upon for decisions by financial institutions. Provided, however,
that neither Metalline nor Minera Metalin warrants the sufficiency of
any Feasibility Study for any purpose.
1.12 "Joint Venture Participant" means any of the parties to this
Joint Venture, Agreement, specifically Metalline Mining Company, Royal
Silver Mines, Inc., and Minera Metalin
1.13 "Manager" means the person or entity appointed under Article
VII to manage Operations, or any successor manager.
1.14 "Minera Metalin concessions" means any concessions acquired
or denounced within the Area of Interest.
1.15 "Liability(ies)" means any and all claims, demands,
investigations, judgments, losses, liabilities, costs and expenses,
including reasonable attorneys' fees.
1.16 "Mining" means the mining, extracting, producing, handling,
milling, beneficiation or other processing of Products.
1.17 "Net Proceeds" means the proceeds from production of Products
from the Properties calculated pursuant to Exhibit "C" hereto.
1.18 "Net Smelter Return Royalty" means certain amounts calculated
as provided in the Net Smelter Return Royalty Agreement among Minera
Metalin, Metalline, Royal Silver and Dakota Mining Company, which may
be payable to underlying interests of the Minera Metalin concessions.
<PAGE> 88
1.19 "Operations" means the Development and Mining activities
carried out on or for the benefit of the Properties.
1.20 "Positive Feasibility Study" means a Feasibility Study that
Metalline in its sole discretion accepts for the purpose of proceeding
with Development.
1.21 "Prime Rate" means the interest rate in United States dollars
published as the Prime Rate in the "Money Rates" column of The Wall
Street Journal, as said rate may change from day to day, or if said
column sets forth a range of rates on a single day, the arithmetic mean
thereof. In the event The Wall Street Journal ceases to be published
or ceases to publish the Prime Rate, the parties shall select an
alternative and mutually acceptable source which quotes an interest
rate as the Prime Rate.
1.22 "Products" means all ore, minerals and mineral resources
produced from the Properties under this Agreement.
1.23 "Program" means a description in reasonable detail of the
scope, duration and nature of Operations to be undertaken by Metalin
for a specified period.
1.24 "Properties" means the Minera Metalin concessions and all
other interests in real property, including surface rights or
concessions in process, held or acquired by the Joint Venture
Participants within the Area of Interest.
1.25 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.26 "Work Expenditures" means the work obligations incurred by
Metalline and Minera Metalin and shall include, for purposes of this
Agreement, the value of all labor, money, supplies, equipment and the
use of equipment contributed to or used on or in connection with the
Properties or the Area of Interest by or on behalf of Metalline in good
faith after the execution of this Agreement, relating to Operations,
including but not limited to (a) all contractors' and consultants' time
and expenses; (b) all time and expenses of geologists and other
personnel of Metalline and Minera Metalin or its Affiliates; (c) all
costs of physical work on the Properties or the Area of Interest; (d)
all costs of project maintenance (including insurance, title
examination and curative work) and costs of acquisition of third party
property and concessions within the Properties or the Area of Interest;
(e) all costs of equipment, materials, fuel, utilities and supplies;
(f) all costs of equipment purchased; (g) all costs associated with
maintaining title to the Properties, payments, taxes, filing fees,
etc.; and (h) costs incurred in the preparation of a Feasibility Study.
1.27 "$" shall mean dollars in the currency of the United States
of America.1.28 "Recoverable Capital Costs" has the meaning described
in Exhibit "C" hereto.
1.28 "Transfer" means to sell, grant, assign, encumber, pledge or
otherwise dispose of or convey.
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1.29 "Underlying Agreements" means collectively the agreements
listed in Exhibit D hereto and all agreements which may be entered into
by the Venture with third parties to lease or acquire mining claims,
mineral rights, real property or other interests in the Area of
Interest.
1.30 "Venture" means the business arrangement of the Participants
under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Capacity of Participants
(a) Minera Metalin represents and warrants that it is a
corporation duly incorporation and in good standing in the Republic of
Mexico and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms and that it is a wholly owned subsidiary of Metalline.
(b) Royal Silver represents and warrants that it is a
corporation duly incorporated and in good standing with the State of
Utah and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms.
(c) Metalline represents and warrants that it is a
corporation duly incorporated and in good standing with the State of
Nevada and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms.
(d) Each of the Participants represent and warrants as
follows:
(i) That it has the capacity to enter into and perform
this Agreement and all transactions contemplated herein and that
all corporate and other actions required to authorize it to enter
into and perform this Agreement have been properly taken.
(ii) That it will not breach any other agreement or
arrangement by entering into or performing this Agreement.
(iii) That this Agreement has been duly executed and
delivered by it and is valid and binding upon it in accordance
with its terms.
2.2 Disclosures. Each of the participants represents and
warrants that its is not aware of any material facts or circumstances
which have not been disclosed in this Agreement which should be
disclosed to the other Participant in order to prevent the
representations in this Article II from being materially misleading.
<PAGE> 90
2.3 Joint Loss of Title. Any failure or loss of title to the
Assets, and all costs of defending title, shall be charged to the Joint
Account, except that all such costs and losses arising out of or
resulting from breach of the representations and warranties of the
Contributing Participant as to the Properties it contributed shall be
charged to that Participant.
ARTICLE III
NAME, PURPOSES AND TERM
3.1 Metalline, Minera Metalin and Royal Silver enter into this
Agreement for the purposes hereinafter mentioned and they agree that
all of their rights and all of the Operations on or in connection with
the Properties or within the Area of Interest shall be subject to and
governed by this Agreement.
3.2 Name. The name of this Venture shall be the Minera Metalin
Joint Venture. The Manager shall register the name as required by
applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following
purposes and, to the extent appropriate, shall serve as the exclusive
means by which they are accomplished: (a) to conduct Exploration on the
Properties and within the Area of Interest, (b) to acquire additional
properties within the Area of Interest, (c) to evaluate the possible
Development of the Properties, (d) to engage in Development and Mining,
(e) to engage in marketing Products to the extent permitted by Article
VI, and (f) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 Limitations. Unless the Participants otherwise agree in
writing, the Operations shall be limited to the purposes described in
paragraph 3.3 above and nothing contained in this Agreement shall be
construed to enlarge such purposes.
3.5 Term. The term of this Agreement shall be fifteen years from
the effective date and for so long thereafter as Products are produced
by or on behalf of the Participants from the Properties or any portion
thereof or Exploration or Development is being conducted on the
Properties unless this Agreement is earlier terminated as herein
provided.
ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership. Nothing contained in this Agreement shall be
deemed to make or constitute Royal Silver as the partner of Minera
Metalin or Metalline, nor, except as otherwise herein expressly
provided, to constitute Royal Silver as the agent or legal
representative of Minera Metalin or Metalline, nor to make Minera
Metalin or Metalline the agent of legal representative of Royal Silver
nor to create any fiduciary relationship among them. It is not the
intention of the Participants to create, nor shall this Agreement be
construed to create, any mining, commercial or other partnership.
Royal Silver shall not have any authority to act for or to assume any
<PAGE> 91
obligation or responsibility on behalf of Metalline and/or Minera
Metalin, except as otherwise expressly provided herein, nor shall
Minera Metalin or Metalline have any authority on behalf of Royal
Silver except as expressly provided herein. The rights, duties,
obligations and liabilities of the Participants shall be several and
not joint or collective. Each Participant shall be responsible only
for its obligations as herein set out and shall be liable only for its
share of the costs and expenses as provided herein. Except pursuant to
the authority expressly granted herein or as otherwise agreed in
writing between the Participants, each Participant shall indemnify,
defend and hold harmless the other Participants and its directors,
officers, employees, agents and attorneys from and against any and all
losses, claims, damages and liabilities arising out of any act or any
assumption of liability by the indemnifying Participant or any of its
directors, officers, employees, agents or attorneys done or undertaken,
or apparently done or undertaken, on behalf of the other Participants.
4.2 Federal Tax Elections. The Participants hereby elect to be,
and to have the arrangement evidenced hereby, excluded from the
application of any provisions of Subchapter K of the U.S. Internal
Revenue Code, as amended. Each of the Participants shall be solely
responsible for preparation and filing of its own income tax returns
and reports.
4.3 State Income Tax. The Participants also agree that, to the
extent permissible under applicable law, their relationship shall be
treated for state income tax purposes in the same manner as it is for
federal income tax purposes including exclusion from any state income
tax provisions that are similar to Subchapter K of the U. S. Internal
Revenue Code, as amended.
4.4 Other Business Opportunities. Except as expressly provided
in this Agreement, each Participant shall have the right independently
to engage in and receive full benefits from business activities,
whether or not competitive with the Operations, without consulting the
other. The doctrines of "corporate opportunity" or "business
opportunity" shall not be applied to any other activity, venture or
operations of any Participant and, except as otherwise provided in
Section 12.6, no Participant shall have any obligation to the others
with respect to any opportunity to acquire any property outside the
Area of Interest at any time or within the Area of Interest after two
years following the termination of this Agreement. Unless otherwise
agreed in writing, no Participant shall have any obligation to mill,
beneficiate or otherwise treat any Products or any other Participant's
share of Products in any facility owned or controlled by such
Participant.
4.5 Waiver of Right to Partition. During the term of this
Agreement, the Participants hereby waive and release all rights of
partition or sale in lieu thereof or other division of Assets,
including any such rights provided by statute.
4.6 Transfer or Termination of Rights to Properties. Except as
otherwise provided in this Agreement, no Participant shall transfer all
or any part of its interest in the Assets or this Agreement or its
Participating Interest, or otherwise permit or cause such interests to
terminate.
<PAGE> 92
4.7 Implied Covenants. The obligations, duties and standards of
conduct of the Participants with respect to their dealings with each
other and with third parties is defined and limited by the express
terms of this Agreement, provided that the covenants of good faith and
fair dealing generally implied in contracts are expressly incorporated
herein.
ARTICLE V
INTERESTS OF PARTICIPANTS
5.1 Initial Participation Interests
(a) The participants shall have the following initial
Participating Interests.
Minera Metalin 65%
Royal Silver 35%
Minera Metalin's interest is beneficially owned by its parent,
Metalline.
(b) In a Net Smelter Royalty Agreement executed by, among
others, Royal Silver, Minera Metalin and Metalline, the parties agreed
to pay certain underlying royalties, together with additional royalties
to be paid to Dakota Mining Company. it is agreed that all royalties
called for in the Net Smelter Royalty Agreement shall be paid out of
Royal Silver's 35% participating interest.
(c) In the event Royal Silver transfers, Assigns, sells or
otherwise conveys all or part of its participating interest, the
interest of any transferee, assignee or buyer shall be subject to the
obligations of Royal Silver to pay royalties, and shall do so in an
amount equal to its proportionate share of Royal Silver's participating
interest under this Agreement.
ARTICLE VI
MANAGEMENT
6.1 Management of the Joint Venture
(a) The Joint Venture will be managed by the Metalline Board
of Directors. RoyalSilver shall be entitled to appoint one director to
the Metalline Board. Joint Venture management decisions of the Board
shall be determined by a simple majority vote of the directors. The
Board shall be responsible for overall policies, objectives,
procedures, methods and action of the Joint Venture.
(b) The officers of Minera Metalin shall be responsible for
day-to-day operations under this Agreement and shall report regularly
to the Metalline Board. The Chief Officer of Minera Metalin shall have
final say on all matters entrusted to the officers of Minera Metalin
under Mexican law. The Chief Officer of Miner Metalin shall conduct
all Operations in a good, workman-like and efficient manner, in
accordance with sound mining and other applicable industry standards
and practices. The Chief Officer shall not be liable for any act or
omission resulting in damage or loss except to the extent caused by or
attributable to the Chief officer's misconduct or gross negligence.
<PAGE> 93
6.2 Powers and Duties of Manager. Subject to the terms and
provisions of this Agreement, the Manager shall have the following
powers and duties which shall be discharged in accordance with adopted
Programs and Budgets.
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and transportation
services required for Operations, such purchases and acquisitions to be
made on the best terms available, taking into account all of the
circumstances; (ii) obtain such customary warranties and guarantees as
are available in connection with such purchases and acquisitions and
(iii) keep the Assets free and clear of all liens and encumbrances,
except for those existing at the time of, or created concurrent with,
the acquisition of such Assets, or mechanic's or materialmen's liens
which shall be released or discharged or contested in a diligent
manner, or liens and encumbrances specifically approved by the
Management Committee.
(c) The Manager shall conduct such title examinations and
cure such title defects as may be advisable in the reasonable judgment
of the Manager.
(d) The Manager shall: (i) make or arrange for all payments
required by leases, licenses, permits, contracts and other agreements
related to the Assets; (ii) pay all taxes, assessments and like charges
on Operations and Assets except taxes determined or measured by a
Participant's sales revenue or net income and (iii) shall do all other
acts reasonably necessary to maintain the Assets. The Manager shall
have the right to contest, in the courts or otherwise, the validity or
amount of any taxes, assessments or charges if the Manager deems them
to be unlawful, unjust, unequal or excessive, or to undertake such
other steps or proceedings as the Manager may deem reasonably necessary
to secure a cancellation, reduction, readjustment or equalization
thereof before the Manager shall be required to pay them, but the
Manager shall not permit or allow title to Assets to be lost as the
result of the nonpayment of any taxes, assessments or like charges.
(e) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) comply with applicable Mexican, U.S.
Government, state and local laws and regulations, including laws and
regulations concerning reclamation and restoration of the Properties;
(iii) notify promptly the Participants of any allegations of
substantial violation thereof and (iv) prepare and file all reports or
notices required for Operations. The Manager shall not be in breach of
this provision if a violation has occurred in spite of the Manager's
good faith efforts to comply and the Manager has cured or disposed of
such violation through performance and/or payment of fines and
penalties.
(f) The Manager shall prosecute or defend all litigation or
administrative proceedings arising out of Operations. The non-managing
Participants shall have the right to participate at their own expense,
in such litigation or administrative proceedings.
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(g) The Manager shall provide insurance for the benefit of
the Participants in amounts required by law and, in any event, in
amounts customary in the mining industry for projects comparable to the
Operations hereunder. If the Manager is or becomes self-insured for
public liability through itself and/or its parent, the manager agrees
to cause the non-managing Participant to be protected against loss in
the event of a third-party claim in the same manner as if it were an
additional insured if the manager carried liability insurance with an
independent carrier. The Manager may charge the Joint Account an
amount equal to the premium reasonably attainable from independent
companies for insurance equivalent to such protection. Nothing herein
shall prevent the manager, if it so elects, from obtaining insurance
for the Venture from a third party and charging the premium therefor to
the Joint Account.
(h) The Manager may dispose of Assets whether by
abandonment, surrender or transfer in the ordinary course of business,
in accordance with Article XIV. However, the Manager shall not,
without prior authorization from the Metalline Board: (i) dispose of
Assets in any one transaction or in a related series of transactions
having a value in excess of $200,000.00; (ii) enter into any sales
contracts or commitments for Product, except as permitted in Section
11.2 (iii); begin a liquidation of the Venture; or (iv) dispose of all
or a substantial part of the Assets necessary to achieve the purposes
of the Venture.
(i) The Manager shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or independent
contractors.
(j) The Manager shall perform or cause to be performed
during the term of this Agreement all assessment and other work
required by law on or for the benefit of the Properties. The Manager
shall not be liable on account of any determination by any court or
governmental agency that the work performed by the Manager does not
constitute the required work or occupancy for the purposes of
preserving or maintaining ownership of the concessions, provided that
the work done is work generally recognized in the mining industry as
sufficient to maintain occupancy or is in accordance with an adopted
Program and Budget. The Manager shall timely record and file with the
appropriate federal, state and local offices, affidavits attesting to
the performance pertaining to the concessions included in the
Properties.
(k) The Manager may: (i) locate, amend, relocate or abandon
any concessions; (ii) locate any fractions resulting from such
amendment or relocation; (iii) apply for patents or mining leases or
other forms of mineral tenure for any such unpatented claims or sites;
(iv) abandon any unpatented mining claims for the purpose of locating
mill sites or otherwise acquiring rights to the ground covered thereby;
(v) abandon any unpatented mill sites for the purpose of locating
mining claims or otherwise acquiring rights to the ground covered
thereby; (vi) exchange with or convey to the United States any of the
Properties for the purpose of acquiring rights to the ground covered
thereby or other adjacent ground and (vii) convert any unpatented
claims or mill sites into one or more leases or other forms of mineral
tenure pursuant to any federal law hereafter enacted.
<PAGE> 95
(l) The Manager shall keep and maintain all required
accounting and financial records pursuant to Exhibit "B", Accounting
Procedure, and in accordance with customary cost accounting practices
in the mining industry.
(m) The Manager shall prepare in writing, with copies
available to all Metalline Board Members and all Joint Venture
participants:
(i) Quarterly progress reports which include statements
of expenditures and comparisons of such expenditures to the
adopted Budget, summaries of data acquired and a description and
analysis of Operations.
(ii) Such other reports as the Metalline Board may
reasonably request. At all reasonable times, the Manager shall
provide the Metalline Board or the representative of any
Participant, upon the request of any member of the Metalline
Board, access to and the right to inspect and copy all maps, drill
logs, core tests, geological reports, surveys, assays, analyses,
production reports, the operations, technical, accounting and
financial records and other information acquired in Operations. In
addition, the Manager shall allow the non-managing Participants,
at their sole risk and expense and subject to reasonable safety
regulations, to inspect the Assets and Operations at all
reasonable times, so long as the inspecting participant does not
unreasonably interfere with Operations.
(n) The Manager shall undertake all other activities
reasonably necessary to fulfill the foregoing.
The Manager shall not be in default of any duties under this
Section 6.2 if its failure to perform results from the failure of the
non-managing Participants to perform acts or to contribute amounts
required of it by this Agreement.
6.3 Standard of Care. The Manager shall not be liable to any
non-managing Participant for any act or omission resulting in damage or
loss to the Venture except to the extent caused by or attributable to
the Manager's willful misconduct or gross negligence.
6.4 Payments to Manager. The Manager shall be compensated for
its services and reimbursed for its costs hereunder in accordance with
the Accounting Procedure, Exhibit B, Article 2.13.
6.5 Transactions with Affiliates. If the Manager engages
Affiliates to provide services hereunder, it shall do so on terms no
less favorable than would be the case with unrelated persons in arm's
length transactions.
6.6 Manager's Lien. The Participants grant to the Manager a lien
and security interest upon their respective Participating Interests,
the Assets, Products, the Properties and upon their interests in all
production as security for payment of costs chargeable to them under
this Agreement. The Manager shall have the right to bring any action
by law or in equity to enforce collection of such indebtedness with or
without foreclosure of such lien.
<PAGE> 96
ARTICLE VII
PROGRAMS AND BUDGET
7.1 Operations shall be conducted and expenses shall be incurred
according to approved Programs and Budgets.
(a) Proposed Programs and Budgets shall be prepared by the
Chief Officer on an annual basis, except during periods of major
capital investment, when Programs and budgets may exceed one year.
During the period encompassed by any Program and Budget, and at least
two months prior to its expiration, a proposed Program and Budget for
the succeeding Budgetary Period shall be prepared by the Chief Officer
and submitted to the Joint Venture Participants.
(b) Within 30 days after submission of a proposed Program
and Budget, each Venture Participant shall submit to the Chief Officer:
(i) Notice that the Joint Venture Participant approves
the proposal; or
(ii) Proposed modifications to the proposal; or
(iii) Notice that the Joint Venture Participant
rejects the proposal.
If a Joint Venture Participant fails to give any of the
foregoing responses within the allotted time, the failure shall be
deemed to be an approval by the Joint Venture Participant of the
proposed Program and Budget. If a Joint Venture Participant makes a
timely submission to the Chief Officer pursuant to paragraph 7.1(b)(ii)
or (iii), then the Chief Officer shall seek to develop a Program and
Budget acceptable to the Joint Venture Participants; provided, however
the proposed Programs and Budgets shall be approved by a simple
majority vote of the Board notwithstanding the inability to accommodate
an individual Joint Venture Participants objections.
(c) The Joint Venture Participants will be required to fund
the Programs and Budgets in proportion to their Joint Venture interest.
(d) In case of emergency, the Chief Officer may take any
reasonable action it deems necessary to protect life, limb or property,
or to comply with law or government regulation. The Chief Officer may
also make reasonable expenditures for unexpected events which are
beyond its reasonable control and which do not result from a breach by
it of it standard of care. The Chief Officer shall promptly notify the
Joint Venture Participants of the emergency or unexpected expenditure,
and the Chief Officer shall be reimbursed for all resulting costs by
the Joint Venture Participants in proportion to their respective
interests.
<PAGE> 97
ARTICLE VIII
ACCOUNTS AND SETTLEMENTS
8.1
(a) The Chief Officer shall promptly submit to the Joint
Venture Participants annual statements of account reflecting in
reasonable detail the charges and credits to the Joint Venture during
the preceding year. The date of the annual accounting shall be June
30.
<PAGE>
(b) On the basis of the adopted Program and Budget, the
Chief Officer shall submit to each Joint Venture Participant, 30 days
prior to the last day of the accounting year, a billing for estimated
contributions required for the next year. Within 10 days after receipt
of each billing, each Joint Venture Participant shall advance its
proportionate share of the estimated amount. Time is of the essence
for payment of such billings. The Chief Officer shall at all times
maintain a cash balance approximately equal to the rate of
disbursements for up to 60 days. All funds in excess of this cash
balance shall be invested in interest-bearing accounts.
(c) A Joint Venture Participant that fails to meet cash
calls in the amount and at the times specified in this Article shall be
in default.
(d) The Joint Venture Participants acknowledge that if a
Joint Venture Participant defaults in making a contribution or a cash
call as required hereunder, it will be difficult to measure the damages
resulting from such default. Therefore, in the event such default is
not covered by payment of all sums due, including applicable interest
at the prime rate plus three percentage points within thirty days after
notice to the defaulting Joint Venture Participant, that Joint Venture
Participant's interest shall be extinguished in its entirety and its
interests and responsibilities shall be deemed to be transferred free
and clear of royalties, liens or other encumbrances arising by, through
or under such defaulting participant to the remaining Joint Venturer
participants, pro rata based on their percentage of Participating
Interests as they existed immediately prior to the default. If, within
thirty days after notice of default pursuant to this paragraph, the
participant alleged to be in default disputes, in good faith, the
existence of a default, its Participating Interest shall not be
terminated until it is adjudged to be in default by a final judgment of
a court of competent jurisdiction and fails within thirty days after
such judgment to pay the amount in default, together with interest at
the rate set forth above.
(e) Any default or transfer under this paragraph shall not
relieve the defaulting Joint Venture Participant of its share of
liabilities to third persons (whether such accrues before or after such
withdrawal). For purposes of this paragraph, the defaulting Joint
Venture participant's share of such liabilities shall be equal to its
Participating Interest percentage at the time such liability was
incurred.
<PAGE> 98
(f) Within 3 months following the end of Metalin's fiscal
year the Chief Officer shall have an audit of the accounting and
financial records for such year conducted. All written exceptions to
and claims upon the Chief Officer for discrepancies disclosed by such
audit shall be made not more than 3 months after receipt of the audit
report. Failure to make any such exception or claim within the 3 month
period shall mean the audit is correct and binding upon the Joint
Venture Participants. The audits shall be conducted by a firm of
certified public accountants selected by the Chief Officer. Additional
audits may be requested by a Joint Venture Participant at any time, the
costs of which shall be borne by the Joint Venture Participant making
that request.
ARTICLE IX
APPLICABILITY OF AGREEMENT
9.1
(a) This Agreement shall take effect upon the completion of
the transfer of all rights, title and interest of the Sierra Mojada and
Mojada 3 concessions described on Exhibit A to this Agreement to Minera
Metalin. It is further agreed that upon such transfer costs or
expenses incurred by Metalline and Minera Metalin which would have been
subject to this Agreement and which were incurred after January 6,
1998, shall be treated as costs and expenses subject to the terms of
this Agreement.
ARTICLE X
ACQUISITIONS WITHIN AREA OF INTEREST
10.1 Royal Silver agrees that neither Royal Silver nor its
affiliates will acquire any interest or right to acquire any interest
in mineral or real property or mining concession within the Area of
Interest during the term of this Agreement. Royal Silver Minera Metalin
and Metalline agree that any acquisition of mineral, or real property,
or mining concession within the Area of Interest shall be done solely
by and in the name of Minera Metalin. Any such acquisition shall be
subject to the terms of this Agreement and no such acquisition shall be
made without approval of the Metalline board. Metalline agrees that
neither Metalline, nor its affiliates, except Minera Metalin as set
forth above will acquire any interest in mineral property, or real
property, or mining concessions within the Area of Interest.
ARTICLE XI
ABANDONMENT AND SURRENDER OF PROPERTIES
11.1
(a) Part or all of the Properties may be surrendered or
abandoned by Minera Metalin If a Joint Venture Participant objects to
the surrender or abandonment, Minera Metalin shall assign to the
objecting Joint Venture Participant, by appropriate deed without cost
to Minera Metalin, all of Minera Metalin's interest in the property to
be abandoned or surrendered, and the abandoned or surrendered property
shall cease to be part of the Properties. The objecting Joint Venture
Participant to whom such property is assigned shall indemnify, defend
and hold harmless each abandoning Joint Venture Participant and its
Affiliates (including without limitation direct and indirect parent
companies), and its or their respective officers, directors,
shareholders, employees, agents and attorneys, from and against any
<PAGE> 99
Liabilities incurred by any of them relating in any respect to
activities occurring thereafter on or with respect to the property
abandoned under this Section. The abandoning Joint Venture Participant
shall remain liable for its share of all Liabilities relating to the
abandoned property arising out of Operations conducted on such property
prior to the transfer of such property to the objecting Joint Venture
Participant.
(b) If any Properties are abandoned or surrendered under the
provisions of this Section with the approval of all Joint Venture
Participants, then, unless this Agreement is earlier terminated, a
Joint Venture Participant or any of its Affiliates (other than Minera
Metalin) shall not acquire any interest in such properties for a period
of two years following the date of such abandonment or surrender. If
a Joint Venture Participant reacquires any properties in violation of
this provision, the other Joint Venture Participant may elect by notice
to the reacquiring Joint Venture Participant within 45 days after it
has actual notice of such reacquisition, to have such properties
acquired by Minera Metalin and made subject to the terms of this
Agreement. In the event such an election is made by the Joint Venture
Participant, the reacquired properties shall thereafter be treated as
Properties, and the costs of reacquisition shall be borne solely by the
reacquiring Joint Venture Participant.
ARTICLE XII
TRANSFER OF INTEREST
12.1 General. A Participant shall have the right to Transfer to
any third party all or any part of its interest in or to this
Agreement, its Participating Interest or the Assets solely as provided
in this Article.
12.2 Limitations on Free Transferability. The right to Transfer of
a Participant in paragraph 12.1. shall be subject to the following
terms and conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest or the Assets
shall have the rights of a Participant unless and until the
transferring Participant has provided to the other Participant notice
of the Transfer and, except as provided in paragraphs 12(f) and (g),
the transferee, has committed in writing to be bound by this Agreement,
as of the effective date of the transfer, to the same extent as the
transferring Participant;
(b) No Participant, without the consent of the other
Participant, shall make a Transfer which shall cause a change in the
tax relationship of the participants under the provisions of Article IV
of this Agreement and if, contrary to this restriction, a Transfer is
made which causes such a change the transferring Participant and
transferee shall indemnify, defend and hold harmless the other
Participant from and against any and all loss, cost, expense or damage
arising from such change;
<PAGE> 100
(c) No Transfer permitted by this Article shall relieve the
transferring Participant of its share of any liability, whether
accruing before or after such Transfer, which arises out of Operations
conducted prior to such Transfer;
(d) The transferring Participant and the transferee shall
bear all tax consequences of the Transfer, including the tax liability
and consequences of and to the non-transferring Participants;
(e) In the event of a Transfer of less than all of a
Participating Interest, the transferring Participant and its transferee
(unless the transferee was a Participant prior to the Transfer) shall
act and be treated as one Participant;
(f) If the Transfer is the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of any
interest in this Agreement, any Participating Interest or the Assets to
secure a loan or other indebtedness of a Participant in a bona fide
transaction, such security interest shall be subordinate to the terms
of this Agreement and the rights and interests of the other Participant
hereunder. Upon any foreclosure or other enforcement of rights in the
security interest, the acquiring third party shall be deemed to have
assumed the position of the encumbering Participant with respect to
this Agreement and the other Participant, and it shall comply with and
be bound by the terms and conditions of this Agreement; and
(g) If a sale or other commitment or disposition of Products
or proceeds from the sale of Products by a Participant upon
distribution to it pursuant to Article XI creates in a third party a
security interest in Products or proceeds therefrom prior to such
distribution, such sales, commitment or disposition shall be subject to
the terms and conditions of this Agreement.
12.3 Pre-emptive Right. Except as otherwise provided in paragraph
12.4, if a Participant desires to Transfer all or any part of its
interest in this Agreement, any Participating Interest or the Assets,
the other Participant shall have the following preemptive right to
acquire such interests:
(a) A Participant intending to Transfer all or any part of
its interest in this Agreement, any Participating Interest or the
Assets shall promptly notify the other Participant of its intentions.
The notice shall state the price and all other pertinent terms and
conditions of the intended Transfer and shall be accompanied by a copy
of the offer or proposed contract for sale. The other Participant
shall have thirty days from the date such notice is delivered to notify
the transferring Participant whether it elects to acquire the offered
interest at the same price and on the same terms and conditions as
described in the notice. If it does so elect, the Transfer shall be
consummated promptly after notice of such election is delivered to the
transferring Participant.
<PAGE> 101
(b) If the other Participant fails to so elect within the
period provided for in paragraph 12.3(a), the transferring Participant
shall have one hundred-eighty (180) days following the expiration of
such period to consummate the Transfer to a third party at a price and
on terms no less favorable than those offered by the transferring
Participant to the other Participant in the notice required in
paragraph 12.3(a).
(c) If the transferring Participant fails to consummate the
Transfer to a third party within the period described in paragraph
12.3(b), the preemptive right of the other Participant in such offered
interest shall be deemed to be revived and any subsequent proposal to
Transfer such interest shall be conducted in accordance with all of the
procedures described in this paragraph 12.3.
12.4 Exceptions to Preemptive Right. Paragraph 12.3 shall not
apply to the following:
(a) Transfer by a Participant of all or any part of its
interest in this Agreement, any Participating Interest or the Assets to
an Affiliate;
(b) Incorporation of a Participant or corporate merger,
consolidation, amalgamation or reorganization of a Participant by which
the surviving entity shall possess substantially all of the stock, or
all of the property rights and interests, and be subject to
substantially all of the liabilities and obligations of that
Participant;
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest or the Assets by
mortgage, deed of trust, pledge, lien or other encumbrances; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant.
ARTICLE XIII
CONFIDENTIALITY
The financial terms of this Agreement and all information obtained
by the parties pursuant hereto shall not be disclosed by the parties to
any third party or the public without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
Moreover, the parties will only disclose it to its officers, directors,
or personnel who need to know such information, and then only after
they have agreed to keep such information confidential. The consent
required herein shall not apply to a disclosure: (a) to a consultant,
contractor, or subcontractor that has a bona fide need to be informed;
or (b) to a governmental agency or to the public which the disclosing
party believes in good faith is required by pertinent law or regulation
or the rules of any stock exchange. In any case to which (a) or (b)
above apply, the disclosing party shall give notice to the other party
concurrent with the making of such disclosure. As to any disclosure
<PAGE> 102
pursuant to (a), only such confidential information as such third party
shall have a legitimate business need to know shall be disclosed and
such third party shall first agree in writing to protect the
confidential information from further disclosure to the same extent as
described herein.
ARTICLE XIV
LIABILITIES AND INDEMNITIES
14.1
(a) If a Joint Venture Participant (the "Joint Venture
Participant providing services"), its Affiliates, or their officers,
directors, or representatives (collectively, the "providers of
services") perform services to Minera Metalin, the providers of
services shall perform or cause the performance of those services in
compliance with the standards of care, skill, and diligence normally
provided by responsible persons or entities in performance of services
similar to those provided. If the performance of services does not meet
this standard and if this deficiency is timely reported in writing to
the Joint Venture Participant providing services by the other Joint
Venture Participant, the Joint Venture Participant providing services
shall correct any deficiencies at its expense. The Joint Venture
Participants agree that, except in cases of gross negligence or willful
misconduct, the liability of the Shareholder providing services and the
providers of services is limited to the correction of the deficiencies.
(b) Each Joint Venture Participant (the "Indemnifier") shall
indemnify and hold harmless the other Joint Venture Participant (the
"Indemnified") against and from all costs, claims, expenses,
liabilities or losses sustained by the Indemnified which result,
directly or indirectly, from a Joint Venture Participant's, its
Affiliates or their officers', directors', or representatives' gross
negligence, willful misconduct, or failure to perform any of its or
their obligations under this Agreement.
ARTICLE XV
ACCESS TO CONCESSIONS AND INFORMATION
15.1
(a) Each Joint Venture Participant, its directors, officers,
employees and agents shall have the right, at the cost and risk of such
Joint Venture Participant and upon reasonable notice to the Chief
Officer, to enter into and upon the Concessions with the Chief Officer
at all reasonable times for the purpose of inspecting the same and the
work performed hereunder. Subject to Section 19(b) and Section 18, each
Joint Venture Participant, its directors, officers, employees and
agents shall have the right at all reasonable times to inspect all
drilling data, samples, cores, logs and other data pertaining to the
Concessions, and upon reasonable request from a Joint Venture
Participant, the Chief Officer shall furnish to such Joint Venture
Participant copies of all logs, assay reports, maps or other documents
connected with the work on the Concessions and reasonable samples of
material for testing purposes. The inspection and access rights herein
are granted on the conditions that the Joint Venture Participant comply
with Minera Metalin's rules and not obstruct or interfere with Minera
Metalin's work.
<PAGE> 103
(b) Notwithstanding any other provision of this Agreement,
neither Joint Venture Participant shall be required to disclose to
another Joint Venture Participant any of its confidential processes,
trade secrets or proprietary information, unless utilized by Minera
Metalin for operations with respect to the Properties, in which event
such information will be held confidential by the non-disclosing Joint
Venture Participant.
ARTICLE XVI
FORCE MAJEURE
16.1
(a) No party shall be liable to the other party and no party
shall be deemed in default hereunder for any failure or delay to
perform any of its covenants, agreements or obligations caused or
arising out of any act not reasonably within the control of such party,
excluding lack of funds, but including and not limited to acts of God,
strikes, lockouts or other industrial disputes, acts of the public
enemy, war, insurrection, riots, fire, storm, flood, explosion,
government restriction or delays in obtaining of governmental
approvals, unavailability of equipment necessary for work or other
causes, whether of the kind enumerated above or otherwise.
(b) The party hereto claiming the occurrence and duration of
any event contemplated under the provisions of paragraph 16 of this
Agreement hereof shall promptly notify the other party accordingly. All
times provided for in this Agreement shall be extended for a period
commensurate with the period of the delay if the party forthwith
notifies the other party in writing of the nature of the delay and, so
far as possible, the party affected takes all reasonable steps to
remedy the delay caused by the events contemplated by this paragraph;
provided however, that nothing contained in this paragraph shall
require any party to settle any industrial dispute or to test the
constitutionality of any law or governmental regulation.
ARTICLE XVII
TERMINATION AND WITHDRAWAL
17.1
(a) This Agreement shall terminate only on the mutual
consent of all Joint Venture Participants.
(b) Upon termination under this Article, the Joint Venture
Participants shall remain liable in accordance with their Participating
Interest percentages at the time of termination for contingency
obligations hereunder until final settlement of all accounts and for
any liability, whether it accrues before or after termination, if it
arises out of Operations during the term of the Agreement.
(c) Promptly after any termination under this Article, the
Manager shall take all action necessary to wind up the activities of
the Joint Venture and all costs and expenses incurred in connection
with the termination of the Venture shall be expenses chargeable to the
Venture. Any Participant that for any reason has a negative capital
account balance when the Venture is terminated shall contribute to the
Assets of the Venture an amount sufficient to raise such balance to
zero. The Assets shall first be paid, applied or distributed in
satisfaction of all liabilities of the Venture to third parties and
<PAGE> 104
then to satisfy any debts, obligations or liabilities owed to the
Participants. Before distributing any funds or Assets to Participants,
the Manager shall have the right to segregate amounts which, in the
Manager's reasonable judgment, are necessary to discharge continuing
obligations or to purchase for the account of Participants bonds or
other securities for the performance of such obligations. Thereafter,
any remaining cash and all other Assets shall be distributed (in
undivided interests unless otherwise agreed) to the Participants, first
in the ratio and to the extent of their respective capital accounts and
then in proportion to their respective Participating Interests as they
may appear at that time.
(d) A Joint Venture Participant may elect to withdraw from
this Agreement and from The Joint Venture by giving notice to the other
Joint Venture Participant of the effective date of withdrawal, which
shall be the later of the end of the then current Program and Budget or
at least 30 days after the date of the notice. Upon such withdrawal,
this Agreement shall terminate, and the withdrawing Joint Venture
Participant shall be deemed to have transferred to the remaining Joint
Venture Participant without cost and free and clear of royalties, liens
or other encumbrances arising by, through or under such withdrawing
Joint Venture Participant, all of its interest in this Agreement.
(e) Non-Compete Covenants. A Participant that withdraws
pursuant to this Article is deemed to have withdrawn pursuant to an
uncured default and its Affiliates shall not directly or indirectly
acquire any interest in property within the Area of Interest for
twenty-four (24) months after the effective date of withdrawal. If a
withdrawing Participant, or the Affiliate of a withdrawing Participant,
breaches this Article, such Participant or Affiliate shall be obligated
to offer to convey to the non-withdrawing Participant, without cost,
any such property or interest so acquired. Such offer shall be made in
writing and can be accepted by the non-withdrawing Participant at any
time within forty-five (45) days after it is received by such
non-withdrawing Participant.
(f) Right to Data After Termination. Within ninety (90) days
after termination of this Agreement pursuant to this Article, each
Participant shall be entitled to copies of all information acquired
hereunder before the effective date of termination and not previously
furnished to it.
(g) Continuing Authority. Upon termination of this Agreement
under this Article the Manager shall have the power and authority,
subject to control of the Management Committee, or any successors
representing the former Participants, to do all things on behalf of the
Participants which are reasonably necessary or convenient to: (a) wind
up Operations and (b) complete any transaction and satisfy any
obligation, unfinished or unsatisfied, at the time of such termination
or withdrawal, if the transaction or obligation arises out of
Operations prior to such termination or withdrawal. The Manager shall
have the power and authority to grant or receive extensions of time or
change the method of payment of an already existing liability or
obligation, prosecute and defend actions on behalf of the Participants
<PAGE> 105
and the Venture, mortgage Assets, and take any other reasonable action
in any matter with respect to which the former Participants continue to
have, or appear or are alleged to have, a common interest or a common
liability.
ARTICLE XVIII
MISCELLANEOUS
18.1
(a) All notices, payments and other required communications
("Notices") to the parties shall be in writing, and shall be addressed,
respectively, as follows:
if to Metalline: Metalline Mining Company
1330 Margaret Avenue
Coeur d'Alene, ID 83815
(Ph) 208-665-2002
(Fax) 208-665-004
Attention: Merlin Bingham
if to Royal Royal Silver Mines Inc.
10200 W. Nevada, Suite 270
(Ph) 509-466-3144
(Fax) 509-466-3321
Attention: John Ryan
if to Minera Metalin: Calle Mina #1
La Esmeralda
Coahuila, Mexico
(Ph) 52-177-52100
Attention: Merlin Bingham
All Notices shall be given (i) by personal delivery to the party, (ii)
by electronic communication, with confirmation of transmission, (iii)
by registered or certified mail return receipt requested, or (iv) by
commercial courier. All Notices shall be effective and shall be deemed
delivered (i) if by personal delivery, on the date of delivery if
delivered during normal business hours and, if not delivered during
normal business hours, on the next business day following delivery, and
(ii) if by electronic communication, by mail, or by commercial carrier,
on the next business day after actual receipt. A party may change its
address by Notice to the other party.
(b) No modification of this Agreement shall be valid unless
made in writing and duly executed by all parties to this Agreement.
(c) Except with respect to matters pertaining to the
formation, corporate proceeding or conduct of business by Minera
Metalin, which matters shall be governed by the laws of the United
Mexican States, including without limitation the Mexican General Law of
Mercantile Companies, this Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho. In the
event that any condition or other provision of this Agreement is held
to be invalid or void by any court of competent jurisdiction, the same
shall be deemed severable from the remainder of this Agreement and
shall in no way affect any other covenant or condition. If such
condition, covenant, or other provision shall be deemed invalid due to
its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
<PAGE> 106
(d) The failure of a Participant to insist upon the strict
performance of any provision of this Agreement or to exercise any
right, power, or remedy upon a breach hereof shall not constitute a
waiver of any provision of this Agreement or limit the Participant's
right thereafter to enforce any provision or exercise any right.
(e) The parties hereby agree to exercise all their voting
rights and other powers of control available to them in relation to
their respective company and their Affiliates so as to procure (insofar
as they are able by the exercise of such rights and powers) that the
parties and their Affiliates will comply with their obligations under
this Agreement.
(f) There are no implied covenants given by either parties
or otherwise contained in this Agreement other than those of good faith
and fair dealing.
(g) Each of the parties agrees that it shall take from time
to time such action and execute such instruments as may be reasonably
necessary or convenient to implement and carry out the intent and
purpose of this Agreement. The parties also agree to cause any
Affiliate of it to take all action necessary to implement and carry out
the intent and purpose of this Agreement.
(h) Except for any other agreement of the parties affecting
the Properties which is executed contemporaneously with this Agreement,
this Agreement contains the entire understanding of the parties and
supersedes all prior agreements and understandings between the parties
relating to the subject matter hereof.
(i) This Agreement may be executed in counterparts, each of
which when so executed shall be deemed an original, and such
counterparts shall together constitute but one and the same instrument.
(j) The captions and headings contained in this Agreement
are for reference only and shall not affect the interpretation of any
provision hereof
(k) Neither this Agreement nor any interest therein nor any
benefit or claim arising thereunder shall be sold, leased, transferred,
or otherwise dealt with except in conjunction with the sale,
assignment, or transfer by such Joint Venture Participant of its
Interest in conjunction with Article XI of this Agreement.
ATTEST: METALLINE MINING COMPANY
________________________ By: __________________________________
Secretary Its ______________________________
ATTEST: ROYAL SILVER MINES, INC.
________________________ By: __________________________________
Secretary Its ______________________________
ATTEST: MINERA METALIN, S.A., DE C.V.
________________________ By: __________________________________
Secretary Its ______________________________
<PAGE> 107
EXHIBIT A
Name of Lot Title No. Hectares Valid Until
Sierra Mojada 198513 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
Mineros Nortenos 169343 336.7900 Exploitation Mining
Concession Valid
until _____________
Esmerelda
Concession 188765 117.5025 Exploration Mining
Concession Valid
until _____________
Esmerelda 187776 97.680 Exploration Mining
Concession Valid
until _____________
La Blanca 188326 33.50444 Exploration Mining
Concession Valid
until ____________
All the foregoing located within the Sierra Mojada District, Coahuila,
Mexico.
<PAGE> 108
EXHIBIT B
ACCOUNTING PROCEDURE
It is contemplated by the parties to the Agreement that it is in
the best interests of the parties that certain services or equipment
may be supplied to The Joint Venture by Metalline or by Affiliates of
Metalline. Certain financial and accounting procedures to be followed
in such cases are set forth below and reasonable and proper expenses
may be charged to The Joint Venture. References in this Accounting
Procedure to Sections and Articles are to those located in this
Accounting Procedure unless it is expressly stated that they are
references to the Joint Venture Agreement. Capitalized terms in this
Accounting Procedure shall have the meanings in the Joint Exploration
and Development Agreement. References in this Accounting Procedure to
the "Provider" shall mean Metalline or that Affiliate of Metalline that
provides services or supplies to The Joint Venture. To the extent that
Royal Silver may provide services or supplies to The Joint Venture,
this Accounting Procedure shall also apply.
The Accounting Procedure shall be reviewed upon the request of
Metalline or Royal Silver to assure that no party suffers a loss or
makes a profit because of its management fee. Royal Silver and
Metalline shall, in good faith, endeavor to agree on modification to
these Accounting Procedures that will remedy any alleged unfairness or
inequity.
ARTICLE I
GENERAL PROVISIONS
1.1 General Accounting Records. The Provider shall maintain
records prepared in accordance with this Accounting Procedure.
1.2 Statements and Billings. The Provider shall prepare
statements and bill The Joint Venture in accordance with Budgets.
Payment of any such billings by The Joint Venture shall not prejudice
the right of Royal Silver to protest or question the correctness
thereof; provided, however, that any such protest or questions shall be
in writing and shall be timely raised.
ARTICLE II
CHARGES TO THE JOINT VENTURE
Subject to the limitations hereinafter set forth, the Provider
shall charge The Joint Venture with the following:
2.1 Rentals, Royalties and Other Payments. All property
acquisition and holding costs, including filing fees, license fees,
costs of permits and assessment work, delay rentals, production
royalties, including any required advances, and all other payments made
by the Provider which are necessary to acquire or maintain title to the
Properties.
<PAGE> 109
2.2 Labor and Employee Benefits
(a) Salaries and wages of the Provider's employees or
employees of the Provider's Affiliates directly engaged in Operations,
including salaries or wages of employees who are temporarily assigned
to The Joint Venture.
(b) The cost of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries and
wages chargeable under Sections 2.2(a) and 2.11. Such costs may be
charged on a "when and as paid basis" or by "percentage assessment" on
the amount of salaries and wages. If percentage assessment is used,
the rate shall be applied to wages or salaries excluding overtime and
bonuses. Such rate shall be based on the Provider's cost experience and
it shall be periodically adjusted at least annually. It is the intent
of the parties to fully compensate the Provider for all actual costs to
the Provider or its affiliates for providing the services of the
employees to the Joint Venture.
(c) The Provider's or its Affiliates' actual cost of
established plans for employees' group life insurance, hospitalization,
pension, retirement, stock purchase, thrift, bonus (except production
or incentive bonus plans under a union contract based on actual rates
of production, cost savings and other production factors, and similar
non-union bonus plans customary in the industry or necessary to attract
competent employees, which bonus payments shall be considered salaries
and wages under Section 2.2(a) or 2.11, rather than employees' benefit
plans) and other benefit plans of a like nature applicable to salaries
and wages chargeable under Sections 2.2(a) or 2.11, provided that the
plans are limited to the extent feasible to those customary in the
industry.
(d) Cost of assessments imposed by governmental authority
which are applicable to salaries and wages chargeable under Sections
2.2(a) and 2.11,including all penalties except those resulting from the
willful misconduct or gross negligence of the Provider or its
Affiliates.
2.3 Fixed Assets, Materials, Equipment and Supplies
(a) All capital costs of developing and operating the
Properties as a mine, including all costs of land, construction,
equipment and mine development, and including maintenance, repairs and
replacements, and any capital expenditures relating to an improvement,
expansion, modernization or replacement of the facilities.
(b) The cost of materials, equipment and supplies (herein
called "Material") purchased from unaffiliated third parties or
furnished by the Provider or its Affiliates. The Provider shall
purchase only so much Material as may be required for immediate use in
efficient and economical Operations. The Provider shall also maintain
inventory levels of Material at reasonable levels to avoid unnecessary
accumulation of surplus stock.
<PAGE> 110
2.4 Equipment and Facilities Furnished by Provider. The cost of
machinery, equipment and facilities owned by the Provider and used in
Operations or used to provide support or utility services to Operations
charged at rates commensurate with the actual costs of ownership and
operation of such machinery, equipment and facilities. Such rates
shall include costs of maintenance, repairs, other operating expenses,
insurance, taxes, depreciation and interest at a rate not to exceed 2%
per annum in excess of the Prime Rate. Such rates shall not exceed the
average commercial rates currently prevailing in the vicinity of the
Operations, and shall not exceed the costs that would be incurred if
such items were purchased by or for the account of The Joint Venture.
2.5 Transportation. Reasonable transportation costs incurred in
connection with the transportation of employees and material necessary
for the Operations.
2.6 Contract Services and Utilities. The cost of contract
services and utilities procured from outside sources, other than
services described in Sections 2.9 and 2.12.
2.7 Insurance Premiums. Net premiums paid for insurance required
to be carried for Operations for the protection of The Joint Venture.
The Joint Venture may self-insure, and the Provider may elect to
include such risks in its self-insurance program and shall charge the
costs of self-insuring such risks to The Joint Venture provided that
such charges shall not exceed published manual rates. If self-
insurance is selected, the Provider shall provide to the Joint
Venturers' statements as to the extent and limits of such self-insurance
and the basis for the charges to The Joint Venture.
2.8 Damages and Losses. All costs in excess of insurance
proceeds necessary to repair damage or losses to any assets of The
Joint Venture resulting from any cause other than the willful
misconduct or gross negligence of the Provider or its affiliates. The
Provider shall furnish the Board with written notice of damages or
losses as soon as practicable after a report thereof has been received
by the Provider.
2.9 Legal and Regulatory Expenses. Except as otherwise provided
in section 2.12, al legal and regulatory costs and expenses incurred in
or resulting from the Operations or necessary to project or recover the
assets of the Joint Venture. All attorneys' fees and other legal costs
to handle, investigate and settle litigation or claims, including the
cost of legal services provided by the Provider's or its Affiliates'
legal staff.
2.10 Audit. Cost of annual audits.
2.11 District and Camp Expense (Field Supervision and Camp
Expenses). A pro rata portion of (i) the costs of maintaining and
operating an office (herein called "the Provider's Project Office") and
any necessary suboffice and (ii) all necessary camps, including housing
facilities for employees, used for Operations. During Development and
thereafter, the expense of those facilities, less any revenue
therefrom, shall include depreciation or a fair monthly rental in lieu
of depreciation of the investment. The total of such charges for all
<PAGE> 111
Properties served by the Provider's employees and facilities shall be
apportioned to The Joint Venture on the basis of the Provider's best
estimate of the proportionate amount of such expenses incurred for the
benefit of The Joint Venture.
2.12 Administrative Charge
(a) Each month, the Provider shall charge The Joint Venture
a sum for each phase of Operations as provided below, which shall be a
liquidated amount to reimburse the Provider and its Affiliates for
their home office overhead and general and administrative expenses to
conduct each phase of the Operations, and which shall be in lieu of any
management fee, except to the extent permitted in Section 2.2:
(1) Exploration Phase - 0% of Allowable Costs;
(2) Development Phase - 2% of Allowable Costs; and
(3) Mining Phase - 2% of Allowable Costs.
(b) The term "Allowable Costs" as used in this Section 2.12
for a particular phase of Operations shall mean all charges to The
Joint Venture excluding (i) the administrative charge referred to
herein; (ii) referred to depreciation, depletion or amortization of
tangible or intangible assets; and (iii) amounts charged in accordance
with Sections 2.1 and 2.9. The Provider shall attribute such Allowable
Costs to a particular phase of Operations by applying the following
guidelines.
(1) The "Exploration Phase" shall cover those
activities directed toward ascertaining the existence, location,
quantity, quality or commercial value of deposits of products. Such
phase shall include all activities undertaken through the completion of
the Feasibility Study, if any, but shall not include construction of
milling or processing facilities or commencement by commercial mining
operations on the Properties.
(2) The "Development Phase" shall cover those
activities conducted to prepare for removal and recovery of products
(including from an existing ore body), and to construct or install a
mill or another improvement to be used for the mining, extracting,
producing, handling, milling, processing or other beneficiation of
products.
(3) The "Mining Phase" shall include mining,
extracting, producing, handling, milling or other processing of
products and all other activities not otherwise covered above,
including activities conducted after mining operations have ceased.
(c) The following is a representative list of items
comprising the Provider's or its Affiliates' principal business office
expenses that are expressly covered by the administrative charge
provided in this Section 2.12, except to the extent that such services
represent a direct charge to The Joint Venture, as provided for in
Article II:
<PAGE> 112
(1) Administrative supervision, which includes services
rendered by chief officers, department supervisors, officers and
directors of the Provider or its Affiliates for Operations;
(2) Rentals and other charges for office and records
storage space, telephone service, office equipment and supplies;
(3) Accounting, data processing, personnel
administration, billing and record keeping in accordance with
governmental regulations and the provisions of the Agreement, and
preparation of reports;
(4) The services of tax counsel and tax administration
employees for all tax matters, including any protests, except any
outside professional fees which the Board may approve as a direct
charge to the Joint Venture;
(5) Routine legal services rendered by the Provider's
or its Affiliates' legal staff.
(d) The board shall biannually review the administration
charges and shall amend the methodology or rates used to determine such
charges if they are found to be insufficient or excessive.
2.13 Other Expenditures. Any reasonable direct expenditure,
other than expenditures which are covered by the foregoing provisions,
incurred by the Provider or its Affiliates for the necessary and proper
conduct of Operations.
ARTICLE III
BASIS OF CHARGES
3.1 Purchases. Material purchased and services procured from
third parties shall be charged to The Joint Venture by the Provider at
invoiced cost, including applicable transfer taxes, less all discounts
taken. If any Material is determined to be defective or is returned to
a vendor for any other reason, the Provider shall credit Newco when an
adjustment is received from the vendor.
3.2 Material Furnished by or Transferred to the Provider or a
Joint Venturer. Any material furnished by the Provider or a Joint
Venturer or their Affiliates or transferred to the same shall be priced
on the following basis:
(a) New Material. New Material transferred from the
Provider or a Joint Venturer or their Affiliates shall be priced F.O.B.
the nearest reputable supply store or railway receiving point, where
like Material is available, at the current replacement costs of the
same kind of Material, exclusive of any available cash discounts, at
the time of the transfer (herein called "New Price).
(b) Used Material. Used Material shall be priced at a value
commensurate with its use or at prevailing prices. Material no longer
suitable for its original purpose but usable for some other purpose
shall be priced on a basis comparable with items normally used for such
other purposes.
<PAGE> 113
(c) Obsolete Material. Any Material which is serviceable
and usable for its original function, but its condition is not
equivalent to that which would justify a price as provided above shall
be priced by the Board. Such price shall be set at a level which will
result in a charge to The Joint Venture equal to the value of the
service to be rendered by such Material.
3.3 Premium Prices. Whenever material is not readily obtainable
at published or listed prices because of national emergencies, strikes
or other unusual circumstances over which the Provider has no control,
the Provider may charge The Joint Venture for the required material on
the basis of the Provider's direct cost and expenses incurred in
procuring such Material and making it suitable for use. The Provider
shall give written notice o the proposed charge to the Joint Venturers
prior to the time when such charge is to be billed, whereupon any Joint
Venturer shall have the right, by notifying the Provider within 10 days
of delivery of the notice from the Provider, to furnish at the usual
receiving point all or part of its share of Material suitable for use
and acceptable to the Provider.
3.4 Warranty of material Furnished by the Operator or Joint
Venturers. Neither the Provider, nor any Joint Venturer warrants the
material furnished beyond any dealer's or manufacturer's warranty and
no credits shall be made to The Joint Venture for defective Material
until adjustments are received by the Provider from the dealer,
manufacturer or their respective agents.
ARTICLE IV
DISPOSAL OF MATERIAL
4.1 Disposition Generally. The provider shall have no obligation
to purchase a Joint Venturer's interest in Material. The Board shall
determine the disposition of major items of surplus Material, provided
the provider shall have the right to dispose of normal accumulations of
junk and scrap material either by sale or by transfer to the Joint
Venturers as provided in Section 4.2.
4.2 Distribution to Joint Venturers. Any Material to be
distributed to the Joint Venturers shall be made in proportion to their
respective Participating Interests, and corresponding credits shall on
the basis provided in Section 3.2.
4.3 Sales. Sales of Material to third parties shall be credited
to The Joint Venture at the net amount received. Any damages or claims
by the purchaser shall be charged back to The Joint Venture if and when
paid.
ARTICLE V
INVENTORIES
5.1 Periodic Inventories, Notice and Representations. At
reasonable intervals, inventories shall be taken by the Provider, which
shall include all such Material as is ordinarily considered
controllable by providers of mining Properties and the expense of
conducing such periodic inventories shall be charged to The Joint
Venture. The Provider shall give written notice to the Joint Venturers
<PAGE> 114
of its intent to take any inventory at least thirty (30) days before
such inventory is scheduled to take place. Joint Venturers shall be
deemed to have accepted the results of any inventory taken by the
Provider if the Joint Venturer fails to be represented at such
inventory.
5.2 Reconciliation and Adjustment of Inventories. Reconciliation
of inventory with charges to The Joint Venture shall be made, and a
list of overages and shortages shall be furnished to the board within
6 months after the inventory is taken. Inventory adjustments shall be
made by the Provider to The Joint Venture for overages and shortages,
but the Provider shall be held accountable only for shortages due to
lack of reasonable diligence.
ARTICLE VI
CREDITS
The Provider will credit The Joint Venture with revenues received
by the Provider including, for example:
(a) Collection of insurance proceeds when the insurance
premiums have been charged to The Joint Venture.
(b) Sales of geologic or other information authorized by the
Joint Venturers, and provided that the costs related to such data have
been charged to The Joint Venture;
(c) Sales or property, plant, equipment and materials of The
Joint Venture in the normal course of the day-to-day business;
(d) Rentals received, refunds of custom duties or
transportation claims, rebates and other credits pertaining to
Operations;
(e) Credits received from third parties or from the Joint
Venturers for the use of facilities or service of the Operations.
(f) Refunds for defective equipment when the Provider
receives the corresponding payments from the manufacturers or agents;
and
(g) Any other credits for material recovery or from other
sources which correspond to The Joint Venture.
<PAGE> 115
EXHIBIT C
NET PROCEEDS
1. Definitions. For the purposes of the Agreement of which this
Exhibit is a part, the following definitions shall apply:
1.1 "Gross Proceeds" shall mean, for any period, the aggregate
Product Sales during such period, proceeds realized by the sale of any
other assets of the Properties other than sales used in the
determination of Product Sales, and any insurance proceeds realized
from mine related accidents, but excluding any investment income
received by any Participant.
"Product Sales" shall mean, for gold, the quantity of refined
gold attributable to the Properties produced in any calendar quarter
valued at the average of the Second London Daily PM Fix in U.S. dollars
per troy ounce for such calendar quarter and, for silver, the quantity
of refined silver attributable to the Properties produced in any
calendar quarter valued at the average of the Metals Week published
monthly price designated as "Handy & Harman" in U.S. cents per troy
ounce for such calendar quarter, and, for any other products, the
proceeds actually realized from the sale of such products.
1.2 "Net Proceeds" shall mean, for any period, Gross Proceeds for
the period less the aggregate of:
(a) Operating Costs for the period;
(b) Negative Net Proceeds, if any, from the previous period;
and,
(c) Changes in working capital for the operation of the
Properties as a mine, as determined by the Manager of the Venture,
after the beginning of commercial production.
(d) Payment of Net Smelter royalties or other Royalty
Agreements to which properties in the Area of Interest are subject.
1.3 "Operating Costs" shall mean, for any period, all costs,
expenses, underlying obligations, liabilities and charges of whatsoever
kind or nature incurred or chargeable, directly or indirectly, by the
Manager or Venture after the date of this Agreement, in connection with
the operation of the Property as a mine during the period, which costs,
expenses, underlying obligations, liabilities and charges shall
include, without limiting the generality of the foregoing, the
following:
(a) All costs of or related to the operation of the property
as a mine;
(b) All costs of or related to marketing of mineral products
including, without limitation, transportation, storage, commissions
and/or discounts;
<PAGE> 116
(c) All costs of maintaining in good standing or renewing
from time to time, the Properties, including but not limited to the
payment of all underlying obligations, if required by the terms of the
Agreement, and other tenements or other interest therein including the
payment of all royalties and taxes of any nature whatsoever in
connection therewith;
(d) All costs of or related to providing and/or operating
employee facilities, including housing and land;
(e) All duties, charges, levies, royalties, taxes (excluding
taxes levied on the income of the parties) and other payments imposed
upon or in connection with operating the Properties as a mine by any
level of government or department or agency thereof;
(f) All reasonable and actual costs of Manager or Venture
for providing technical, management and/or supervisory services, and
fees paid by Manager or Venture as referenced in the Accounting
Procedure Exhibit "B" (the intent being that the Manager of the Venture
will neither realize a profit nor suffer a loss as a result of its
indirect costs incurred as a result of its management activity);
(g) All costs of consulting, legal, accounting, insurance
and other services;
(h) All costs relating to maintenance, repairs, replacements
and expansion, including capital expenditures, land acquisition
expenditures, and any development costs incurred to increase the output
of the Properties or to expose or provide access to a major new orebody
or orebodies, all incurred after the mine has commenced commercial
production;
(i) All costs for pollution control, reclamation or other
similar costs incurred or to be incurred by Manager or Venture;
(j) Any costs or expenses incurred or to be incurred
relating to the termination of the operation of the Properties as a
mine;
(k) Exploration expenditures, however incurred, development
drilling and underground or open pit development costs incurred after
commencement of commercial production to maintain an economic output of
saleable minerals, as determined by Manager of the Venture;
(l) All interest on funds advanced or guaranteed by any
Participant for the benefit of the Properties, from the date of the
advance to date of repayment of such funds at the Citibank, N.A., 399
Park Avenue, New York, NY 10043, prime rate of interest plus Two
Percent (2%); and
(m) All interest on funds incurred by the project itself on
a nonrecourse basis;
but, shall exclude any non-cash expenses such as
depreciation, amortization and depletion.
<PAGE> 117
Subject to the above, all operating costs shall be determined in
accordance with generally accepted accounting principles consistently
applied.
1.4 "Recoverable Capital Costs" shall mean all costs incurred
before beginning of commercial production for all Qualified Exploration
and Development Expenditures of the mine or mines including interest
pursuant to Sections 1.3(l) and 1.3(m) of this Exhibit, and property
acquisition costs such as lease, option and cash payments and all costs
of equipping the Properties for commercial production, including
inventory and pre-production working capital, plus such amount to
compensate Manager or Venture for its overhead as outlined in the
Accounting Procedure, Exhibit "B", attached to the Agreement.
2. Custom Milling. In the event any of the facilities of the
Property are used for the treatment of ore or concentrate from another
property, not controlled by the Participants, any fee or charge
received by Manager or Venture for the use of the facilities shall be
included as Gross Proceeds.
Exhibit C to ____________ Joint Venture Agreement dated the ____ day of
________, 1998, by and among Minera Metalin, Metalline Mining Company
and Royal Silver Mining Co.
<PAGE> 118
EXHIBIT 10.2
ACKNOWLEDGMENT
TO: Minera Metalin S.A. de C.V.
Metalline Mining Company
Royal Silver Mines, Inc. hereby acknowledges and agrees that it
has no right, title or interest, whatsoever, arising out of a Joint
Venture Agreement among itself, Minera Metalin SA de C.V. and Metalline
Mining Company and/or any mining concession subject to that agreement.
Royal Silver Mines, Inc. further acknowledges it has no right to
enter into any other joint venture agreement with Metalline Mining
and/or Minera Metalin, or to obtain any right, title or interest in any
mining concessions located in Coahuila, Mexico, arising out of an
Agreement among Royal Silver Mines, Inc., Metalline Mining Company and
Dakota Mining Company or by virtue of any other agreement.
Royal Silver Mines further acknowledges and agrees that any right,
title or interest, whatsoever, that Grand Central Silver Mines, Inc.
may have had in any joint venture involving Minera Metalin and/or
Metalline Mining Company and/or Royal Silver Mines, together with any
right, title or interest Grand Central Silver Mines may have had in any
mining properties and/or mining concessions located in Coahuila,
Mexico, arising out of or by virtue of any Joint Venture Agreement has
been wholly terminated and extinguished.
ROYAL SILVER MINES, INC.
By: /s/ Howard Crosby,
Its President
DATED:____________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at October 31, 1998 Audited and
July 31, 1999 (Unaudited) and the Consolidated Statement of Income for the year
ended October 31, 1998 (Audited) and the six months ended July 31, 1999
(Unaudited) and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> OCT-31-1998 OCT-31-1999
<PERIOD-END> OCT-31-1998 JUL-31-1999
<CASH> 313,322 448,343
<SECURITIES> 0 0
<RECEIVABLES> 2,849 2,849
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 342,631 476,321
<PP&E> 132,166 132,166
<DEPRECIATION> 37,489 56,119
<TOTAL-ASSETS> 1,209,950 1,517,610
<CURRENT-LIABILITIES> 60,565 47,238
<BONDS> 0 0
0 0
0 0
<COMMON> 60,908 70,588
<OTHER-SE> 1,088,477 1,399,784
<TOTAL-LIABILITY-AND-EQUITY> 1,209,950 1,517,610
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 729,036 2,308,405
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (729,036) (2,316,230)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (729,036) (2,316,230)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (729,036) (947,014)
<EPS-BASIC> (0.13) (0.14)
<EPS-DILUTED> (0.11) (0.12)
</TABLE>
<PAGE> 120
EXHIBIT 99.1
BUSINESS CONSULTANT AGREEMENT
THIS BUSINESS CONSULTANT AGREEMENT ("Agreement") is entered into
effective December 01, 1997, between METALLINE MINING COMPANY, INC., a
Nevada corporation, with its principal offices located at 1010 Ironwood
Drive, suite 105 Coeur d'Alene, Idaho 83814 (hereinafter referred to as
the "Company"), and JAMES C. CZIRR, consultant, with his principal
offices located at 425 Janish Dr., Sandpoint, ID 83864) (hereinafter
"CONSULTANT").
1. Consulting Services
The Company hereby engages CONSULTANT to perform the financial
consulting and public relations services listed below on the terms and
conditions set forth in this Agreement.
(a) Review the business operations of potential transaction
candidates;
(b) Meet with the appropriate shareholder groups in an
effort to resolve any valuation differences;
(c) Initiate and negotiate on behalf of the Company to
explore potential transactions which may involve either a merger into
public company shell or initial public
offering of equity;
(d) Analyze and evaluate the projected financial performance
of the Company;
(e) Assist in the formulation of a strategy for discussions
with and the presentation of a transaction proposal to any interested
parties;
(f) As mutually agreed, advise the Company regarding
alternative financing structures (including bridge loans) with which to
effect a transaction;
(g) Assist in negotiation of letters of intent and
definitive purchase or financing agreements with any interested parties
and their advisors;
(h) Provide, as deemed appropriate by CONSULTANT, additional
financial advisory services related to a transaction.
The Company acknowledges that CONSULTANT cannot provide any
guaranty or assurances that the Company will be successful in
completing any transaction of the types set forth above, as they are
subject to numerous factors which are beyond the control of CONSULTANT,
including, but not limited to, market conditions, results of operations
of the Company, industry trends and underwriter interest.
<PAGE> 121
Company acknowledges that CONSULTANT is not a registered broker-
dealer and that CONSULTANT cannot, and shall not be required hereunder
to, engage in the offer or sale of securities on behalf of the Company.
While CONSULTANT has relationships and contact with various investors,
broker-dealers, and investment funds, Consultant's participation in the
actual offer or sale of the Company securities shall be limited to that
of an advisor to the Company and a "finder" of investors, broker-
dealers and funds. The Company acknowledges and agrees that the
solicitation and consummation of any purchases of the Company's
securities shall be handled by the Company or one or more NASD member
firms engaged by the Company for such purpose.
2. Terms of Agreement
The term of this Agreement shall commence on the date hereof and
shall continue for a period of Thirty-six (36) months.
3. Consideration to CONSULTANT
3.1 The Company shall pay the CONSULTANT 3000 S-8 shares per
month. In the event the S-8 share exemption is not available the
Company shall accrue a debt of the unissued shares. CONSULTANT may at
his sole option leave the share debt accrue or elect to have shares
subject to rule 144 restriction issued in lieu of waiting for the
Company to qualify for the issue S-8 shares.
3.2 Expenses incurred by CONSULTANT in performing services
under this Agreement will be reimbursed at cost within fifteen (15)
days of receipt of an invoice at the offices of the Company.
3.3 (a) The Company agrees to grant to CONSULTANT, upon
execution of this Agreement, an option to purchase One Hundred Thousand
(1000,000) shares of the Company's Common Stock, $.01 par value ("Common
Stock") at an initial exercise price of Seventy five Cents ($.75) per
share, subject to adjustment in certain events, with a term of five (5)
years, pursuant to the terms of an Option Agreement in the form
attached hereto as Exhibit "A". ** Issued prior to execution.** /s/ jr
- - written in -
3.4 As additional consideration for the services of
CONSULTANT, the Company agrees to indemnify and hold harmless
CONSULTANT and each of its officers, directors, agents, employees and
controlling persons (collectively "Indemnified Persons") to the fullest
extent permitted by law, from and against any and all losses, claims,
damages, expenses (including reasonable fees, disbursements and other
charges of counsel), actions, proceedings or investigations (whether
formal or informal), or threats thereof (all of the foregoing being
hereinafter referred to as "Liabilities"), based upon, relating to or
arising out of Consultant's engagement hereunder, including, but not
limited to Liabilities arising in connection with the dissemination of
information about the Company or the Company's business, whether in any
presentation, in person, through the mails or otherwise; provided,
however, that the Company shall not be liable under this paragraph to
the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct or gross
<PAGE> 123
negligence of the Indemnified Person seeking Indemnification. In
connection with the Company's obligation to indemnify for expenses as
set forth above, the Company further agrees to reimburse each
Indemnified Person for all expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by
such Indemnified Person; provided, however, that if an Indemnified
person is reimbursed hereunder for any expenses, the amount so paid
shall be refunded if and to the extent it is finally judicially
determined that the Liabilities in question resulted primarily from the
willful misconduct or gross negligence of such Indemnified Person.
4. Miscellaneous
4.1 Further Actions. At any time and from time to time,
each party agrees, at its or his expense, to take such actions and to
execute and deliver such documents as may be reasonably necessary to
effectuate the purposes of this Agreement.
4.2 Entire Agreement Modification. This Agreement sets
forth the entire understanding of the parties with respect to the
subject matter hereof and supersedes all existing agreements among them
concerning such subject matter, and may be modified only by a written
instrument duly executed by the party to be bound.
4.3 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed
by certified mail, return receipt requested (or by the most nearly
comparable method if mailed from or to a location outside of the United
States), or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished
in writing in accordance with the provisions of this Section). Any
notice given to any corporate party shall be addressed to the attention
of the Corporation Secretary. Any notice of other communication given
by certified mail (or by such comparable method) shall be deemed given
at the time of certification thereof (or comparable act), except for a
notice changing a party's address which will be deemed given at the time
of receipt thereof.
4.4 Waiver. Any waiver by any party of a breach of any
provision of this Agreement shall not operate as or be construed to be
a waiver of any other breach of that provision or of any of any other
provision of this Agreement. The failure of a party to insist upon
strict adherence to any term of this Agreement on one or more occasions
will not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
term of this Agreement. Any waiver must be in writing and, in the case
of a corporate party, be authorized by a resolution of the board of
directors or by an officer of the waiving party.
4.5 Binding Effect. The provisions of this Agreement shall
be binding upon the inure to the benefit of the Company and CONSULTANT
and their respective successors and assigns; provided, however, that
nay assignment by any party of its rights under this Agreement without
the written consent of the other party shall be void.
<PAGE> 124
4.6 Severability. If any provisions of this Agreement are
invalid, illegal, or unenforceable, the balance of this Agreement shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to any other
persons and circumstances.
4.7 Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
4.8 Counterparts: Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the
same instrument. It shall be governed by and construed in accordance
with the laws of the State of Idaho, without giving effect to conflict
of laws.
4.9 Attorney's Fees. In the event of a dispute with respect
to this Agreement, the prevailing party shall be entitled to its
reasonable attorney's fees and other costs and expenses incurred in
litigating or otherwise resolving or settling such dispute.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
METALLINE MINING COMPANY, INC.
A Nevada corporation
By: /s/ John P. Ryan 12/31/97
John Ryan, Vice President
CONSULTANT
By: /s/ James C. Czirr
James C. Czirr
<PAGE> 125
EXHIBIT 99.2
ADDENDUM TO BUSINESS CONSULTING AGREEMENT
of James C. Czirr with Metalline Mining Company
dated December 1, 1997
This addendum is to be added to and incorporated in the above
referenced agreement between James C. Czirr and Metalline Mining
Company. It is agreed this 24th day of August 1998 to extend the above
referenced agreement for a period of 24 months to December 1, 2002.
In exchange for extending this agreement the following is agreed
to:
Consultant will be issued a warrant to purchase 100,000, One
hundred thousand shares of Metalline Mining Company common stock at a
price of $1.00, one dollar a per share. Said warrant shall have a term
of seven years from the date of this addendum and be identical in every
other respect to the initial warrant issued with the original agreement
signed December 31, 1997.
Consultant agrees to the following vesting schedule changes and or
buy back provisions for;
1. All warrants issued under December 1, 1997 agreement
2. All warrants issued as part of this extension
3. 300,000 shares of Metalline Mining common stock previously
issued consultant at 10 cents per share.
Warrants Issued to Consultant Per Consulting Agreement:
The warrants issued under Consultants original consulting
agreement and those issued per this extension will not be executable by
Consultant until December 24, 2002. In the event between the date of
this addendum and December 24, 2002 Consultant is unable or unwilling
to perform the duties outlined in The Consulting Agreement the warrants
will become null and void. It is understood Metalline will have the
authority to stop transfer on any attempt to execute the above
referenced warrants by Consultant or his assigns prior to completing
the extension of Consultants Agreement.
Shares Sold to Consultant for Ten Cents Per Share:
Consultant agrees not to transfer or sell any of the three hundred
thousand shares until December 24, 2002 with out written approval from
The Company. In the event between the date of this addendum and
December 24, 2002 Consultant is unable or unwilling to perform the
duties outlined in The Consulting Agreement it is agreed that
Consultants right to sell or transfer said shares will be subject to
the following restrictions and buy back provisions;
a. Consultant's right to sell or transfer said shares will be
limited to a number of shares equal to 20% of said shares for each
completed year of Consulting Agreement between the date of signing and
December 24, 2002.
<PAGE> 126
b. In the event Consultant doesn't finish the extension of his
agreement with The Company, Metalline Mining will buy back the number
of shares prohibited from transfer or sell for a price of ten cents per
share.
Agreed to this 24th day of August 1998 by:
Metalline Mining Company Consultant
______________________ _______ ______________________ _______
Merlin Bingham, Date James C. Czirr Date
President
