UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal year ended December 31, 1999
Commission file number 0-24393
AURORA GOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 13-3945947
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1505 - 1060 ALBERNI STREET, VANCOUVER B.C. CANADA V6E 4K2
(Address of principal executive offices)
Registrant's telephone number, including area code 604-687-4432
Securities registered under Section 12(b) of the Securities Exchange Act of
1934: None
Securities registered pursuant to Section 12 (g) of the Securities Exchange Act
of 1934:
Title of each class Name of each exchange on
which registered
- ----------------------- ---------------------------
Common stock, par value $0.001 per share NASD OTC Bulletin Board
- --------------------------------------------------- ---------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Security Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part 111 of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
Revenue for the fiscal year ended December 31, 1999 was $Nil
The aggregate market value of the Registrant's voting common Stock held by
non-affiliates was $5,851,738 as of January 31, 2000. There were 11,460,651
shares of the registrant's Common Stock outstanding as of January 31, 2000.
Documents incorporated by reference herein: None
Transitional Small Business disclosure format (check one); YES [ ] NO [X]
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AURORA GOLD CORPORATION
This annual report contains statements that plan for or anticipate the
future and are not historical facts. In this Report these forward looking
statements are generally identified by words such as "anticipate", "plan",
"believe", "expect", "estimate", and the like. Because forward-looking
statements involve future risks and uncertainties, these are factors that could
cause actual results to differ materially from the estimated results. These
risks and uncertainties are detailed in Item 1. "Business", Item 2.
"Properties", Item 6. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" Item 7 "Financial Statements", Item 12
"Certain Relationships and Related Transactions".
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for such statements, may not apply to this Report.
ITEM 1. BUSINESS
(A) GENERAL
Aurora Gold Corporation (the "Company" or "Aurora") was incorporated under
the laws of the State of Delaware on October 10, 1995, under the name "Chefs
Acquisition Corp." Initially formed for the purpose of engaging in the food
preparation business, it redirected its business efforts in late 1995 following
a change of control, which occurred on October 30, 1995, to the acquisition,
exploration and, if warranted, the development of mineral resource properties.
The Company changed its name to Aurora Gold Corporation on August 20, 1996 to
more fully reflect its business activities.
Since its redirection, the Company's activities have been limited primarily
to the acquisition of rights to certain mineral properties and the
implementation of preliminary exploration programs on these properties in which
it has acquired an interest. See "Item 2. Description of Property."
The Company is engaged in the location, acquisition, exploration and, if
warranted, development of mineral resource properties. All of the mineral
properties in which the Company has an interest or a right to acquire an
interest in are currently in the exploration stage. None of the properties have
a known body of Mineral Reserves. The Company's primary objective is to explore
for gold, silver, base metals and industrial minerals and, if warranted, to
develop those existing mineral properties. Its secondary objective is to locate,
evaluate, and acquire other mineral properties, and to finance their exploration
and development either through equity financing, by way of joint venture or
option agreements or through a combination of both.
Currently, the Company's activities are centered in Canada, Guatemala,
Tunisia and the United States of America.
During 1999, the Company completed initial exploration programs for gold
mineralization on its properties in the Yukon Territory and Guatemala. The
results from the Yukon have been assessed and the Company is considering
increases to the more prospective blocks of claims while reducing the overall
area held.
In Guatemala, the Company was granted the San Diego Exploration
Reconnaissance License in September, 1999 and entered into a joint venture with
Patagonia Gold Corporation in October 1999. Initial exploration work begun in
1998 will continue into 2000. The Company reduced the number of exploration
licenses held in Guatemala following review of results obtained in 1998 and
1999.
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In October, 1999 and January, 2000 the Company entered into agreements for
the acquisition of properties in Tunisia, North Africa, and made further
applications for exploration permits in its own right. In March 2000 the Company
signed a letter of intent with two subsidiaries of Billiton plc for funding of
exploration on one of the properties. The Company will commence exploration for
zinc-lead deposits on its Tunisian properties during the first half of 2000.
None of the Company's properties contain any known Mineral Reserves.
The Company's common stock is traded on the NASD's OTC Bulletin Board.
The Company has not declared or paid dividends on its shares since incorporation
and does not anticipate doing so in the near future.
The Company's offices are located at 1505 - 1060 Alberni Street, Vancouver,
British Columbia, Canada, V6E 4K2.
(B) SIGNIFICANT DEVELOPMENTS IN FISCAL 1999 AND SUBSEQUENT EVENTS
In fiscal 1999 the Company issued 279,157 common shares and received
advances on 900,000 common shares for an aggregate consideration of $620,694.
The following is a breakdown of the common shares issued and subscribed. The
Company issued 22,871 common shares for aggregate cash consideration of $15,000
and received $425,000 on the subscription of 900,000 shares. The 900,000 common
shares were issued during the first quarter of 2000. The Company settled
$160,382 of debt with the issuance of 231,286 common shares at prices ranging
from $0.62 to $0.84 per common share. The Company also issued 25,000 common
shares at a price of $0.81 per common share for aggregate consideration of
$20,312 in payment of a finder's fee.
British Columbia, Canada
In February, 1999, the Company acquired, by staking, a high grade limestone
property three (3) square kilometres (741 acres) located on the north shore
of Kumealon Inlet, 54 kilometres South-Southeast of Prince Rupert, B.C.
Canada.
Yukon Territory, Canada
In May and June, 1999 the Company acquired a 100% interest in five gold
exploration properties by staking 1,055 claims covering approximately 240
square kilometers, in the Yukon's Tintina Gold Belt. The properties are
known as Carlisle Creek, Independence Creek, Livingstone North, Sonora West
and White River.
During summer and autumn 1999 the Company conducted field programs on the
Sonora West, Independence Creek, Carlisle Creek and White Creek properties.
The work involved soil and stream sediment geochemical sampling and
geological mapping. The results of the fieldwork were assessed in the last
quarter of 1999 and the Company is considering increases to the more
prospective blocks of claims but with reductions to the overall area held.
Guatemala, Central America
As a consequence of the results of the geological reconnaissance, sampling
of rock outcrops and stream sediment sampling which were carried out in
1998 and the first quarter of 1999, it was decided to surrender six (6)
exploration licenses (January, 1999) and withdraw four (4) applications
(February, 1999). The Company retains five (5) mineral exploration
licenses, specifically Aguas Calientes, Apantes, La Esperanza, El Jicaro
and Valenton 1,
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and one mineral reconnaissance license known as San Diego, which was
awarded in September 1999.
In October 1999 the Company entered into a joint venture with Patagonia
Gold Corporation for preliminary exploration of the San Diego
reconnaissance license, which covers 800 square kilometers. An exploration
program funded by Patagonia Gold Corporation commenced on the most
prospective areas during the last quarter of 1999 and will continue in
2000.
Tunisia, North Africa
Following review of extensive data prepared by the Office National des
Mines ("ONM") of Tunisia, the Company entered into six Option Agreements
with High Marsh Holdings Limited ("High Marsh"), a company incorporated in
the British Virgin Islands, to acquire 100% interest in six properties,
considered highly prospective for discovery of predominantly zinc-bearing
deposits, similar to those currently being exploited in Tunisia. The
properties are known as Hamman Zriba/Jebel Guebli, Ouled Moussa (Bou Jabeur
Est), Koudiat Sidii, Jebel Oum Edeboua (Garn Halfaya), El Moghuer (Garn
Halfaya) and Hammala (Kebbouch Ouest).
The four Option Agreements for Hamman Zriba/Jebel Guebli, Koudiat Sidii,
Ouled Moussa (Bou Jabeur Est) and Hammala (Kebbouch Ouest) provide for cash
payments of $5,000 for each property on signing and receipt of title
documents, with additional cash payments for each property of $10,000,
$15,000, $20,000 and $25,000 on the anniversary dates in subsequent years.
Cash payments for Jebel Oum Edeboua and El Mohguer are $2,500 for each on
signing and receipt of title documents, and $5,000, $7,500, $10,000 and
$12,500 on the anniversary dates in subsequent years.
Work commitments required to be completed by the anniversary dates on
Hamman Zriba/ Jebel Guebli, Ouled Moussa and Hammala are $50,000 in the
first and second years, increasing to $75,000, $150,000 and $175,000 for
subsequent years.
Work commitments on Jebel Oum Edeboua, and El Mohguer, are $25,000 in the
first and second years and $37,500, $75,000, and $87,500 for subsequent
years. For Koudiat Sidii the work commitments are $25,000 in the first
year, and $50,000, $100,000, $150,000 and $175,000 in subsequent years.
The Option Agreements allow for royalties of 2% Net Smelter Return ("NSR")
on commencement of commercial production. The NSR on each property can be
reduced to 1% by cash payment of $1.0 million. Advance royalties of $25,000
per annum are payable for each property, after vesting of the properties
through compliance with cash payments and work commitments, until
commercial production is established.
In February 2000 the Company, in its own right, filed applications for ten
(10) additional exploration permits which were accepted by the Directeur
General L'Office National des Mines. The new permit areas are contiguous
with the Hammala property and will increase the area under Aurora's control
to 42 square kilometers. The Hammala property, and these additional permit
areas in the Kebbouch district, will be foremost in the Company's
exploration plans for 2000.
In March 2000 the Company signed a letter of intent with two subsidiaries
of Billiton plc ("Billiton"), a major international mining company, for
funding of exploration on the Hammala property. The letter of intent will
lead to an agreement under which Billiton will make an initial private
placement of $600,000 at a unit price of $0.70. Each unit will comprise a
common share with a purchase warrant exercisable for one year, at $0.85,
for
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further proceeds of $728,571. After the initial private placement is spent,
Billiton can elect to take a First Option wherein it can earn 51% in the
Hammala property by spending a further $1.0 million over two years.
Following the First Option period, a Joint Venture Phase of further
exploration of the Hammala property, with expenditure of $2.0 million, will
be funded pro rata by Billiton and Aurora. Prior to the end of the Joint
Venture Phase, Billiton can elect to exercise a Second Option to earn a
further 19%, i.e., to reach a total of 70%, by financing all further work,
including Pre-feasibility and Feasibility Studies, engineering, mine
development and construction through to commercial production. Aurora's pro
rata share of these costs will be repaid from Aurora's share of cash flow.
Aurora will be the Operator from the outset and, subject to certain
limitations, will also carry out regional exploration for zinc in Tunisia
for Billiton, with Billiton having a right of first refusal to enter into
further exploration agreements
United States of America
The Totem Talc property, covering approximately 206 acres is located near
Metalline Falls, Pend Oreille County, Washington, approximately 100 miles
north of Spokane. The property is held under option by Aurora in an
Agreement with the joint venture owners, United Catalysts Inc. and Getchell
Gold Corporation.
The Company engaged a firm of consultants to re-estimate the Mineral
Resources of the talc deposit and provide an overview for further
development of the project. The revised estimate of Mineral Resources
represent increases of 71% in tonnage (to 2.2 million tonnes), and 2.27 %
in talc grade (to 45.9%), above those previously reported by Aurora. The
Company is considering strategies for the project based on conclusions and
recommendations within the consultant's report.
The Company has not complied with the expenditure requirements for 1999 and
is seeking modification to the schedule of option payments commencing with
the payment which was due on December 15, 1999.
(C) EXPLORATION AND DEVELOPMENT
The Company conducts exploration activities from its headquarters in
Vancouver, Canada. The Company owns or controls unpatented mining claims, and
mineral exploration concessions, in British Columbia and Yukon Territories,
Canada; Guatemala, Tunisia, and the United States of America. The Company's
strategy is to concentrate its investigations into:
(1) Existing operations where an infrastructure already exists;
(2) Properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and
(3) Grass-roots exploration opportunities.
The Company is currently concentrating its exploration activities in
Canada, Guatemala and Tunisia. The Company is also examining other exploration
properties in Mexico and North Africa.
Exploration expenses on the British Columbia Kumealon limestone prospect
totalled $2,286 during fiscal 1999 (1998 - $0) in addition to the $23,630 (1998
- - $0) in mineral property acquisition costs.
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Exploration expenses in the Yukon Territories with respect to the Carlisle
Creek, Independence Creek, Livingstone North, Sonora West and White River
properties totalled $407,319 during fiscal 1999 (1998 - $0).
Exploration expenses in Guatemala totalled $53,597 during fiscal 1999 (1998
- - $148,774) in addition to the $15,500 (1998 - $57,942) in mineral property
acquisition costs. Exploration expenditures on the San Diego Reconnaissance
Concession by Aurora's joint venture partner totalled $23,117 during fiscal 1999
(1998 - $0) in addition to the $9,250 (1998 - $0) in mineral property
acquisition costs
Exploration expenses in Tunisia totalled $93,362 during fiscal 1999 (1998 -
$0) in addition to the $15,000 (1998 - $0) in mineral property acquisition
costs.
Exploration expenses in the United States with respect to the Totem Talc
property totalled $39,783 during fiscal 1999 (1998 - $11,418).
Project assessment and exploration expenditures of $90,621 (1998 -
$230,041) were spent on project assessment and exploration in fiscal 1999.
All of the Company's properties are in the exploration stages only and are
without a known body of Mineral Reserves. Development of the properties will
follow only if satisfactory exploration results are obtained. Mineral
exploration and development involves a high degree of risk and few properties
that are explored are ultimately developed into producing mines. There is no
assurance that the Company's mineral exploration and development activities will
result in any discoveries of commercially viable bodies of mineralization. The
long-term profitability of the Company's operations will be, in part, directly
related to the cost and success of its exploration programs, which may be
affected by a number of factors.
(D) EMPLOYEES
As of January 31, 2000 there were six (6) full time employees and twelve
(12) part time employees.
(E) REGULATION OF MINING ACTIVITY
Aurora's interests in its projects will be subject to various laws and
regulations concerning development, production, taxes, labor standards,
environmental protection, mine safety and other matters. In addition, new laws
or regulations governing operations and activities could have a material adverse
impact on Aurora.
(F) FOREIGN COUNTRIES AND REGULATORY REQUIREMENTS
Mineral exploration, development and mining activities on the Company's
properties may be affected in varying degrees by political stability, and the
policies of other nations. Any changes in regulations or shifts in political
conditions are beyond the control of the Company and may adversely affect its
business. Operations may be affected by government laws and regulations or the
interpretations thereof, including those with respect to export controls,
expropriation of property, employment, land use, water use, environmental
legislation and mine safety. Operations may be also affected by political and
economic instability, confiscatory taxation, restriction on currency
conversions, imports and sources of supplies, the expropriation of private
enterprises, economic or other sanctions imposed by other nations, terrorism,
military repression, crime, and extreme fluctuations in currency exchange rates
and high inflation and make it more difficult for the Company to raise funds for
the development of its mineral interests in some countries.
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(G) COMPETITION
Many companies are engaged in the exploration and development of mineral
properties. The company encounters strong competition from other mining
companies in connection with the acquisition of properties producing or capable
of producing gold, lead, zinc and industrial minerals. Many of these companies
have substantially greater technical and financial resources than Aurora and
thus the company may be at a disadvantage with respect to some of its
competitors.
The marketing of minerals is affected by numerous factors, many of which
are beyond the control of the company. Such factors include the price of the
mineral in the marketplace, imports of minerals from other nations, the
availability of adequate refining and processing facilities, the price of fuel,
electricity, labor, supplies and reagents and the market price of competitive
minerals. In addition, sale prices for many commodities are determined by world
market forces or are subject to rapid and significant fluctuations that may not
necessarily be related to supply or demand or competitive conditions that in the
past have affected such prices. Significant price movements in mineral prices
over short periods of time may be affected by numerous factors beyond the
control of the Company, including international economic and political trends,
expectations of inflation, currency exchange fluctuations (specifically, the
U.S. dollar relative to other currencies), interest rates and global or regional
consumption patterns, speculative activities and increased production due to
improved mining and production methods. The effect of these factors on the price
of minerals and, therefore, the economic viability of any of the Company's
projects cannot accurately be predicted. As the Company is in the development
stage, the above factors have had no material impact on operations or income.
(H) ENVIRONMENTAL REGULATIONS
All phases of the Company's operations in Canada, Guatemala, Tunisia and
the United States of America are subject to environmental regulations.
Environmental legislation in all countries is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. Although the Company believes it is in compliance with
all applicable environmental legislation, there is no assurance that future
changes in environmental regulation, if any, will not adversely affect the
Company's operations.
(I) MINING RISKS AND INSURANCE
Mineral exploration involves many risks, which even a combination of
experience, knowledge and careful evaluation may not be able to overcome.
Operations in which the Company has a direct or indirect interest will be
subject to all type of hazards and risks or unexpected formations, cave-ins,
pollution, all of which could result in work stoppages, damages to property, and
possible environmental damages. The Company does not have general liability
insurance covering its operations and does not presently intend to obtain
liability insurance as to such hazards and liabilities. Payment of any
liabilities therefore could have a materially adverse effect upon the Company's
financial condition.
ITEM 2. DESCRIPTION OF PROPERTY
All of the Company's properties are in the preliminary exploration stage and do
not contain any known body of ore.
The Company's exploration activities are presently in Canada, Guatemala,
Tunisia and the United States of America.
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(A) BRITISH COLUMBIA, CANADA
In February 1999, the Company acquired, by staking, a high grade limestone
property three (3) square kilometres (741 acres) located on the north shore of
Kumealon Inlet, 54 kilometres south-southeast of Prince Rupert, B.C. Canada.
This developed property is highlighted by consistence of purity and
whiteness of the limestone zone outcropping along the southwest shore of
Kumealon Lagoon. The zone is comprised mostly of white, recrystallized, fine to
course grained limestone, striking 150 degrees and can be traced for at least
1200 meters. The zone is estimated to have an average stratigraphic thickness of
180 meters. Chip samples taken across the zone averaged 55.06% CaO, 2.11%
insolubles and 43.51% ignition loss. The zone is estimated to contain 19 million
tonnes of high-grade limestone over a strike length of 1200 meters, with an
average width of 180 meters and an average height above water of 30 meters.
The Company's plans for a complete geological investigation in connection
with an extensive bedrock-sampling program have been deferred until 2000. In the
meantime, the Company is considering an offer to sell the property in part to
reduce the geological and geological spread of its exploration interests.
Exploration expenses on the British Columbia Kumealon limestone prospect
totalled $2,286 during fiscal 1999 (1998 - $0) in addition to the $23,630 (1998
- - $0) in mineral property acquisition costs.
(B) YUKON TERRITORIES, CANADA
In May and June 1999 the Company acquired by staking, 100% interest in five
(5) gold exploration properties covering approximately 240 square
kilometers, in the Yukon. The primary interest lies between the Tintina
Fault to the north and the Denali Fault to the south and defining a broad
arc through central Alaska and the Yukon, known as the Tintina Gold Belt.
Although the geological models and theories on the formation of recent
major discoveries of gold deposits in Alaska are still being defined and
refined, there is compelling evidence that deposits similar to Pogo
(Mineral Resource containing 5.2 million ounces of gold) and Fort Knox
(Mineral Reserve containing 7.3 million ounces of gold) may be discovered
in the Yukon.
The Company compiled geochemical, geophysical and Yukon Minifile
information in a computer-based Graphical Information System ("GIS"). With
these data, the Company identified a large number of gold targets within
the Yukon's Tintina Gold Belt and, subsequently, staked a total of 1,055
claims in five (5) main blocks, viz:
Carlisle Creek Property
The property comprises 102 contiguous claims covering approximately 25
square kilometers, which were staked in June 1999. It is located in
the Dawson Range, 200 kilometers northwest of the town of Carmacks and
125 kilometers south of Dawson City. The property was staked because
of anomalous gold, arsenic, antimony and tungsten levels in stream
sediment samples identified from the GIS and a similar geological
setting to the Pogo deposit, owned by Sumitomo Metal Mining Arizona,
Inc., SC Minerals Inc., and Teck Resources, Inc., located in
east-central Alaska, approximately 145 kilometers southeast of
Fairbanks.
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Independence Creek Property
The property comprises 244 claims, in two blocks, covering
approximately 60 square kilometers, which were staked in June 1999. It
is located in close proximity to the east of the Carlisle Creek
property. The property was selected because of anomalous gold,
arsenic, antimony and tungsten levels in stream sediment samples
identified from the GIS, and as with the Carlisle Creek property,
similar geological setting to the Pogo deposit.
Livingstone North
The property comprises 479 claims, in two blocks, covering
approximately 120 square kilometers, which were staked in July 1999.
It is located in the Big Salmon Range, 100 kilometers north-northeast
of the city of Whitehorse. The property was selected because of
strongly anomalous gold, arsenic, antimony and tungsten levels in
stream sediment samples identified from the GIS. Additional factors
leading to selection of the property were the geological similarities
to the area north of Fairbanks, Alaska, and occurrence of placer gold
and bismuth minerals in quartz vein material at Livingstone Creek.
Sonora West
The property comprises 116 contiguous claims, covering approximately
29 square kilometers, which were staked in June 1999. It is located in
the Dawson Range, 115 kilometers northwest of the town of Carmacks.
The property was selected to cover geophysical anomalies, suggestive
of hydrothermal alteration, in an area drained by streams from which
weakly anomalous values of gold, arsenic and antimony were detected in
stream sediment samples identified from the GIS.
White River
The property comprises 114 claims, in three blocks, covering
approximately 29 square kilometers, which were staked in June 1999. It
is located in the Dawson Range, 235 kilometers northwest of the town
of Carmacks and 125 kilometers south of Dawson City. The property was
selected because of anomalous values of gold, arsenic and antimony
detected in stream sediment samples identified from the GIS. There are
also similarities in the geological setting to that of the Pogo
deposit.
In the period from July through September, 1999 the Company conducted field
programs on the Sonora West, Independence Creek, Carlisle Creek and White
Creek properties. The work involved soil and stream sediment geochemical
sampling and geological mapping. The results of the fieldwork were assessed
in the last quarter of 1999 and the Company is considering reducing the
overall area held but with increases to the more prospective blocks of
claims.
Exploration expenses in the Yukon Territories with respect to the Carlisle
Creek, Independence Creek, Livingstone North, Sonora West and White River
properties totalled $407,319 during fiscal 1999 (1998 - $0).
(C) GUATEMALA, CENTRAL AMERICA
In Guatemala, the Company's rights are working interests in mineral
exploration concession licenses and a mineral reconnaissance license. The
mineral exploration concession license confers on the titleholder the exclusive
right to locate, study, analyze and evaluate the deposits that have been
granted, within the licenses' territorial limits and to unlimited depth in the
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subsoil. The mineral reconnaissance license confers to the titleholder the
exclusive rights to identify and locate possible areas for exploration, within
the license's territorial limits and to unlimited depth in the subsoil.
During 1998, the Company applied for fifteen (15) mineral exploration
licenses and one (1) mineral reconnaissance license. The following ten (10)
mineral exploration concession licenses were granted by the Guatemala government
to the company in 1998, viz: Miramundo, El Rancho, Monjitas, Los Angeles, Los
Cipreces, Chiyax , Apantes, Jicaro, Valenton 1and Aguas Calientes. At December
31, 1998 five (5) applications for mineral exploration concession licenses,
namely Barranquillo, Bola de Oro, La Esperanza, La Union and El Tesoro 1 and one
(1) mineral reconnaissance license, San Diego, were pending and subsequently
granted during 1999.
All the Company's concessions are located within the South Volcanic Belt in
Guatemala, which is considered to be the geological setting with the greatest
mineral potential in the country. The Volcanic Province is represented by a
Quaternary chain of active volcanoes to the south and Tertiary igneous rocks to
the north. In the Tertiary area, ignimbrites and rhyolites crop out, as well as
acidic tuffs and several intrusives. Gold-silver deposits are expected to be
found in granites and in quartz veins within the tuffs. The epithermal type of
precious and basic metallic deposits and the presence of lithofilic elements are
associated with the geology of this area. In the eastern part of the volcanic
province, the most common mineralogy is pyrite and arsenopyrite with
chalcopyrite, covelite and native gold as associated minerals, and it is related
to epithermal processes associated with intrusive igneous bodies. Important
deposits of copper-lead-zinc-silver, gold-silver and lead-zinc mineralization
occur in veins located in fractures within Tertiary volcanic rocks, typical
features of epithermal deposits filling fissures that originated from tensional
stresses. The mineralization consists mainly of zinc sulfides, lead-silver and
copper with calcite and quartz as gangue minerals. Other deposits of economic
importance are formed by a series of iron oxide bodies. It is important to note
that most of this province has not yet been explored and evaluated, but it is
one of the more important zones of interest due to its favorable geological
environment for mineralization.
During fiscal 1998, and early 1999, the Company carried out programs of
geological reconnaissance, sampling of rock outcrops and sampling of stream
sediments, on the mineral exploration concession licenses at Aguas Calientes,
Apantes, Chiyax, El Rancho, El Jicaro, Los Angeles 1, Los Cipreces, Miramundo,
Monjitas and Valenton 1. In addition, similar programs were completed on five
(5) properties for which applications for mineral exploration concession
licenses were pending, namely Barranquillo, Bola de Oro, La Esperanza, La Union
and El Tesoro 1.
As a consequence of the results of the work programs, the mineral
exploration concession licenses were cancelled for Los Angeles 1, Chiyax, Los
Cipreces, Miramundo, Monjitas, and El Rancho in January, and February 1999.
Applications for Barranquillo, Bola de Oro, La Union 1 and El Tesoro 1 were
withdrawn in the same time period.
The Company retains a portfolio of five (5) mineral exploration concession
licenses, namely: Aguas Calientes, Apantes, La Esperanza, El Jicaro and Valenton
1 and one (1) mineral reconnaissance license, San Diego which was granted in
September 1999. In October 1999 the Company entered into a joint venture
agreement with Patagonia Gold Corporation ("Patagonia") to carry out preliminary
exploration within the San Diego license area. Under the terms of the joint
venture Patagonia can earn a fifty percent (50%) interest in the San Diego
mineral reconnaissance licence upon (a) payment of $9,250 (paid) Guatemala
government fee for the acquisition of the San Diego mineral exploration
reconnaissance licence and (b) the payment of $18,617 (paid) for a Phase 1
exploration program.
Discussion of the individual properties follows:
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Aguas Calientes - Mineral Exploration Concession License
The Aguas Calientes mineral exploration concession is located in the
department of Sacatepequez in western Guatemala, some 30 kilometers
southwest of Guatemala City. It covers an area of 99 square kilometers.
Mining was carried out in the Spanish colonial period in a U-shaped,
volcanic caldera in which the villages of San Antonio, Santa Catarina,
Santiago and San Miguel are located. Investigation into old workings and a
reconnaissance sampling program are planned during 2000.
Apantes - Mineral Exploration Concession License
The Apantes mineral exploration concession is located in the Jutiapa and
Jalapa departments of eastern Guatemala 130 kilometers east of Guatemala
City. It covers an area of 88 square kilometers. The area is located within
tertiary volcanic rocks in contact with several pockets of redbeds. The
reconnaissance program conducted in 1999 showed anomalous gold and silver
values in quatz-sericite-pyrite alteration in basic volcanic rocks on the
southeastern part of the concession. Further sampling and mapping of this
area is required. The Company is considering an offer to sell the Apantes
concession to reduce work commitments and concentrate on the other
concessions.
El Jicaro - Mineral Exploration Concession License
The El Jicaro mineral exploration concession is located in the El Progreso
department of eastern Guatemala, some 80 kilometers east of Guatemala City.
It covers an area of 90 square kilometers. The geology of the region is
characterized by the presence of several rock types, including intrusives,
tertiary rhyolites and redbeds of the Cretaceous age and is marked by the
presence of the Motagua Fault, the largest east-west structure in
Guatemala. The reconnaissance program carried out in 1999 identified
anomalous gold values in partly metamorphosed rocks (serpentinite) and
stream sediments in the southern part of the concession. Further sampling
and mapping of this area is planned during 2000.
Valenton 1 - Mineral Exploration Concession License
The Valenton 1 mineral exploration concession is located in the Guatemala
and Baja Verapaz departments in central Guatemala, 20 kilometers north of
Guatemala City. It covers an area of 25 square kilometers. The mineral
exploration concession is located within metamorphic rocks (serpentinite)
extremely close to the Montagua Fault system in a zone of great geological
complexity, which may control mineralization. Alluvial gold has been
retrieved from sand bars in the Motagua River since Spanish colonial times.
The reconnaissance program conducted in 1999 concentrated on sampling of
sediments of streams draining into the Motagua River. Anomalous values in
gold were obtained and further fieldwork, including sampling and mapping is
planned.
La Esperanza - Mineral Exploration Concession License
The La Esperanza mineral exploration concession is located in the Zacapa
department in eastern Guatemala some 115 kilometers east of Guatemala City.
It covers an area of 40 square kilometers. The vein system within
metamorphic rocks consists of a set of at least sixteen white-clear, quartz
veins, varying from 0.3 to 9.0 meters in width, oriented between N60o W and
N30o W, outcropping in some cases for up to 500 meters. The quartz veins
contain sulfides in the form of galena, chalcopyrite, pyrite, native copper
and some copper oxides. A program of trenching and chip sampling showed
anomalous gold and silver values with defined spatial distribution in the
central area of the vein system. Additional trenching and sampling is
warranted, followed by drilling below the high-grade sections to determine
whether, or not, grades increase and the veins are continuous, with depth.
11
<PAGE>
San Diego - Mineral Reconnaissance License
San Diego is a mineral reconnaissance concession located in the Zacapa and
Chiquimula departments in eastern Guatemala, some 150 kilometers east of
Guatemala City. As a mineral reconnaissance concession, it covers a larger
area than a mineral exploration concession, specifically 800 square
kilometers. The main feature of the mineral reconnaissance concession is
the fact that it completely surrounds the El Pato gold and silver mineral
reserve, an exploration project funded by the United Nations which
identified a Mineral Resource estimated to contain some 200,000 ounces of
gold. Geologically, because of its size this mineral reconnaissance
concession contains several geological settings. Most important is the
presence of the Motagua Fault to the North and the Chiguimula Pluton
(intrusive) on the eastern half of the concession.
Following archival and other research, the Company, as operator for the
joint venture with Patagonia, commenced work on prospective areas within
the reconnaissance concession in November 1999. The work consists of
sampling of outcrops, soils and stream sediments and mapping, the results
of which are expected during the first quarter of 2000. The aim of the
preliminary exploration work is to identify a number of highly prospective
areas for which applications for mineral exploration licenses will be made,
and subsequently undertake more comprehensive work.
Exploration expenses in Guatemala totalled $53,597 during fiscal 1999 (1998
- - $148,774) in addition to the $15,500 (1998 - $57,942) in mineral property
acquisition costs. Exploration expenditures on the San Diego Reconnaissance
Concession by Aurora's joint venture partner totalled $23,117 during fiscal 1999
(1998 - $0) in addition to the $9,250 (1998 - $0) in mineral property
acquisition costs.
(D) TUNISIA, NORTH AFRICA
Following review of extensive data prepared by the Office National des
Mines ("ONM") of Tunisia, North Africa, the Company entered into six Option
Agreements with High Marsh Holdings Ltd. ("High Marsh"), a company incorporated
in the British Virgin Islands, in July 1999, to acquire 100% interest in six
properties, considered highly prospective for discovery of predominantly
zinc-bearing deposits, similar to those currently being exploited in Tunisia.
The properties are held under exploration permits ("Permis de Recherche") from
the ONM.
In February 2000 the Company, in its own right, filed applications for ten
(10) additional exploration permits which were accepted by the Directeur General
L'Office National des Mines. The new permit areas are contiguous with the
Hammala property, in the Kebbouch district. In March, 2000 the Company signed a
letter of intent with two subsidiaries of Billiton, which will lead to an
agreement for funding of exploration and development, if subsequently warranted,
of the Hammala property.
The properties are located in the "Zone des Domes", a southwest - northeast
striking belt of Triassic salt domes and diapirs intruded into Cretaceous
carbonates. The zone is the central part of the Atlas fold belt in Tunisia, and
is approximately 250 kilometers long by 80 kilometers wide. Most of the past
zinc producers and the three currently producing mines are located in the Zone
des Domes.
Zinc and lead mineralization, as sphalerite (ZnS) and galena (PbS),
accompanied by barite and fluorite, occurs in marls and dolomitic limestones.
The deposits are, in the main, structurally controlled and located on the flanks
of the southwest - northeast trending Triassic diapirs where these have been cut
by north-northwest trending strike-slip faults. The deposits include lenses and
12
<PAGE>
veins along the flanks and in the cap-rocks of the diapirs, stratabound
disseminations in adjacent limestones and marls, and replacements and fill, in
solution cavities (karsts).
The Bahloul Formation, limestone formed in the Cenomanian to Turonian time
(Middle to Upper Cretaceous stages), is an important formation for exploration
within Northern Tunisia. The formation, between 30 and 50 meters thick, is
organic-rich and known to host stratiform lead-zinc mineralization with
extensive disseminated mineralization within the hanging wall rocks. The Bou
Grine deposit, currently being extracted by Breakwater Resources Tunisia, S.A.,
with reported Mineral Reserves as at December 31, 1998, of 2.7 million tonnes at
grades of 2.3% lead and11.9% zinc, is the most significant Bahloul-hosted
deposit found to date.
The properties held under option by the Company are:
Hammala (Kebbouch Ouest)
The property comprises four (4) square kilometers in the western Kebbouch
district located between the town of Le Krib and the city of Le Kef,
approximately 150 kilometers by road, southwest of Tunis. The property
covers a portion of the west side of a crescent-shaped Triassic diapir,
known as Jebbel Kebbouch, where Cenomanian-Turonian rocks, including the
Bahloul Formation, are common. The exploration potential is considered
significant because of a large, geochemical anomaly extending over a
distance of some 1.5 kilometers, with soil sample values as high as 97,000
parts per million (9.7%) for zinc and 15,000 parts per million (1.5%) for
lead. The anomaly, the extent of which has not been defined and, thus,
remains largely untested, overlies favorable stratigraphy.
The Hammala property was previously explored by the Office National des
Mine ("ONM"), the Tunisian government entity responsible, until recently,
for exploration and evaluation of mineral resources within the country.
The ONM also drilled five holes on the northwestern flank of the diapir
within the Hammala property with the most significant intercept being 21
meters of 5.35% zinc and 1.1% lead. The mineralization remains open at
depth and along strike.
The ten additional exploration permits applied for by the Company in
February, 2000 will increase the contiguous area to 42 square kilometers,
and give substantial coverage of the Jebel Kebbouch diapir extending
southwest from its northeastern extremity to the northern and western
boundaries of Kebbouch Sud, an exploration permit held by Breakwater
Tunisia S.A
Overall, the target is stratiform mineralization within the Bahloul
Formation and associated stockwork mineralization, akin to the Bou Grine
deposit being mined by Breakwater Tunisia S.A. The Hammala property, and
the additional permit areas in the Kebbouch district, will be foremost in
the Company's exploration plans for 2000. Aurora will be the Operator under
the terms of the letter of intent, and subsequent agreement, signed with
Billiton, which covers exploration at Hammala and other regional prospects.
Koudiat Sidii
The property comprises four (4) square kilometers located approximately 22
kilometers south of the city of Le Kef, five kilometers west of road MC71,
approximately 200 kilometers by road, southwest of Tunis. The property is
centered on a buried Triassic diapir flanked by a transition zone breccia
and Bahloul Formation. Oxide mineralization was mined between 1905 and 1913
and limited exploration drilling was carried out in 1992 and 1995.
13
<PAGE>
Soil geochemical profiles were carried out bas a joint effort by
Metallgesellschaft and the ONM in 1992. An anomaly, approximately one
kilometer long, was identified in which zinc values ranged from 1,000 to
20,000 parts per million. Three drill holes were subsequently drilled and,
although zinc-lead intercepts were sub-economic, the results showed that
the Bahloul Formation is mineralized in this area. Further exploration will
be aimed at identifying podiform, replacement and disseminated lead-zinc
mineralization within the extensive, untested zones of geochemically
anomalous Bahloul stratigraphy.
Hamman Zriba /Jebel Guebli
The property comprises sixteen (16) square kilometers located approximately
eight kilometers southeast of the town of Zaghouan, on the outskirts of the
village of Hamman Zriba, approximately 60 kilometers, by road, southwest of
Tunis. The stratiform deposit of barite and fluorite, two to five meters
thick, was mined between 1992 and 1995 although other workings for
lead/zinc mineralization date back to Roman times. Previous exploration
drill holes were generally terminated when lead/zinc mineralization was
encountered. Exploration would be aimed at identifying discrete sulfide
deposits associated with the barite and fluorite.
Ouled Moussa (Bou Jabeur Est)
The property comprises sixteen (16) square kilometers located close to the
Algerian border, six kilometers west of the village of Kalaat-es-Senaam,
approximately 240 kilometers, by road, southwest of Tunis. The Tunisian
government has an operating mine, Bou Jabeur Est, on property, which
extends west to the Algerian border. The deposit is a replacement and
cavity-fill with no recognized metal zonation and although barite and
fluorite are extracted, lead and zinc are accessories. The mineralization
reportedly plunges to the west and Algerian operations exploit primarily
lead and zinc mineralization. Aurora's property is immediately to the east
of Bou Jabeur Est and the exploration target is for eastward plunging
metalliferous mineralization similar to that of the western extension.
Jebel Oum Edeboua (Garn Halfaya) and El Mohguer (Garn Halfaya)
The properties comprise two adjoining blocks, each four (4) square
kilometers, located approximately 25 kilometers west of the city of Le Kef,
five kilometers north of road GP5, approximately 200 kilometers, by road,
west-southwest of Tunis. Mining of lead-zinc veins in Cenomanian limestone
and marl, ceased in 1951. Outcrops of Bahloul Formation are exposed on the
property and exploration efforts would be aimed at identifying stratiform
or peneconcordant lead/zinc mineralization in this formation, and
replacement lead/zinc mineralization in a "blind" transition zone on the
southeast flank of the Jebel Oum Edeboua diapir.
Exploration expenses in Tunisia totalled $93,362 during fiscal 1999 (1998 -
$0) in addition to the $15,000 (1998 - $0) in mineral property acquisition
costs. The Tunisian authorities are welcoming foreign investment and Aurora is
one of very few companies which have so far taken advantage of the privatization
of mineral exploration and exploitation. There is compelling evidence that
significant deposits of zinc-lead mineralization may exist within the properties
in which the Company has either entered into Option Agreements, or moved to
acquire in its own right.
(E) UNITED STATES OF AMERICA:
The Totem Talc property is located near Metalline Falls, Pend Oreille
County, Washington, approximately 100 miles north of Spokane. The Totem Talc
property consists of ten unpatented
14
<PAGE>
lode claims, covering approximately 206 acres, and is held under option by
Aurora in an Agreement with the joint venture owners, United Catalysts Inc. and
Getchell Gold Corporation.
The Company engaged an international firm of consultants to re-estimate the
Mineral Resources (not "Reserves") of the talc deposit and provide an overview
for further development of the project. The total Mineral Resources, categorized
as Combined Indicated and Inferred, were re-estimated as 2.22 million tons at a
grade of 45.9% talc above a cut-off grade of 20% talc. Included in the total are
Mineral Resources for two high-grade areas, the Southwestern and Northeastern
Areas, which are estimated to contain 861,000 tons at a grade of 60.2% talc
above a cutoff grade of 50% talc. The mineralization in the Southwestern and
Northeastern Areas is in the three most prominent and adjacent zones, and is
amenable to extraction by open pit mining with low stripping ratios.
The revised estimate of Mineral Resources represent increases of 71% in
tonnage, and 2.27% in talc grade, above those previously reported by Aurora as
provided by the Joint Venture owners. The increases are mainly attributable to
modifications in the geological interpretations with extensions both vertically
and horizontally, and the fact that the previously reported Mineral Resources
were confined by a preliminary open pit design.
The Company is considering strategies for advancing the development of the
property based on the conclusions and recommendations in the report provided by
the consultants.
Exploration expenses with respect to the Totem Talc property totalled
$39,783 during fiscal 1999 (1998 - $11,418). The Company has not complied with
the expenditure requirements for 1999 and is seeking modification to the
schedule of option payments commencing with the payment due on December 15,
1999.
ITEM 3. LEGAL PROCEEDINGS
The company is not party to any litigation, and has no knowledge of
any pending or threatened litigation against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART 11
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock of the Company has been quoted on the OTC
Bulletin Board since December 5, 1996. The following table sets
forth the high and low bid prices for the Common Stock for the
calendar quarters indicated as reported by the OTC bulletin Board
for the last two years. These prices represent quotations between
dealers without adjustment for retail markup, markdown or
commission and may not represent actual transactions.
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1999 - High $0.843 $0.875 $0.875 $0.700
1999 - Low 0.625 0.593 0.593 0.437
1998 - High 2.860 2.125 1.547 1.125
1998 - Low 1.750 0.938 0.672 0.687
</TABLE>
15
<PAGE>
(b) As of January 31, 2000, there were 784 holders of record of the
Common Stock.
(c) There were no Common Stock cash dividends paid in 1999, 1998 or
1997. The amount and frequency of cash dividends are
significantly influenced by metal prices, operating results and
the Company's cash requirements.
The Registrant has issued securities in the manner set forth below without
registration under the Securities Act of 1933, as amended (the "Act").
In January 1999 amounts owing to a director of $42,190 were
settled with the issuance of 50,000 common shares.
In February 1999 accounts payable of $7,000 were settled with the
issuance of 8,615 common shares.
In February 1999 a finder's fee of $20,312 was settled with the
issuance of 25,000 common shares.
In March 1999, the Company issued 22,871 shares at a price of
$0.656 per share for an aggregate consideration of $15,000,
In March 1999 amounts owing to a director of $22,650 were settled
with the issuance of 31,510 common shares.
In August 1999 accounts payable of $15,000 were settled with the
issuance of 24,000 common shares.
In August 1999 accounts payable of $70,042 were settled with the
issuance of 112,066 common shares.
In August 1999 accounts payable of $3,500 were settled with the
issuance of 5,096 common shares.
In September 1999, 350,000 common shares were subscribed for at a
price of $0.50 per common share for aggregate consideration of
$175,000.
In December 1999, 550,000 common shares were subscribed for at a
price of $0.455 per common share for aggregate consideration of
$250,000.
All the above shares are "restricted securities," as that term is defined
in the rules and regulations promulgated under the Securities Act of 1933, as
amended, subject to certain restrictions regarding resale. Certificates
evidencing all of the above-referenced securities have been stamped with a
restrictive legend and will be subject to stop transfer orders.
The Registrant believes that each of the above-referenced transaction was
exempt from registration under the Act, pursuant to Section 4(2) of the Act and
the rules and regulations promulgated thereunder as a transaction by an issuer
not involving any public offering.
16
<PAGE>
ITEM 6. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(A) GENERAL
The Company is a mineral exploration company based in Vancouver, Canada
engaged in the exploration of base, precious metals and industrial minerals
worldwide. The Company was incorporated under the laws of the State of Delaware
on October 10, 1995, under the name "Chefs Acquisition Corp.".
The Company conducts exploration activities from it headquarters in
Vancouver, Canada. The Company owns or controls unpatented mining claims, and
mineral exploration concessions, in British Columbia and Yukon Territories,
Canada; Guatemala; Tunisia and the United States of America. The Company's
strategy is to concentrate its investigations into:
(1) Existing operations where an infrastructure already exists;
(2) Properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and
(3) Grass-roots exploration opportunities.
The Company is currently concentrating its exploration activities in
Canada, Guatemala and Tunisia. The Company is also examining other exploration
properties in Mexico and North Africa. All of the Company's properties are in
the preliminary exploration stage without any presently known Mineral Reserves.
The Company had no revenues during fiscal 1999, 1998 and 1997. Income
during fiscal 1999 1998 and 1997 was the result of interest earned on funds
raised, as the Company has no mineral properties in production. Funds raised in
fiscal 1999, 1998 and 1997 were used for exploration of the Company's properties
and general administration.
During the next 12 months the Company needs to raise additional funds
through equity offerings and/or debt borrowing to meet its
administrative/general operating expenses, to conduct work on its exploration
properties, to meet its obligations under the Tunisian and the Totem Talc
agreement (see Item 1 Business - Significant Developments in Fiscal 1999). The
Company intends to move forward in the current low gold price environment by
selectively developing its existing assets and to further develop the Company
through the possible acquisition or joint venturing of additional mineral
properties either in the exploration or development stage. Additional employees
will be hired on a consulting basis as required by the exploration projects.
(B) FINANCING
In fiscal 1999 the Company issued 279,157 common shares and received
advances on 900,000 common shares for an aggregate consideration of $620,694.
The following is a breakdown of the common shares issued and subscribed. The
Company issued 22,871 common shares for aggregate cash consideration of $15,000
and received $425,000 on the subscription of 900,000 shares. The 900,000 common
shares were issued during the first quarter of 2000. The Company settled
$160,382 of debt with the issuance of 231,286 common shares at prices ranging
from $0.62 to $0.84 per common share. The Company also issued 25,000 common
shares at a price of $0.81 per common share for aggregate consideration of
$20,312 in payment of a finder's fee.
In Fiscal 1998, the Company raised $411,250 through the issuance of 415,000
common shares at prices ranging $0.75 to $1.25 per share.
17
<PAGE>
(C) FINANCIAL INFORMATION
(a) Twelve Months Ended December 31, 1999 (Fiscal 1999) versus Twelve
Months Ended December 31, 1998
For the year ended December 31, 1999 the Company recorded a loss of
$855,391, or $0.08 per share, compared to a loss of $1,151,604 ($0.11
per share) in 1998 and a loss of $615,880 ($0.06 per share) in 1997.
General and administrative expenses - For the year ended December 31,
1999 the Company recorded general and administrative expenses of
$169,092, compared to $764,266 in 1998. The 1998 amount of $764,266
includes stock option compensation expense of $508,273 (1999 - $0).
Administrative cost savings in 1999 reflect the increased sharing of
costs with six other junior resource companies.
Exploration expenditures - For the year ended December 31, 1999 the
Company recorded exploration expenses of $686,968, compared to
$390,203 in 1998. The following is a breakdown of the exploration
expenses by property: - Canada, Kumealon property $2,286 (December 31,
1998 - $0); Canada - Yukon properties $407,319 (December 31, 1998 -
$0); Guatemala $53,597 (December 31, 1998 - $148,744); Tunisia $93,362
(December 31, 1998 - $0); United States, Totem Talc property $39,783
(December 31, 1998 - $11,418); and Project assessment and exploration
expenditures of $90,621, which amount includes stock option
compensation expense of $29,500 (December 31, 1998 - $230,041, which
amount includes stock option compensation expense of $182,727).
Amortization expenditures - For the year ended December 31, 1999 the
Company recorded depreciation and amortization costs of $4,607,
compared to $6,515 in 1998. The Company initially capitalized all
costs directly incurred in its formation. To comply with the American
Institute of Certified Public Accounts Statement of Position 98-5
"Reporting on Costs of Start-Up Activities", the remaining balance was
written off to depreciation expense during 1999.
(b) Twelve Months Ended December 31, 1998 (Fiscal 1998) versus twelve
Months ended December 31, 1997 (Fiscal 1997):
For the year ended December 31, 1998 the Company recorded a loss of
$1,151,604, or $0.11 per share, compared to a loss of $615,880 ($0.06
per share) in 1997.
General and administrative expenses - For the year ended December 31,
1998 the Company recorded general and administrative expenses of
$764,266, compared to $372,027 in 1997. The 1998 amount of $764,266
includes stock option compensation expense of $508,273 (1997 - $0).
The Company reduced its general and administrative expenses in 1998 as
a result of cost sharing with four other junior resource companies.
Exploration expenses - for the year ended December 31, 1998 the
Company recorded exploration expenditures of $390,203, compared to
$215,515 in 1997. The following is a breakdown of the exploration
expenses by property: - Canada, Cape Breton property $0 (December 31,
1997 - $96,186); Guatemala $148,744 (December 31, 1997 - $45,900);
United States, Totem Talc property $11,418 (December 31, 1997 - $0);
and Project assessment and exploration expenditures of $230,041, which
amount includes stock option compensation expense of $182,727
(December 31, 1997 - $73,429, which amount includes stock option
compensation expense
18
<PAGE>
of $0). In 1998 the Company amended its accounting policy to charge to
expense all exploration costs as incurred. Future costs will continue
to be charged to income until such time that proven reserves are
established. From that time forward, the Company will capitalise all
costs to the extent that future cash flow from reserves equals or
exceeds the costs deferred. Certain other 1997 financial statement
amounts have been restated to conform to the 1998 presentation.
(D) FINANCIAL CONDITION AND LIQUIDITY
At December 31, 1999, the Company had cash of $2,109 (1998 - $68,326) and
working capital deficiency of $211,974 (1998 working capital - $47,746)
respectively. Total liabilities as of December 31, 1999 were $214,083 as
compared to $20,580 on December 31, 1998, an increase of $193,503. During 1999
financing activities consisted of the following, net proceeds from the issuance
and subscription of common stock of $440,000 (December 31, 1998 - $411,250)
proceeds from notes and advances payable $303,228 (1998 - $0), repayment of
notes payable $250,000 (1998 - $0). In Fiscal 1999 investing activities
consisted of additions to mineral properties $59,130 (1998 - $58,942) and
proceeds from the sale of fixed assets $0 (1998 - $14,449). For the year ended
December 31, 1999 the Company recorded a loss of $855,391, or $0.08 per share,
compared to a loss of $1,151,604 ($0.11 per share) in 1998 and a loss of
$615,880 ($0.06 per share) in 1997.
The Company does not have sufficient working capital to (i) pay its
administrative and general operating expenses through December 31, 2000 and (ii)
to conduct its preliminary exploration programs. Without cash flow from
operations, it may need to obtain additional funds (presumably through equity
offerings and/or debt borrowing) in order, if warranted, to implement additional
exploration programs on its properties. Failure to obtain such additional
financing may result in a reduction of the Company's interest in certain
properties or an actual foreclosure of its interest. The Company has no
agreements or understandings with any person as to such additional financing.
None of the Company's properties has commenced commercial production and
the Company has no history of earnings or cash flow from its operations. While
the Company may attempt to generate additional working capital through the
operation, development, sale or possible joint venture development of its
properties, there is no assurance that any such activity will generate funds
that will be available for operations.
The Company has not declared or paid dividends on its shares since
incorporation and does not anticipate doing so in the foreseeable future.
(E) YEAR 2000 ISSUES.
The "Year 2000 problem", as it has come to be known, refers to the fact
that many computer programs use only the last two digits to refer to a year, and
therefore recognize a year that begins with "20" as instead beginning with "19".
For example, the year 2000 would be read as being the year 1900. If not
corrected, this problem could cause many computer applications to fail or create
erroneous results.
The Company has modified and tested all the critical applications of its
information technology ("IT"), the result of which is that all such critical
applications are now Year 2000 compliant. The Company believes that virtually
all of the non-critical applications of its IT are Year 2000 compliant. The
Company is using independent consultants to oversee the Year 2000 project as
well, as to perform certain remediation efforts. In addition, progress on the
Year 2000 project is also monitored by senior management, and reported to the
Board of Directors. The total amount of the payments made to date and to be made
hereafter to such independent consultant are not expected to be material. New
equipment and software was installed during the third and fourth quarters of
1999. Based on the Company's analysis to date, the Company believes that its
material
19
<PAGE>
non-IT systems are either Year 2000 compliant, or do not need to be made Year
2000 compliant in order to continue to function in substantially the same manner
in the Year 2000. The Company's Year 2000 compliance work has not caused, nor
does the Company expect that it will cause, a deferral on the part of the
Company of any material IT or non-IT projects.
However, there can be no assurance that any of the Company's vendors or
others, with whom it transacts business, will be Year 2000 compliant prior to
such date. The company is unable to predict the ultimate affect that the Year
2000 problem may have upon the Company, in that there is no way to predict the
impact that the problem will have nation-wide or world-wide and how the Company
will in turn be affected, and, in addition, the company cannot predict the
number and nature of its vendors and customers who will fail to become Year 2000
compliant prior to January 1, 2000. Significant Year 2000 difficulties on the
part of vendors or customers could have a material adverse impact upon the
Company. The Company intends to monitor the progress of its vendors and
customers in becoming Year 2000 compliant. The Company has formulated a
contingency plan to deal with the potential non-compliance of vendors and
customers.
As of March 10, 2000 the Company has not experienced any year 2000 problems
nor has any of the Company's vendors or others with whom it transacts business.
(F) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
companies to recognize all derivative contracts as either assets or liabilities
on the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition (i) the changes in the fair value of the hedged
asset or the liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standards on January 1, 2001 to affect its
financial statements.
ITEM 7. FINANCIAL STATEMENTS
See ITEM 13 of this Report for information with respect to the
financial statements filed as a part hereof, including financial
statements filed pursuant to the requirements of this ITEM 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
20
<PAGE>
PART 111.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
The following table lists the names and positions of the executive officers
and directors of the Company as of December 31, 1999 and March 10, 2000. All
executive officers and directors have been elected and appointed to serve until
their successors are elected and qualified. Additional information regarding the
business experience, length of time served in each capacity and other matters
relevant to each individual are set forth below the table.
Name Position
- ---- --------
David E. Jenkins Age 46, Founder, President and Director since October
1995. - President of Patagonia Gold Corporation and
Director of Eurasia Gold Fields, Inc. President of
DataLogic Marketing Corporation, 1989 to current.
Investment advisor for PaineWebber, Inc. and Blythe
Eastman Dillon Inc., 1983 to 1989.
John A. A. James Age 61, Vice President and Director since October 1996.
President of JAMine Inc. (formerly James Askew
Associates, Inc.) since 1988. President and Director of
Mirage Resource Corporation from 1994 to 1997.
Extensive international experience in exploration, mine
development, construction and management from 1968.
Antonino G. Cacace Age 54, Director since October 1995. Engineer, Founder
and current Managing Director of Stelax Industries in
the United Kingdom. Between 1984 and 1995 he was
managing director/chief executive officer of several
Companies involved in development and operation of
steel/bar rolling mills.
Richard O'C Whittall Age 41, Director since August 1999. Managing partner of
Dillon, Whittall, Gill & Company Ltd. Prior to Dillon,
Whittall, Gill & Company he was a Senior Vice
President, Corporate Finance and a Director of Marleau
Lemire Securities Inc. and Vice President, Investment
Banking at Richardson Greenshields Canada.
Scott Broughton P.Eng. Age 39, Vice President since May 1999. Engineer with
extensive international experience in exploration and
mine development. President of Barramundi Gold Ltd.
1995 to 1999. 1985 to 1995 held senior management
positions with a number of junior public resource
companies.
A. Cameron Richardson Age 47, Controller since October 1997, & Secretary
since April 1998. 1981 to 1997 held accounting
positions with various Canadian resource companies.
There are no family relationships between any of the executive officers.
21
<PAGE>
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE, OF THE EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange commission
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section 16
(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during the fiscal year ended December 31, 1999 all filings requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
(A) General
The following table sets forth information concerning the compensation of
the named executive officers for each of the registrant's last three completed
fiscal year:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------- -----------------------------------------------------
Awards Payments
--------------------------- -------------------------
Securities
Other Under- All
Annual Restricted Lying other
Name And Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonuses Sation Award(s) SARs Payouts sation
($) ($) ($) ($) (=) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Jenkins 1999 60,000 -0- -0- None None None -0-
President and 1998 60,000 -0- -0- None 500,000 None -0-
Director 1997 60,000 -0- -0- None None None -0-
- ------------------------------------------------------------------------------------------------------------------------------------
John A A. James 1999 111,890 -0- -0- None None None -0-
Vice President and 1998 -0- -0- -0- None 200,000 None -0-
Director 1997 34,713 -0- -0- None None None -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Scott Broughton 1999 26,972 -0- -0- None 150,000 None -0-
Vice President 1998 -0- -0- -0- None None None -0-
1997 -0- -0- -0- None None None -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Cameron Richardson 1999 7,059 -0- -0- None None None -0-
Controller and 1998 9,946 -0- -0- None 25,000 None -0-
Secretary 1997 2,000 -0- -0- None None None -0-
====================================================================================================================================
</TABLE>
Effective January 1, 1998, none of the Company's officers or directors were
party to an employment agreement with the Company. Prior to January 1, 1998
Mr. Jenkins had been party to a written agreement. Mr. Jenkins, in his
capacity as president of the Company, receives a monthly salary of $5,000.
Directors and/or officers receive expense reimbursement for expenses
reasonably incurred on behalf of the Company. During the
22
<PAGE>
fiscal year ending December 31, 1999 the entire board of directors acted as
the Company's compensation committee.
(B) Options/SAR Grants Table
The following table sets forth information concerning individual grants of
stock options (whether or not in tandem with stock appreciation rights ("SARs")
and freestanding SARs made during the last completed fiscal year to each of the
named executive officers;
OPTION/SAR GRANTS IN 1997(1) 1998 AND 1999 FISCAL YEARS
(Individual Grants)
<TABLE>
<CAPTION>
=======================================================================================================
Percent Of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Option/SARs In Fiscal Base Price Expiration Date
Name Granted (#) Year ($/Sh) (M/D/Y)
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David Jenkins 200,000(2) 17.3% $0.01 06/26/03
200,000(3) 17.3% 0.75 09/09/03
100,000(4) 8.7% 0.75 12/11/03
- -------------------------------------------------------------------------------------------------------
John James 100,000(2) 8.7% $0.01 06/26/03
50,000(3) 4.3% 0.75 09/09/03
50,000(4) 4.3% 0.75 12/11/03
- -------------------------------------------------------------------------------------------------------
Scott Broughton 150,000(5) 60.0% $0.69 08/05/04
- -------------------------------------------------------------------------------------------------------
Cameron Richardson 25,000(3) 2.2% $0.75 09/09/03
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) No options were awarded in 1997.
(2) These options are exercisable from date of grant (June 26, 1998),
(3) These options are exercisable from date of grant (September 9, 1998),
(4) These options are exercisable from date of grant (December 11, 1998),
(5) These options are exercisable from date of grant (August 5, 1999).
(C) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
The following table sets forth information concerning each exercise of
stock options (or tandem SARs) and freestanding SARs during the last completed
fiscal year by each of the named executive officers and the fiscal year-end
value of unexercised options and SARs, on an aggregated basis:
23
<PAGE>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
================================================================================================================
Number of
Securities Value Of
Underlying Unexercised
Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired Value At FY-End ($) At FY-End ($0.52)
On Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David Jenkins None None 500,000 $102,000
- ----------------------------------------------------------------------------------------------------------------
John James None None 200,000 $51,000
- ----------------------------------------------------------------------------------------------------------------
Scott Broughton None None 150,000 Nil
- ----------------------------------------------------------------------------------------------------------------
Cameron Richardson None None 25,000 Nil
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(D) Long-Term Incentive Plans ("LTIP") Awards Table
The Company does not have a Long-term Incentive Plan.
(E) Compensation of Directors
The Company does not pay a fee to its outside, non-officer directors.
The Company reimburses its directors for reasonable expenses incurred by
them in attending meetings of the Board of Directors. During fiscal 1999
non-officers directors received a total of $0 in consulting fees.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 31, 2000 by (i) each
person who is known by the Company to own beneficially more than five percent
(5%) of the Company's outstanding Common Stock; (ii) each of the Company's
directors and officers; and (iii) all directors and officers of the Company as a
group. As at January 31, 2000, there were 11,460,651 shares of Common Stock
issued and outstanding.
<TABLE>
<CAPTION>
Name of Shares of Common Approximate
Beneficial Stock Beneficially Percentage
Owner Owned Owned
----- ----- -----
<S> <C> <C>
Cede & Co 6,184,585(1) 54.0%
Box 222
Bowling Green Station
New York, NY 10274
Moristan Limited 800,000(1) 7.0%
Trident Chambers Wickhams Cay
PO Box 146
Road Town, Tortola
British Virgin Islands
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Name of Shares of Common Approximate
Beneficial Stock Beneficially Percentage
Owner Owned Owned
----- ----- -----
<S> <C> <C>
New Odessy Limited 700,000(1) 6.1%
Kings Court
Bay Street, PO Box N3944
Nassau Bahamas
Viabilite Et Ablissement a.r.l. 656,205(1) 5.7%
Broadcasting House
Rouge Bouillon
St Helier, Jersey Channel Islands
Officers and Directors
David E. Jenkins 596,105(2) 5.0%
1505-1060 Alberni Street
Vancouver, B.C. Canada V6E 4K2
John A.A. James (3) 302,870(3) 2.6%
2055 South Ingalls Way,
Lakewood, Colorado
U.S.A. 80227-2515
Antonino G. Cacace 33,333(4) *
Crud-y-Gloyat
Carswell Bay
Swansea Wales, U.K.
Richard O'C Whittall 50,000(5) *
Suite 310 - 601 West Cordova Street
Vancouver, B.C. Canada
V6B 1G1
Scott Broughton 150,000(6) 1.3%
1706 - 1323 Homer Street
Vancouver, BC Canada
A. Cameron Richardson 25,000(7) *
1505-1060 Alberni Street
Vancouver, B.C. Canada V6E 4K2
Officers and Directors (6 persons) 1,157,308(8) 9.3%
</TABLE>
(1) None of the officers and directors of the Company are affiliated with
either Cede & Co., Moristan Limited, New Odessy Limited or Viabilite et
Ablissement a.r.l.
(2) Includes options to purchase up to 500,000 shares of common stock. See
"Item 10. Executive Compensation."
(3) Includes options to purchase up to 200,000 shares of common stock. See
"Item 10. Executive Compensation."
(4) Includes options to purchase up to 25,000 shares of common stock. See "Item
10. Executive Compensation."
(5) Includes options to purchase up to 50,000 shares of common stock. See "Item
10. Executive Compensation."
25
<PAGE>
(6) Includes options to purchase up to 150,000 shares of common stock. See
"Item 10. Executive Compensation."
(7) Includes options to purchase up to 25,000 shares of common stock. See "Item
10. Executive Compensation."
(8) Includes options to purchase up to 950,000 shares of common stock. See
"Item 10. Executive Compensation."
* Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The proposed business of the Company raises potential conflicts of
interests between the Company and certain of its officers and directors.
Certain of the directors of the Company are directors of other mineral
resource companies and, to the extent that such other companies may participate
in ventures in which the Company may participate, the directors of the Company
may have a conflict of interest in negotiating and concluding terms regarding
the extent of such participation. In the event that such a conflict of interest
arises at a meeting of the directors of the Company, a director who has such a
conflict will abstain from voting for or against the approval of such
participation or such terms. In appropriate cases, the Company will establish a
special committee of independent directors to review a matter in which several
directors, or Management, may have a conflict. From time to time, several
companies may participate in the acquisition, exploration and development of
natural resource properties thereby allowing for their participation in larger
programs, involvement in a greater number of programs and reduction of the
financial exposure with respect to any one program. It may also occur that a
particular company will assign all or a portion of its interest in a particular
program to another of these companies due to the financial position of the
company making the assignment. In determining whether the Company will
participate in a particular program and the interest therein to be acquired by
it, the directors will primarily consider the potential benefits to the Company,
the degree of risk to which the Company may be exposed and its financial
position at that time. Other than as indicated, the Company has no other
procedures or mechanisms to deal with conflicts of interest. The Company is not
aware of the existence of any conflict of interest as described herein.
Directors and/or officers will receive expense reimbursement for expenses
reasonably incurred on behalf of the Company.
Included in accounts payable at December 31, 1999 is $43,505 (1998 -
$3,475) due to directors and a corporation controlled by a director in respect
of salaries, consulting fees and reimbursement for operating expenses.
Indebtedness to directors totaling $78,190 (1998 - $68,697) was settled with the
issuance of 102,870 (1998 - 96,105) shares of common stock. In January 2000,
amounts owing to a director of $33,700 were settled with the issuance of 70,000
common shares. The conversion rates were based on the quoted market prices at
the date of conversion.
The Company does not pay a fee to its outside, non-officer directors. The
Company believes that consulting fees and reimbursement for operating expenses
paid to corporations owned by directors are comparable to amounts that would
have been paid to at arms length third party providers of such services.
26
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(1) FINANCIAL STATEMENTS - Reference is made to the Financial Statements
appearing on pages F-1, through F-19
(3) EXHIBITS
3.1 Certificate of Incorporation*
3.2 Certificate of Amendment to the Certificate of Incorporation*
3.3 Certificate of Restoration and Renewal of Certificate of Incorporation*
3.4 Amended and Restated By-laws*
10.1 Agreement dated July 18, 1997 between The Company and Minera Motagua,
S.A.*
10.2 Agreement dated August 16, 1997 between the Company and Minera Motagua,
S.A.*
10.3 Agreement dated November 3, 1997 between the Company and Minera Motagua,
S.A.*
10.4 Agreement dated July 28, 1998 between the Company and Minera Motagua,
S.A.*
10.5 Agreement dated August 24, 1998 with Jorge Mario Rios Munoz. *
10.6 Agreement dated November 18, 1998 between the Company and United
Catalyst, Inc. and Getchell Gold Corporation. *
10.7 Agreement dated February 23, 1999 between the Company and Gregory G.
Crowe. *
10.8 Option Agreements dated as shown between the Company and High Marsh
Holdings Ltd.
10.8.1 Hamman Zriba/Jebel Guebli October 15, 1999
10.8.2 Koudiat Sidii October 15, 1999
10.8.3 Ouled Moussa (bou Jabeur Est) October 15, 1999
10.8.4 Hammala January 20, 2000
10.8.5 El Mohguer (Garn Halfaya) January 20, 2000
10.8.6 Jebel Oum Edeboua (Garn Halfaya) January 20, 2000
10.9 Joint Venture Agreement between the Company and Patagonia Gold
Corporation
10.10 Letter of Intent between the Company and Billiton UK Resources B.V.
21.1 List of subsidiaries of the Registrant.
27.1 Financial Data Schedule
- --------
* Previously Filed
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
Date: March 13, 2000 BY: /s/ David Jenkins
-----------------
David Jenkins
Director and President
Date: March 13, 2000 BY: /s/ John A.A. James
-------------------
John A.A. James
Director and Vice-President
EXHIBIT (1) THE FOLLOWING FINANCIAL STATEMENTS REQUIRED TO BE INCLUDED IN ITEM 8
ARE LISTED BELOW
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
-------------------- ----
Report of Independent Accountants F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Changes in
Stockholders' Equity (Deficit) F-5
Consolidated Statements of Operations F-6
Consolidated Statements of Cash Flows F-7
Summary of Significant Accounting Policies F-8 to F-11
Notes to the Consolidated Financial Statements F-12 to F-20
Financial Statement Schedules *
*Financial Statement Schedules have been omitted as not applicable
28
<PAGE>
Aurora Gold Corporation
Consolidated Financial Statements
For the year ended December 31, 1999
(Expressed in U.S. Dollars)
F-1
<PAGE>
- --------------------------------------------------------------------------------
Aurora Gold Corporation
- --------------------------------------------------------------------------------
Table of Contents
Report of Independent Accountants
Consolidated Financial Statements
Balance Sheets
Statements of Changes in Stockholders' Equity (Deficit)
Statements of Operations
Statements of Cash Flows
Summary of Significant Accounting Policies
Notes to the Financial Statements
F-2
<PAGE>
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
To The Board of Directors and Stockholders
Aurora Gold Corporation
We have audited the Consolidated Balance Sheets of Aurora Gold Corporation as at
December 31, 1999 and 1998, the Consolidated Statements of Changes in
Stockholders' Equity (Deficit) for the years ended December 31, 1999 and 1998
and the Consolidated Statements of Operations and Cash Flows for the period from
October 10, 1995 (inception) to December 31, 1999 and for the years ended
December 31, 1999 and 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and 1998 and the results of its operations and its cash flows for the period
from October 10, 1995 (inception) to December 31, 1999 and for the years ended
December 31, 1999 and 1998 in conformity with generally accepted accounting
principles in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and the satisfaction of liabilities in
the normal course of business. As discussed in Note 1 to the financial
statements, the Company has incurred a loss from operations and lacks liquidity
which raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Vancouver, Canada "BDO Dunwoody LLP"
February 10, 2000 Chartered Accountants
F-3
<PAGE>
================================================================================
Aurora Gold Corporation
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
December 31 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current
Cash $ 2,109 $ 68,326
Mineral property costs (Note 2) 148,571 89,441
Organization costs (Note 3) -- 4,607
----------- -----------
$ 150,680 $ 162,374
=========================================================================================
Liabilities and Stockholders' Equity (Deficit)
Liabilities
Current
Accounts payable and accrued liabilities $ 160,855 $ 20,580
Loans payable (Note 4) 53,228 --
----------- -----------
214,083 20,580
----------- -----------
Stockholders' equity (deficit)
Share capital
Authorized
50,000,000 common shares, par value $0.001 per share
Issued
11,460,651 (1998 - 11,181,494) common shares 11,461 11,182
Additional paid-in capital 2,484,219 2,259,304
Advances for stock subscriptions (Note 5) 425,000 --
Accumulated deficit (2,984,083) (2,128,692)
----------- -----------
(63,403) 141,794
----------- -----------
$ 150,680 $ 162,374
=========================================================================================
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
Approved by the Board:
/s/ David Jenkins /s/ John A.A. James
- ----------------------- ----------------------
Director Director
F-4
<PAGE>
================================================================================
Aurora Gold Corporation
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
(Expressed in U.S. Dollars)
For the years ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Stock Additional Advances for Stockholders'
------------------------- Paid-In Stock Accumulated Equity
Shares Amount Capital Subscriptions Deficit (Deficit)
----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 10,670,389 $ 10,670 $ 1,088,869 $ -- $ (977,088) $ 122,451
Issuance of common stock
For cash in May 1998 at
$1.25 per share 200,000 200 249,800 -- -- 250,000
For cash in November 1998
at $0.75 per share 71,667 72 53,678 -- -- 53,750
For cash in December 1998
at $0.75 per share 143,333 143 107,357 -- -- 107,500
For settlement of
indebtedness (Note 8) 96,105 96 68,601 -- -- 68,697
Grant of options to employees
and directors (Note 6) -- -- 518,900 -- -- 518,900
Grant of options to
consultants (Note 6) -- -- 172,100 -- -- 172,100
Net loss for the year -- -- -- -- (1,151,604) (1,151,604)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 11,181,494 11,182 2,259,304 -- (2,128,692) 141,794
Issuance of common stock
For cash in March 1999 at
$0.656 per share 22,871 23 14,977 -- -- 15,000
For settlement of
indebtedness (Note 8) 231,286 231 160,151 -- -- 160,382
For finder's fee in February
1999 at $0.81 per share
(Note 2) 25,000 25 20,287 -- -- 20,312
Grant of options to
consultants (Note 6) -- -- 29,500 -- -- 29,500
Cash advanced on stock
subscriptions (Note 5) -- -- -- 425,000 -- 425,000
Net loss for the year -- -- -- -- (855,391) (855,391)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 11,460,651 $ 11,461 $ 2,484,219 $ 425,000 $(2,984,083) $ (63,403)
====================================================================================================================================
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-5
<PAGE>
================================================================================
Aurora Gold Corporation
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
October 10
1995
(inception) to Twelve-months ended
December 31 December 31
1999 ------------------------------
(cumulative) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General and administrative expenses
Depreciation and amortization $ 21,862 $ 4,607 $ 6,515
Interest, bank charges and foreign exchange 36,393 16,470 16,112
Administrative and general, net of recoveries 470,109 44,844 117,468
Professional fees - accounting and legal
(Note 6) 319,218 34,396 161,112
Salaries and consulting fees (Note 6) 732,184 68,776 463,059
----------- ----------- -----------
1,579,766 169,093 764,266
Less interest income 21,530 670 2,865
----------- ----------- -----------
1,558,236 168,423 761,401
Exploration expenses (Notes 2 and 6) 1,386,437 686,968 390,203
Write off of mineral properties 39,410 -- --
----------- ----------- -----------
Net loss for the period $ 2,984,083 $ 855,391 $ 1,151,604
====================================================================================================================================
Loss per share
Basic and diluted $ 0.08 $ 0.11
=========== ===========
Weighted average common shares outstanding
Basic and diluted 11,284,435 10,800,784
=========== ===========
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-6
<PAGE>
================================================================================
Aurora Gold Corporation
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
October 10
1995
(inception) to Twelve-months ended
December 31 December 31
1999 --------------------------------
(cumulative) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities
Net loss for the period $(2,984,083) $ (855,391) $(1,151,604)
Adjustment to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 21,862 4,607 6,515
Write off of mineral properties 39,410 -- --
Compensation on stock options 720,500 29,500 691,000
Expenses satisfied with common stock 249,391 180,694 42,522
Changes in assets and liabilities
Decrease in accounts receivable -- -- 12,326
Increase (decrease) in accounts payable 160,855 140,275 (22,111)
----------- ----------- -----------
(1,792,065) (500,315) (421,352)
----------- ----------- -----------
Investing activities
Purchase of fixed assets (24,800) -- --
Mineral property costs (187,981) (59,130) (58,942)
Proceeds on disposal of fixed assets 14,449 -- 14,449
Incorporation costs (11,511) -- --
----------- ----------- -----------
(209,843) (59,130) (44,493)
----------- ----------- -----------
Financing activities
Proceeds from the issuance of common stock
and stock subscription receipts 1,950,789 440,000 411,250
Repayment of notes payable (300,000) (250,000) --
Proceeds from notes and advances payable 353,228 303,228 --
----------- ----------- -----------
2,004,017 493,228 411,250
----------- ----------- -----------
Increase (decrease) in cash for the period 2,109 (66,217) (54,595)
Cash, beginning of period -- 68,326 122,921
----------- ----------- -----------
Cash, end of period $ 2,109 $ 2,109 $ 68,326
====================================================================================================================================
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-7
<PAGE>
================================================================================
Aurora Gold Corporation
Summary of Significant Accounting Policies
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Basis of Consolidation
These consolidated financial statements are stated in US dollars and have
been prepared in accordance with accounting principles generally accepted
in the United States and include the accounts of the Company and its
wholly-owned subsidiaries Aurora Gold, S.A., Aurora Gold (BVI) Ltd. and
Deltango Gold Limited. All intercompany transactions and balances have been
eliminated.
During the year, the Company incorporated Deltango Gold Limited to hold the
Company's Yukon mineral properties.
Mineral Properties and Exploration Expenses
Exploration costs are charged to operations as incurred as are normal
development costs until such time that proven reserves are discovered. At
such time that proven reserves are established, the Company will capitalize
all costs to the extent that future cash flow from mineral reserves equals
or exceeds the costs deferred. At December 31, 1999 and 1998, the Company
did not have proven mineral reserves.
Costs of initial acquisition of mineral rights and concessions are
capitalized until the properties are abandoned or the right expires.
Exploration activities conducted jointly with others are reflected at the
Company's proportionate interest in such activities.
Foreign Currency Transactions
Foreign currency accounts are translated into U.S. dollars as follows:
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect at
that date. At the year end, monetary assets and liabilities are translated
into U.S. dollars by using the exchange rate in effect at that date. The
resulting foreign exchange gains and losses are included in operations.
F-8
<PAGE>
================================================================================
Aurora Gold Corporation
Summary of Significant Accounting Policies - Continued
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Organization Costs
The Company initially capitalized all costs directly incurred in its
formation. To comply with the American Institute of Certified Public
Accountants Statement of Position 98-5 "Reporting on Costs of Start-Up
Activities", the remaining balance was written off to depreciation expense
during the year.
Accounting 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.
Fair Value of Financial
Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash and accounts payable and accrued liabilities. Fair values were
assumed to approximate carrying values for these financial instruments,
except where noted, since they are short term in nature and their carrying
amounts approximate fair values or they are receivable or payable on
demand. Management is of the opinion that the Company is not exposed to
significant interest, credit, or currency risks arising from these
financial instruments.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, which requires the Company to recognize
deferred tax liabilities and assets for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and tax bases of assets
and liabilities using enacted rates in effect in the years in which the
differences are expected to reverse.
F-9
<PAGE>
================================================================================
Aurora Gold Corporation
Summary of Significant Accounting Policies - Continued
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Loss Per Share
Loss per share is computed in accordance with SFAS No. 128, "Earnings Per
Share". Basic loss per share is calculated by dividing the net loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in earnings of an entity.
In loss periods, dilutive common equivalent shares are excluded as the
effect would be anti-dilutive. Basic and diluted earnings per share are the
same for the periods presented.
For the year ended December 31, 1999, total stock options of 1,405,000
(1998 - 1,155,000) and advances for a private placement of 900,000 shares
were not included in the computation of diluted earnings per share because
the effect was anti-dilutive.
Stock Based
Compensation
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for stock option plans. Under APB No. 25, compensation cost is
recognized for stock options granted at prices below the market price of
the underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro-forma information regarding net income as if
compensation cost for the Company's stock option plan had been determined
in accordance with the fair value based method prescribed in SFAS No. 123.
F-10
<PAGE>
================================================================================
Aurora Gold Corporation
Summary of Significant Accounting Policies - Continued
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
requires companies to recognize all derivatives contracts as either assets
or liabilities on the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standards on January 1, 2001 to
affect its financial statements.
Reclassifications
Certain comparative amounts have been restated to conform with the current
period's financial statement presentation.
F-11
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Nature of Business and Going Concern
The Company was formed on October 10, 1995 under the laws of the State of
Delaware and is in the business of location, acquisition, exploration and,
if warranted, development of mineral properties. The Company has not yet
determined whether its properties contain mineral reserves that may be
economically recoverable.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The general business
strategy of the Company is to acquire mineral properties either directly or
through the acquisition of operating entities. The continued operations of
the Company and the recoverability of mineral property costs is dependent
upon the existence of economically recoverable mineral reserves,
confirmation of the Company's interest in the underlying mineral claims,
the ability of the Company to obtain necessary financing to complete the
development and upon future profitable production. The Company has incurred
recurring operating losses and requires additional funds to meet its
obligations and maintain its operations. Management's plans in this regard
are to raise equity financing as required.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might result from this uncertainty.
- --------------------------------------------------------------------------------
2. Mineral Properties and Exploration Expenses
a) Guatemala, Central America
In 1997, the Company entered into agency agreements with a Guatemalan
company to apply for mineral exploration licenses on certain
Guatemalan mineral concessions.
The agreements provided for the payment of $10,000 and the issuance of
1,500 shares of common stock for each mineral
exploration/reconnaissance concession granted by the Guatemalan
government. In November 1997, the Company advanced $20,000 to the
principals of the agent against the issuance of future shares.
Subsequently, the agency agreement was terminated with the Company
agreeing to forfeit its claims against the $20,000 advance in exchange
for releasing the Company from any future stock issuance obligation
stemming from this agreement.
F-12
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
2. Mineral Properties and Exploration Expenses - Continued
a) Guatemala, Central America - Continued
During 1998, the Company made application to the Guatemalan government
for fifteen mineral exploration licenses and one mineral
reconnaissance license, of which ten mineral exploration licenses were
granted during 1998. At December 31, 1998, applications for five
mineral exploration licenses and one mineral reconnaissance license
were awaiting government approval. As a consequence of the results of
the geological reconnaissance, sampling of rock outcrops and stream
sediment sampling which was carried out in 1998 and the first quarter
of 1999, the Company decided to surrender six exploration licenses
(January, 1999) and withdraw four applications (February, 1999). At
December 31, 1999, the Company retains five mineral exploration
licenses and one mineral reconnaissance license.
Each distinct mineral deposit per mineral concession acquired by the
Company will be subject to a Net Smelter Return ("NSR") royalty equal
to 1% of the NSR royalty payable to the Government of Guatemala.
b) Totem Talc Property
An Option Agreement, dated November 18, 1998, was established between
the Company and joint venture owners of the Totem Talc property. The
Totem Talc property consists of 10 unpatented lode claims covering
approximately 206 acres and is located near Metalline Falls in Pend
Oreille County, Washington, approximately 100 miles north of Spokane.
The agreement calls for the Company to pay the Joint Venture $5,000 on
or before May 18, 1999 in addition to the initial payment of $1,000
already made. The Company committed to expenditures of $10,000 by July
18, 1999 and an additional $50,000 by November 18, 1999 on further
development of the project through market studies, geological and
engineering work, claims maintenance and the like. The Company is
committed to pay the Joint Venture a further total of $400,000
commencing with $100,000 on December 15, 1999 and subsequent payments
of $100,000 on December 15, 2000 and $200,000 on December 15, 2001.
The Company has not complied with the expenditure requirements for
1999 and has not made the required option payment on December 15,
1999. The Company is seeking modification to the exploration
commitments and the schedule of option payments.
c) British Columbia, Canada - Kumealon Property
In February 1999, the Company acquired, by staking, a 741 acre
limestone property located on the north shore of Kumealon Inlet,
southeast of Prince Rupert, British Columbia. A finder's fee of 25,000
shares of common stock was paid in connection with these claims.
F-13
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
2. Mineral Properties and Exploration Expenses - Continued
d) Tunisia, North Africa
In October 1999 and January 2000, the Company entered into option
agreements (subject to regulatory approval by authorities in Tunisia)
with a company incorporated in the British Virgin Islands, to acquire
100% interest in six Tunisian zinc properties. The Republic of Tunisia
has granted exploration permits on the properties expiring on various
dates between December 2000 and July 2002. The properties are known as
Hamman Zriba (Jebel Guebli), Ouled Moussa (Bou Jabeur Est), Koudiat
Sidii, Jebel Oum Edeboua (Garn Halfaya), El Mohguer (Garn Halfaya) and
Hammala (Kebbouch Ouest). Option payments and work commitments for the
properties are as follows:
<TABLE>
<CAPTION>
Initial 1st 2nd 3rd 4th 5th
Payment Anniversary Anniversary Anniversary Anniversary Anniversary Total
------------- ------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Property Option Payments
Hamman Zriba -
Jebel Guebli $ 5,000 $ 10,000 $ 15,000 $ 20,000 $ 25,000 $ -- $ 75,000
Koudiat Sidii 5,000 10,000 15,000 20,000 25,000 -- 75,000
Ouled Moussa 5,000 10,000 15,000 20,000 25,000 -- 75,000
Jebel Oum Edeboua 2,500 5,000 7,500 10,000 12,500 -- 37,500
El Mohguer 2,500 5,000 7,500 10,000 12,500 -- 37,500
Hammala 5,000 10,000 15,000 20,000 25,000 -- 75,000
------------- ------------- ------------- ------------- -------------- ------------- -------------
25,000 50,000 75,000 100,000 125,000 -- 375,000
------------- ------------- ------------- ------------- -------------- ------------- -------------
Property Work Commitments
Hamman Zriba -
Jebel Guebli -- 50,000 50,000 75,000 150,000 175,000 500,000
Koudiat Sidii -- 25,000 50,000 100,000 150,000 175,000 500,000
Ouled Moussa -- 50,000 50,000 75,000 150,000 175,000 500,000
Jebel Oum Edeboua -- 25,000 25,000 37,500 75,000 87,500 250,000
El Mohguer -- 25,000 25,000 37,500 75,000 87,500 250,000
Hammala -- 50,000 50,000 75,000 150,000 175,000 500,000
------------- ------------- ------------- ------------- -------------- ------------- -------------
-- 225,000 250,000 400,000 750,000 875,000 2,500,000
------------- ------------- ------------- ------------- -------------- ------------- -------------
$ 25,000 $ 275,000 $ 325,000 $ 500,000 $ 875,000 $ 875,000 $ 2,875,000
============= ============= ============= ============= ============== ============= =============
</TABLE>
The Option Agreements provide for royalties of 2% Net Smelter Return
("NSR") on commencement of commercial production. The NSR can be
reduced to 1% by cash payment of $1.0 million per property. Advance
royalties of $25,000 per annum are payable for each property, after
vesting of the properties through compliance with cash payments and
work commitments, until commercial production is established.
F-14
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
2. Mineral Properties and Exploration Expenses - Continued
e) Yukon Territory, Canada
In May and June 1999, the Company acquired, by staking, 100% interest
in five gold exploration properties covering approximately 240 square
kilometres in the Yukon's Tintina Gold Belt. The properties are known
as Carlisle Creek, Independence Creek, Livingstone Creek North, Sonora
West and White River. Permits on the properties expire in June and
July 2000, but are subject to renewal.
<TABLE>
<CAPTION>
Accumulated Accumulated Accumulated
Balance Balance Balance
January 1 December 31 December 31
1998 Additions 1998 Additions 1999
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Property acquisition
expenditures
Canada - Kumealon $ -- $ -- $ -- $ 23,630 $ 23,630
Guatemala 30,499 57,942 88,441 15,500 103,941
Tunisia -- -- -- 15,000 15,000
United States - Totem Talc -- 1,000 1,000 5,000 6,000
--------------- --------------- --------------- --------------- ---------------
30,499 58,942 89,441 59,130 148,571
--------------- --------------- --------------- --------------- ---------------
Property exploration
expenditures
Canada - Cape Breton 96,186 -- 96,186 -- 96,186
Canada - Kumealon -- -- -- 2,286 2,286
Canada - Yukon -- -- -- 407,319 407,319
Guatemala 45,900 148,744 194,644 53,597 248,241
Tunisia -- -- -- 93,362 93,362
United States - Totem Talc -- 11,418 11,418 39,783 51,201
Project assessment and
exploration expenditures
(Note 6) 167,180 230,041 397,221 90,621 487,842
--------------- --------------- --------------- --------------- ---------------
309,266 390,203 699,469 686,968 1,386,437
--------------- --------------- --------------- --------------- ---------------
$ 339,765 $ 449,145 $ 788,910 $ 746,098 $ 1,535,008
=============== =============== =============== =============== ===============
</TABLE>
F-15
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
3. Organization Costs
1999 1998
-------- --------
Cost $ 11,511 $ 11,511
Less accumulated amortization (11,511) (6,904)
-------- --------
$ -- $ 4,607
======== ========
The cumulative effect of the adoption of SOP 98-5 in 1999 resulted in a
write off of $4,607. This amount is included in depreciation and
amortization on the Statement of Operations due to its insignificance.
- --------------------------------------------------------------------------------
4. Loans Payable
Loans payable are unsecured, non-interest bearing and due on demand.
- --------------------------------------------------------------------------------
5. Advances for Stock Subscriptions
In September 1999, the Company received $175,000 on a subscription for
350,000 shares of common stock. In December 1999, the Company further
received $250,000 on a subscription for 550,000 shares of common stock. The
advances are unsecured and non-interest bearing. The stock was issued
subsequent to December 31, 1999.
- --------------------------------------------------------------------------------
6. Stock Options
In 1997, the Company's Board of Directors approved a stock option plan
("the Plan") to offer an inducement to obtain services of key employees,
directors and consultants of the Company. The maximum number of shares
issuable under the Plan in any calendar year shall be an amount equal to
15% of the issued and outstanding common stock on January 1 of each year.
Under the Plan, the exercise price of an incentive stock option must be at
least equal to 100% of the fair market value of the common stock on the
date of grant (110% of fair market value in the case of options granted to
employees who hold more than 10% of the Company's capital stock on the date
of grant). The exercise price of a non-qualified stock option must not be
less than the par value of a share of the common stock on the date of the
grant. The term of an incentive or non-qualified stock option is not to
exceed five years.
F-16
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
6. Stock Options - Continued
Pro-forma information regarding Net Loss and Loss per Share is required
under SFAS No. 123, and has been determined as if the Company had accounted
for its stock options under the fair value method of SFAS No. 123. The
weighted average fair value of options granted in 1999 was $0.60 (1998 -
$0.79). The fair value of these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted
average assumptions: no dividends, a risk-free interest rate of 5.39% (1998
- 5.45%), volatility factor of the expected market price of the Company's
common stock of 180% (1998 - 91%) and a weighted average expected life of
the option of 30 (1998 - 30) months.
Under the accounting provisions of SFAS No. 123, the Company's 1999 and
1998 Net Loss and Loss per Share would have been increased to the pro-forma
amounts indicated below:
As Reported Pro-forma
-------------- --------------
1999
Net loss for the year $ 855,391 $ 974,764
Loss per share - basic and diluted $0.08 $0.09
1998
Net loss for the year $1,151,604 $1,161,604
Loss per share - basic and diluted $0.11 $0.11
A summary of the status of the Company's stock options as of December 31,
1999 and 1998 and the changes during the years then ended is as follows:
Weighted
Average Weighted
Number of Exercise Average
Options Price Fair Value
---------- ---------- ----------
Outstanding, January 1, 1998 -- --
Granted 1,155,000 $ 0.43 $ 0.79
---------- ---------- ----------
Outstanding and exercisable,
December 31, 1998 1,155,000 $ 0.43
Granted 250,000 $ 0.70 $ 0.60
---------- ---------- ----------
Outstanding and exercisable,
December 31, 1999 1,405,000 $ 0.48
========== ==========
F-17
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
6. Stock Options - Continued
Expense for the options granted in 1999 and 1998 were allocated as follows:
1999 1998
-------- --------
Professional fees - legal $ -- $117,922
Salaries and consulting fees -- 390,351
Exploration expenses 29,500 182,727
-------- --------
$ 29,500 $691,000
======== ========
The expense related to the grant of options to employees and directors in
1998 consists of the difference between the exercise price and the market
value of the Company's common stock at the grant date. Compensation expense
for options granted to consultants in 1999 and 1998 is determined using the
Black Scholes option pricing model.
Stock options outstanding and exercisable at December 31, 1999 are as
follows:
Number Exercise Price Expiry
--------------- ----------------------- ----------------------
505,000 $0.01 June 2003
450,000 $0.75 September 2003
200,000 $0.75 December 2003
50,000 $0.72 March 2004
200,000 $0.69 August 2004
---------------
1,405,000
===============
- --------------------------------------------------------------------------------
7. Related Party Transactions
Related party transactions not disclosed elsewhere in these financial
statements include:
a) Included in accounts payable is $43,505 (1998 - $3,475) due to
directors and a company controlled by a director in respect of
salaries, consulting fees and reimbursement for expenses.
b) During the year, salaries and consulting fees of $193,313 (1998 -
$70,681) were paid or are payable to directors or companies controlled
by directors.
F-18
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
7. Related Party Transactions - Continued
c) In September 1998, fixed assets of $14,449 were sold for their book
value to a director. The Company is renting these assets back on a
month-to-month basis.
Except as otherwise noted, these transactions are recorded at the exchange
amount, being the value established and agreed to by the related parties.
- --------------------------------------------------------------------------------
8. Non Cash Investing and Financing Activities
In 1999 and 1998, the Company settled various debts with the issuance of
shares of common stock as follows:
<TABLE>
<CAPTION>
1999
Conversion
Month of Settlement Indebtedness Price Shares
------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
January $ 42,190 $0.84 50,000
February 7,000 $0.81 8,615
March 22,650 $0.72 31,510
August 15,000 $0.62 24,000
August 70,042 $0.62 112,066
August 3,500 $0.69 5,095
------------------ ------------------
$160,382 231,286
================== ==================
<CAPTION>
1998
Conversion
Month of Settlement Indebtedness Price Shares
------------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C>
September $ 37,194 $0.69 54,100
December 31,503 $0.75 42,005
------------------- ------------------
$ 68,697 96,105
=================== ==================
</TABLE>
F-19
<PAGE>
================================================================================
Aurora Gold Corporation
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
8. Non Cash Investing and Financing Activities - Continued
The carrying value of the indebtedness approximated the fair value of the
common shares issued.
Indebtedness of directors totalling $78,190 (1998 - $68,697) was settled
with the issuance of 102,870 (1998 - 96,105) shares of common stock.
Subsequent to year end, the Company reached agreement with a director to
settle accounts payable to the director totalling $33,700 at December 31,
1999 for the issuance of 70,000 shares of common stock.
- --------------------------------------------------------------------------------
9. Income Taxes
a) The Company has net losses for tax purposes totalling approximately
$2,050,000 which may be applied against future taxable income.
Accordingly, there is no tax expense for the years ended December 31,
1999 and 1998. The potential tax benefits arising from these losses
have not been recorded in the financial statements. The Company
evaluates its valuation allowance requirements on an annual basis
based on projected future operations. When circumstances change and
this causes a change in management's judgement about the realizability
of deferred tax assets, the impact of the change on the valuation
allowance is reflected in current operations.
The right to claim these losses expires as follows:
2011 $ 360,000
2012 564,000
2018 331,000
2019 795,000
-----------
$2,050,000
==========
b) The tax effects of temporary differences that give rise to the
Company's deferred tax asset are as follows:
1999 1998
--------- ---------
Tax loss carryforwards $ 697,000 $ 427,000
Mineral exploration expenses 39,000 39,000
Valuation allowance (736,000) (466,000)
--------- ---------
$ -- $ --
========= =========
F-20
DATED: October 15, 1999
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
- --------------------------------------------------------------------------------
O P T I O N A G R E E M E N T
- --------------------------------------------------------------------------------
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
<PAGE>
OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 4
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE................................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 8
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 9
AFTER ACQUIRED PROPERTIES.................................................... 9
NOTICE....................................................................... 10
FURTHER ASSURANCES........................................................... 10
RULE AGAINST PERPETUITIES.................................................... 10
TIME OF THE ESSENCE.......................................................... 10
ENUREMENT.................................................................... 11
FORCE MAJEURE................................................................ 11
DEFAULT...................................................................... 11
SEVERABILITY................................................................. 11
AMENDMENT.................................................................... 12
ENTIRE AGREEMENT............................................................. 12
OPTION ONLY.................................................................. 12
GOVERNING LAW AND ARBITRATION................................................ 12
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 15th day of October, 1999.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated pursuant to
the laws of the British Virgin Islands and having an office at 11 Bath
Street, P.O. Box 398, Jersey, Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated pursuant to the
laws of the State of Delaware, one of the United States of America,
and having an office at Suite 1505, 1060 Alberni Street, Vancouver,
British Columbia, V6E 4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor is the legal and beneficial owner of the Property as more
particularly described in Schedule "A" attached to and made a part of this
Agreement;
B. The Optionor wishes to grant and the Optionee wishes to acquire the Property
on the terms and subject to the conditions set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
<PAGE>
- 2 -
(b) "After Acquired Properties" mean any and all mineral interests staked,
located, granted or acquired by or on behalf of any party during the
currency of this Agreement which are located, in whole or in part,
within one (1) kilometre of the perimeter of the Property;
(c) "Agreement" means this agreement, as amended from time to time;
(d) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(e) "Effective Date" means the date this Agreement is deemed to take
effect, being the 15th day of October, 1999, or such other date as
shall be agreed to, in writing, by the parties;
(f) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(g) "Exploration Permit" means the exploration permit (permis de
recherche) dated July 14, 1999 issued by the Minister of Industry of
Tunisia granting to the Optionor the right to explore for base and
precious metals (3rd group as described in the Mining Law Decree of
the Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit forms part of Schedule "A"
hereto;
(h) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes assessment work, geophysical,
geochemical and geological surveying, studies and mapping,
investigating, trenching, drilling, designing, examining, equipping,
improving, surveying, shaft sinking, raising, crosscutting and
drifting, searching
<PAGE>
- 3 -
for, digging, trucking, sampling, working and procuring minerals,
ores, metals and concentrates, surveying and bringing any mineral
claims or other interests to lease or patent, reporting and all other
work usually considered to be prospecting, exploration, development
and mining work;
(i) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "B";
(j) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(k) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto, and any After-Acquired
Properties;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or agreements
contained in or constitute a default under, or result in the creation
of any encumbrance, lien or charge under the provisions of its
constating or initiating documents or any indenture, agreement or
other instrument whatsoever to which it
<PAGE>
- 4 -
is a party or by which it is bound or to which it may be subject and
will not contravene any applicable laws.
2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property;
(b) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(c) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other
person;
(d) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(e) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be entitled, in addition to any other
remedy to which it may be entitled, to set off any such loss, damage or costs
suffered by it as a result of any such breach against any payment required to be
made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which
<PAGE>
- 5 -
Expenditures will not be less than $500,000, in aggregate, to be incurred in the
following manner:
(a) $50,000 on or by the first anniversary of the Effective Date;
(b) an additional $50,000 on or by the second anniversary of the Effective
Date;
(c) an additional $75,000 on or by the third anniversary of the Effective
Date;
(d) an additional $150,000 on or by the fourth anniversary of the
Effective Date; and
(f) an additional $175,000 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $75,000 to the Optionor, in the
following manner:
(a) the sum of $5,000 on the Effective Date;
(b) the sum of $10,000 on the first anniversary of the Effective Date;
(c) the sum of $15,000 on the second anniversary of the Effective Date;
(d) the sum of $20,000 on the third anniversary of the Effective Date; and
(e) the sum of $25,000 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns Royalty payments by offering to transfer the Property back
to the Optionor, or its assignee as the case may be, for nominal consideration.
All advance Net Smelter Return Royalty payments shall be credited against the
Optionee's obligation to pay Net Smelter Return Royalties following the
commencement of Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of
<PAGE>
- 6 -
the notice exercising the NSR Option.
3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the purpose of inspecting work being done thereon
but at their own risk and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred without gross negligence or bad faith
by the
<PAGE>
- 7 -
Optionee directly or indirectly as a result of its exercise of its
powers pursuant to this Subsection 5.1(c); and
(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(g)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee
engaged in the operations hereunder to the extent of
$1,000,000;
(ii) comprehensive general liability insurance in such form as
may be customarily carried by a prudent operator for similar
operations with a bodily injury, death and property damage
limit of $1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned,
operated and/or licensed by the Optionee, with a bodily
injury, death and property damage limit of $5,000,000
inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written notice of any reduction or termination of
such coverage;
<PAGE>
- 8 -
(e) maintain true and correct books, accounts and records of operations
hereunder.
6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Section
3.1, then subject to the provisions of Sections 7.3 and 17.1 of this Agreement,
the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
<PAGE>
- 9 -
8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. AFTER ACQUIRED PROPERTIES
10.1 The parties covenant and agree, each with the other, that any and all After
Acquired Properties shall be subject to the terms and conditions of this
Agreement and shall be added to and deemed, for all purposes hereof, to be
included in the Property. Any costs incurred by the Optionee in staking,
locating, recording or otherwise acquiring any After Acquired Properties shall
be included in the calculation of its Expenditures hereunder.
<PAGE>
- 10 -
11. NOTICE
11.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
11.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only when actually
received and, if sent by telegram, telecommunication or other similar form of
communication, be deemed to have been given and received on the day it was
actually received.
11.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
12. FURTHER ASSURANCES
12.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
13. RULE AGAINST PERPETUITIES
13.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
14. TIME OF THE ESSENCE
14.1 Time shall be of the essence in the performance of this Agreement.
<PAGE>
- 11 -
15. ENUREMENT
15.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
16. FORCE MAJEURE
16.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
16.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
16.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to all other
parties as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
17. DEFAULT
17.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
18. SEVERABILITY
18.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
<PAGE>
- 12 -
19. AMENDMENT
19.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
20. ENTIRE AGREEMENT
20.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
21. OPTION ONLY
21.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
22. GOVERNING LAW AND ARBITRATION
22.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
22.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
22.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
<PAGE>
- 13 -
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH
HOLDINGS LTD. was hereto affixed )
in the presence of: )
)
)
/s/ Lester Kemp )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- -------------------------------------------- )
Authorized Signatory )
)
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto affixed )
in the presence of: )
)
)
/s/ David Jenkins )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- -------------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Numbers Area Exploration Permit
================================================================================
Hamman Zriba - Jebel Guebli 640387-640390 1600 hectares July 13, 2002
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
---------------------------------------
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "B" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
DATED: October 15, 1999
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
- --------------------------------------------------------------------------------
O P T I O N A G R E E M E N T
- --------------------------------------------------------------------------------
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
<PAGE>
OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 4
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE................................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 8
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 9
AFTER ACQUIRED PROPERTIES.................................................... 9
NOTICE....................................................................... 10
FURTHER ASSURANCES........................................................... 10
RULE AGAINST PERPETUITIES.................................................... 10
TIME OF THE ESSENCE.......................................................... 10
ENUREMENT.................................................................... 11
FORCE MAJEURE................................................................ 11
DEFAULT...................................................................... 11
SEVERABILITY................................................................. 11
AMENDMENT.................................................................... 12
ENTIRE AGREEMENT............................................................. 12
OPTION ONLY.................................................................. 12
GOVERNING LAW AND ARBITRATION................................................ 12
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 15th day of October, 1999.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated pursuant
to the laws of the British Virgin Islands and having an office at
11 Bath Street, P.O. Box 398, Jersey, Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated pursuant
to the laws of the State of Delaware, one of the United States of
America, and having an office at Suite 1505, 1060 Alberni Street,
Vancouver, British Columbia, V6E 4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor is the legal and beneficial owner of the Property
as more particularly described in Schedule "A" attached to and
made a part of this Agreement;
B. The Optionor wishes to grant and the Optionee wishes to
acquire the Property on the terms and subject to the conditions
set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
<PAGE>
- 2 -
(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
(b) "After Acquired Properties" mean any and all mineral interests staked,
located, granted or acquired by or on behalf of any party during the
currency of this Agreement which are located, in whole or in part,
within one (1) kilometre of the perimeter of the Property;
(c) "Agreement" means this agreement, as amended from time to time;
(d) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(e) "Effective Date" means the date this Agreement is deemed to take
effect, being the 15th day of October, 1999, or such other date as
shall be agreed to, in writing, by the parties;
(f) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(g) "Exploration Permit" means the exploration permit (permis de
recherche) dated July 14, 1999 issued by the Minister of Industry of
Tunisia granting to the Optionor the right to explore for base and
precious metals (3rd group as described in the Mining Law Decree of
the Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit forms part of Schedule "A"
hereto;
(h) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes assessment work,
<PAGE>
- 3 -
geophysical, geochemical and geological surveying, studies and
mapping, investigating, trenching, drilling, designing, examining,
equipping, improving, surveying, shaft sinking, raising, crosscutting
and drifting, searching for, digging, trucking, sampling, working and
procuring minerals, ores, metals and concentrates, surveying and
bringing any mineral claims or other interests to lease or patent,
reporting and all other work usually considered to be prospecting,
exploration, development and mining work;
(i) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "B";
(j) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(k) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto, and any After-Acquired
Properties;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or agreements
contained in or constitute a default under, or result in the creation
of any encumbrance,
<PAGE>
- 4 -
lien or charge under the provisions of its constating or initiating
documents or any indenture, agreement or other instrument whatsoever
to which it is a party or by which it is bound or to which it may be
subject and will not contravene any applicable laws.
2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property;
(b) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(c) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other
person;
(d) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(e) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be entitled, in addition to any other
remedy to which it may be entitled, to set off any such loss, damage or costs
suffered by it as a result of any such breach against any payment required to be
made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which Expenditures will not be less than $500,000, in aggregate, to be incurred
in the following manner:
(a) $25,000 on or by the first anniversary of the Effective Date;
<PAGE>
- 5 -
(b) an additional $50,000 on or by the second anniversary of the Effective
Date;
(c) an additional $100,000 on or by the third anniversary of the Effective
Date;
(d) an additional $150,000 on or by the fourth anniversary of the
Effective Date; and
(f) an additional $175,000 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $75,000 to the Optionor, in the
following manner:
(a) the sum of $5,000 on the Effective Date;
(b) the sum of $10,000 on the first anniversary of the Effective Date;
(c) the sum of $15,000 on the second anniversary of the Effective Date;
(d) the sum of $20,000 on the third anniversary of the Effective Date; and
(e) the sum of $25,000 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns Royalty payments by offering to transfer the Property back
to the Optionor, or its assignee as the case may be, for nominal consideration.
All advance Net Smelter Return Royalty payments shall be credited against the
Optionee's obligation to pay Net Smelter Return Royalties following the
commencement of Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of the notice exercising the NSR
Option.
<PAGE>
- 6 -
3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the purpose of inspecting work being done thereon
but at their own risk and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred
<PAGE>
- 7 -
without gross negligence or bad faith by the Optionee directly or
indirectly as a result of its exercise of its powers pursuant to this
Subsection 5.1(c); and
(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(g)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee engaged in
the operations hereunder to the extent of $1,000,000;
(ii) comprehensive general liability insurance in such form as may be
customarily carried by a prudent operator for similar operations
with a bodily injury, death and property damage limit of
$1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned, operated
and/or licensed by the Optionee, with a bodily injury, death and
property damage limit of $5,000,000 inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written
<PAGE>
- 8 -
notice of any reduction or termination of such coverage;
(e) maintain true and correct books, accounts and records of operations
hereunder.
6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Section
3.1, then subject to the provisions of Sections 7.3 and 17.1 of this Agreement,
the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
<PAGE>
- 9 -
8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. AFTER ACQUIRED PROPERTIES
10.1 The parties covenant and agree, each with the other, that any and all After
Acquired Properties shall be subject to the terms and conditions of this
Agreement and shall be added to and deemed, for all purposes hereof, to be
included in the Property. Any costs incurred by the Optionee in staking,
locating, recording or otherwise acquiring any After Acquired Properties shall
be included in the calculation of its Expenditures hereunder.
<PAGE>
- 10 -
11. NOTICE
11.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
11.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only when actually
received and, if sent by telegram, telecommunication or other similar form of
communication, be deemed to have been given and received on the day it was
actually received.
11.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
12. FURTHER ASSURANCES
12.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
13. RULE AGAINST PERPETUITIES
13.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
14. TIME OF THE ESSENCE
14.1 Time shall be of the essence in the performance of this Agreement.
<PAGE>
- 11 -
15. ENUREMENT
15.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
16. FORCE MAJEURE
16.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
16.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
16.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to all other
parties as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
17. DEFAULT
17.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
18. SEVERABILITY
18.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
<PAGE>
- 12 -
19. AMENDMENT
19.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
20. ENTIRE AGREEMENT
20.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
21. OPTION ONLY
21.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
22. GOVERNING LAW AND ARBITRATION
22.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
22.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
22.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
<PAGE>
- 13 -
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH )
HOLDINGS LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Lester Kemp )
- --------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- --------------------------------------- )
Authorized Signatory )
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto )
affixed in the presence of: )
)
)
/s/ David Jenkins )
- --------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- --------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Number Area Exploration Permit
================================================================================
Koudiat Sidii 640395 400 hectares July 13, 2002
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "B" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
DATED: October 15, 1999
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
- --------------------------------------------------------------------------------
O P T I O N A G R E E M E N T
- --------------------------------------------------------------------------------
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
<PAGE>
OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 4
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE................................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 8
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 9
NOTICE....................................................................... 9
FURTHER ASSURANCES........................................................... 10
RULE AGAINST PERPETUITIES.................................................... 10
TIME OF THE ESSENCE.......................................................... 10
ENUREMENT.................................................................... 10
FORCE MAJEURE................................................................ 10
DEFAULT...................................................................... 11
SEVERABILITY................................................................. 11
AMENDMENT.................................................................... 11
ENTIRE AGREEMENT............................................................. 11
OPTION ONLY.................................................................. 12
GOVERNING LAW AND ARBITRATION................................................ 12
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 15th day of October, 1999.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated
pursuant to the laws of the British Virgin Islands and
having an office at 11 Bath Street, P.O. Box 398, Jersey,
Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated
pursuant to the laws of the State of Delaware, one of the
United States of America, and having an office at Suite
1505, 1060 Alberni Street, Vancouver, British Columbia, V6E
4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor is the legal and beneficial owner of the Property as more
particularly described in Schedule "A" attached to and made a part of this
Agreement;
B. The Optionor wishes to grant and the Optionee wishes to acquire the Property
on the terms and subject to the conditions set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
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(b) "Agreement" means this agreement, as amended from time to time;
(c) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(d) "Effective Date" means the date this Agreement is deemed to take
effect, being the 15th day of October, 1999, or such other date as
shall be agreed to, in writing, by the parties;
(e) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(f) "Exploration Permit" means the exploration permit (permis de
recherche) dated July 14, 1999 issued by the Minister of Industry of
Tunisia granting to the Optionor the right to explore for base and
precious metals (3rd group as described in the Mining Law Decree of
the Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit forms part of Schedule "A"
hereto;
(g) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes assessment work, geophysical,
geochemical and geological surveying, studies and mapping,
investigating, trenching, drilling, designing, examining, equipping,
improving, surveying, shaft sinking, raising, crosscutting and
drifting, searching for, digging, trucking, sampling, working and
procuring minerals, ores, metals and concentrates, surveying and
bringing any mineral claims or other interests to lease or patent,
reporting and all other work usually considered to be prospecting,
exploration, development and mining work;
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(h) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "B";
(i) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(j) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or agreements
contained in or constitute a default under, or result in the creation
of any encumbrance, lien or charge under the provisions of its
constating or initiating documents or any indenture, agreement or
other instrument whatsoever to which it is a party or by which it is
bound or to which it may be subject and will not contravene any
applicable laws.
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2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property;
(b) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(c) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other
person;
(d) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(e) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be entitled, in addition to any other
remedy to which it may be entitled, to set off any such loss, damage or costs
suffered by it as a result of any such breach against any payment required to be
made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which Expenditures will not be less than $500,000, in aggregate, to be incurred
in the following manner:
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(a) $50,000 on or by the first anniversary of the Effective Date;
(b) an additional $50,000 on or by the second anniversary of the Effective
Date;
(c) an additional $75,000 on or by the third anniversary of the Effective
Date;
(d) an additional $150,000 on or by the fourth anniversary of the
Effective Date; and
(f) an additional $175,000 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $75,000 to the Optionor, in the
following manner:
(a) the sum of $5,000 on the Effective Date;
(b) the sum of $10,000 on the first anniversary of the Effective Date;
(c) the sum of $15,000 on the second anniversary of the Effective Date;
(d) the sum of $20,000 on the third anniversary of the Effective Date; and
(e) the sum of $25,000 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns Royalty payments by offering to transfer the Property back
to the Optionor, or its assignee as the case may be, for nominal consideration.
All advance Net Smelter Return Royalty payments shall be credited against the
Optionee's obligation to pay Net Smelter Return Royalties following the
commencement of Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of the notice exercising the NSR
Option.
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3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the purpose of inspecting work being done thereon
but at their own risk and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred without gross negligence or bad faith
by the Optionee directly or indirectly as a result of its exercise of
its powers pursuant to this Subsection 5.1(c); and
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(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(f)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee engaged in
the operations hereunder to the extent of $1,000,000;
(ii) comprehensive general liability insurance in such form as may be
customarily carried by a prudent operator for similar operations
with a bodily injury, death and property damage limit of
$1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned, operated
and/or licensed by the Optionee, with a bodily injury, death and
property damage limit of $5,000,000 inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written notice of any reduction or termination of
such coverage;
(e) maintain true and correct books, accounts and records of operations
hereunder.
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6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Section
3.1, then subject to the provisions of Sections 7.3 and 17.1 of this Agreement,
the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
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8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. NOTICE
10.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
10.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only
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when actually received and, if sent by telegram, telecommunication or other
similar form of communication, be deemed to have been given and received on the
day it was actually received.
10.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
11. FURTHER ASSURANCES
11.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
12. RULE AGAINST PERPETUITIES
12.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
13. TIME OF THE ESSENCE
13.1 Time shall be of the essence in the performance of this Agreement.
14. ENUREMENT
14.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
15. FORCE MAJEURE
15.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
15.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
15.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall
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give written notice to all other parties as soon as the Intervening Event ceases
to exist, shall take all reasonable steps to eliminate any Intervening Event and
will perform its obligations under this Agreement as far as practicable, but
nothing herein will require such party to settle or adjust any labour dispute or
to question or to test the validity of any law, rule, regulation or order of any
duly constituted governmental authority or to complete its obligations under
this Agreement if an Intervening Event renders completion impossible.
16. DEFAULT
16.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
17. SEVERABILITY
17.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
18. AMENDMENT
18.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
19. ENTIRE AGREEMENT
19.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
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20. OPTION ONLY
20.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
21. GOVERNING LAW AND ARBITRATION
21.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
21.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
21.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH )
HOLDINGS LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Lester Kemp )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- -------------------------------------------- )
Authorized Signatory )
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto )
affixed in the presence of: )
)
)
/s/ David Jenkins )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- -------------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Numbers Area Exploration Permit
================================================================================
Ouled Moussa (Bou 640397-640400 1600 hectares July 13, 2002
Jabeur Est Extension)
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
OCTOBER 15, 1999 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "B" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
DATED: January 20, 2000
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
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O P T I O N A G R E E M E N T
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SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
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OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
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INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 5
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR...................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 9
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 10
AFTER ACQUIRED PROPERTIES.................................................... 10
NOTICE....................................................................... 11
FURTHER ASSURANCES........................................................... 11
RULE AGAINST PERPETUITIES.................................................... 11
TIME OF THE ESSENCE.......................................................... 11
ENUREMENT.................................................................... 11
FORCE MAJEURE................................................................ 12
DEFAULT...................................................................... 12
SEVERABILITY................................................................. 12
AMENDMENT.................................................................... 13
ENTIRE AGREEMENT............................................................. 13
OPTION ONLY.................................................................. 13
GOVERNING LAW AND ARBITRATION................................................ 13
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OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 20th day of January, 2000.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated
pursuant to the laws of the British Virgin Islands and
having an office at 11 Bath Street, P.O. Box 398, Jersey,
Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated
pursuant to the laws of the State of Delaware, one of the
United States of America, and having an office at Suite
1505, 1060 Alberni Street, Vancouver, British Columbia, V6E
4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor holds certain interests in the Property as more particularly
described in Schedule "A" attached to and made a part of this Agreement;
B. The Optionor's interests in the Property are held pursuant to an agreement
dated January 18, 2000 made between the Optionor and L'office National des Mines
("ONM"), a copy of which is attached hereto as Schedule "B" and made part of
this Agreement (the "ONM Agreement");
C. The Optionor wishes to grant and the Optionee wishes to acquire the Property
on the terms and subject to the conditions set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
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(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
(b) "After Acquired Properties" mean any and all mineral interests staked,
located, granted or acquired by or on behalf of any party during the
currency of this Agreement which are located, in whole or in part,
within one (1) kilometre of the perimeter of the Property;
(c) "Agreement" means this agreement, as amended from time to time;
(d) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(e) "Effective Date" means the date this Agreement is deemed to take
effect, being the date that all of the conditions precedent described
in Section 11.1 herein have been satisfied, or such other date as
shall be agreed to, in writing, by the parties;
(f) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(g) "Exploration Permit" means the exploration permit (permis de
recherche) dated June 30, 1998 issued by the Minister of Industry of
Tunisia granting to ONM the right to explore for base and precious
metals (3rd group as described in the Mining Law Decree of the
Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit is attached hereto as
Schedule "C";
(h) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes
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assessment work, geophysical, geochemical and geological surveying,
studies and mapping, investigating, trenching, drilling, designing,
examining, equipping, improving, surveying, shaft sinking, raising,
crosscutting and drifting, searching for, digging, trucking, sampling,
working and procuring minerals, ores, metals and concentrates,
surveying and bringing any mineral claims or other interests to lease
or patent, reporting and all other work usually considered to be
prospecting, exploration, development and mining work;
(i) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "D";
(j) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(k) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto, and any After-Acquired
Properties;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or
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agreements contained in or constitute a default under, or result in
the creation of any encumbrance, lien or charge under the provisions
of its constating or initiating documents or any indenture, agreement
or other instrument whatsoever to which it is a party or by which it
is bound or to which it may be subject and will not contravene any
applicable laws.
2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property, subject to the interests of ONM under the ONM Agreement;
(b) the ONM Agreement is in full force and effect, no interest therein has
been assigned or otherwise disposed of by either ONM or the Optionor,
the Optionor has complied with all its obligations thereunder and ONM
has received written consent to the ONM Agreement from the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, pursuant to the
provisions of Article 25 of the Mining Law Decree of the Republic of
Tunisia dated January 1, 1953;
(c) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(d) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other person
other than ONM pursuant to the terms of the ONM Agreement;
(e) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(f) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be
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entitled, in addition to any other remedy to which it may be entitled, to set
off any such loss, damage or costs suffered by it as a result of any such breach
against any payment required to be made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which Expenditures will not be less than $500,000, in aggregate, to be incurred
in the following manner:
(a) $50,000 on or by the first anniversary of the Effective Date;
(b) an additional $50,000 on or by the second anniversary of the Effective
Date;
(c) an additional $75,000 on or by the third anniversary of the Effective
Date;
(d) an additional $150,000 on or by the fourth anniversary of the
Effective Date; and
(f) an additional $175,000 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $75,000 to the Optionor, in the
following manner:
(a) the sum of $5,000 on the Effective Date;
(b) the sum of $10,000 on the first anniversary of the Effective Date;
(c) the sum of $15,000 on the second anniversary of the Effective Date;
(d) the sum of $20,000 on the third anniversary of the Effective Date; and
(e) the sum of $25,000 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns
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Royalty payments by offering to transfer the Property back to the Optionor, or
its assignee as the case may be, for nominal consideration. All advance Net
Smelter Return Royalty payments shall be credited against the Optionee's
obligation to pay Net Smelter Return Royalties following the commencement of
Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of the notice exercising the NSR
Option.
3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the
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purpose of inspecting work being done thereon but at their own risk
and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred without gross negligence or bad faith
by the Optionee directly or indirectly as a result of its exercise of
its powers pursuant to this Subsection 5.1(c); and
(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(g)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee engaged in
the operations hereunder to the extent of $1,000,000;
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(ii) comprehensive general liability insurance in such form as may be
customarily carried by a prudent operator for similar operations
with a bodily injury, death and property damage limit of
$1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned, operated
and/or licensed by the Optionee, with a bodily injury, death and
property damage limit of $5,000,000 inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written notice of any reduction or termination of
such coverage;
(e) maintain true and correct books, accounts and records of operations
hereunder.
5.3 During the term of this Agreement, the Optionor shall maintain the ONM
Agreement in good standing by making all payments due to ONM in accordance with
the terms of the ONM Agreement, and otherwise ensuring compliance with the
Optionor's obligations thereunder. Furthermore, the Optionor shall not assign or
dispose of any interest in the ONM Agreement to any third party during the term
of this Agreement. In the event the Optionor for whatever reason fails to comply
with any provision of the ONM Agreement, the Optionee shall have the right, but
not the obligation, to take such action as may be necessary to ensure the
Optionor's compliance with the ONM Agreement, including but not limited to
making any payments due thereunder, and any such payments made by the Optionee
on behalf of the Optionor shall for the purposes of this Agreement be considered
to be Expenditures and credited towards the Optionee's obligations under Section
3.1 herein.
5.4 During the term of this Agreement, the Optionor shall deliver to the
Optionee copies of all written correspondence between the Optionor and ONM and
evidence of all payments made by the Optionor to ONM pursuant to the terms of
the ONM Agreement or otherwise.
6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee. Thereafter, the Optionor shall take all
steps necessary to cause ONM to transfer the Permit to the Optionee as soon as
practicable.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
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7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Sections
3.1 and 3.2, then subject to the provisions of Sections 7.3 and 17.1 of this
Agreement, the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
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9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. AFTER ACQUIRED PROPERTIES
10.1 The parties covenant and agree, each with the other, that any and all After
Acquired Properties shall be subject to the terms and conditions of this
Agreement and shall be added to and deemed, for all purposes hereof, to be
included in the Property. Any costs incurred by the Optionee in staking,
locating, recording or otherwise acquiring any After Acquired Properties shall
be included in the calculation of its Expenditures hereunder.
11. CONDITIONS PRECEDENT
11.1 This Agreement and the obligations of the parties hereunder are in each
case subject to the following conditions precedent:
(a) receipt by each of the parties of the written consent of ONM to the
Agreement in the form attached hereto as Schedule "E"; and
(b) receipt by each of the parties of the written consent of the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, to this
Agreement.
11.2 In the event the conditions precedent described in Section 11.1 are not
satisfied on or before July 31, 2000, this Agreement shall terminate and be of
no further force or effect.
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12. NOTICE
12.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
12.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only when actually
received and, if sent by telegram, telecommunication or other similar form of
communication, be deemed to have been given and received on the day it was
actually received.
12.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
13. FURTHER ASSURANCES
13.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
14. RULE AGAINST PERPETUITIES
14.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
15. TIME OF THE ESSENCE
15.1 Time shall be of the essence in the performance of this Agreement.
16. ENUREMENT
16.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
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17. FORCE MAJEURE
17.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
17.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
17.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to all other
parties as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
18. DEFAULT
18.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
19. SEVERABILITY
19.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
<PAGE>
- 13 -
20. AMENDMENT
20.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
21. ENTIRE AGREEMENT
21.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
22. OPTION ONLY
22.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
23. GOVERNING LAW AND ARBITRATION
23.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
23.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
23.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
<PAGE>
- 14 -
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH )
HOLDINGS LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Lester Kemp )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- -------------------------------------------- )
Authorized Signatory )
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto )
affixed in the presence of: )
)
)
/s/ David Jenkins )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- -------------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Number Area Exploration Permit
================================================================================
Hammala 638002 400 hectares June 29, 2001
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "C" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "D" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "D" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
<PAGE>
THIS IS SCHEDULE "E" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
CONSENT
To: High Marsh Holdings Ltd.
11 Bath Street
P.O. Box 398
Jersey, Channel Islands
JE4 8UT
And to: Aurora Gold Corporation
Suite 1505 1060 Alberni Street
Vancouver, British Columbia
V6E 4K2
Re: Grant of Option by High Marsh Holdings Ltd. to Aurora
Gold Corporation in respect of Hammala Exploration Permit (the "Property")
Pursuant to Article IV - 2.7 of that certain agreement pertaining to the
Property made between L'office National des Mines ("ONM") and High Marsh
Holdings Ltd. ("High Marsh") dated __________________________, 2000 (the
"Agreement"), ONM hereby consents to the grant by High Marsh to Aurora Gold
Corporation ("Aurora") of an option to acquire 100% of High Marsh's interest in
the Property on the terms and conditions contained in the Option Agreement
entered into between High Marsh and Aurora dated January ______, 2000, a copy of
which ONM acknowledges having received and reviewed (the "Option").
Notwithstanding the provisions of Article VII of the Agreement, ONM hereby also
consents to High Marsh disclosing to Aurora all confidential information
relating to the Property which High Marsh has obtained from either ONM or other
sources.
Dated at _________________________, this _____ day of ___________________, 2000.
L'OFFICE NATIONAL DES MINES
Per: __________________________
Authorized Signatory
DATED: January 20, 2000
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
- --------------------------------------------------------------------------------
O P T I O N A G R E E M E N T
- --------------------------------------------------------------------------------
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
<PAGE>
OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
- ------- ----
INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 5
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR...................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 9
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 10
AFTER ACQUIRED PROPERTIES.................................................... 10
NOTICE....................................................................... 11
FURTHER ASSURANCES........................................................... 11
RULE AGAINST PERPETUITIES.................................................... 11
TIME OF THE ESSENCE.......................................................... 11
ENUREMENT.................................................................... 11
FORCE MAJEURE................................................................ 12
DEFAULT...................................................................... 12
SEVERABILITY................................................................. 12
AMENDMENT.................................................................... 13
ENTIRE AGREEMENT............................................................. 13
OPTION ONLY.................................................................. 13
GOVERNING LAW AND ARBITRATION................................................ 13
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 20th day of January, 2000.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated
pursuant to the laws of the British Virgin Islands and
having an office at 11 Bath Street, P.O. Box 398, Jersey,
Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated
pursuant to the laws of the State of Delaware, one of the
United States of America, and having an office at Suite
1505, 1060 Alberni Street, Vancouver, British Columbia, V6E
4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor holds certain interests in the Property as more particularly
described in Schedule "A" attached to and made a part of this Agreement;
B. The Optionor's interests in the Property are held pursuant to an agreement
dated January 18, 2000 made between the Optionor and L'office National des Mines
("ONM"), a copy of which is attached hereto as Schedule "B" and made part of
this Agreement (the "ONM Agreement");
C. The Optionor wishes to grant and the Optionee wishes to acquire the Property
on the terms and subject to the conditions set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
<PAGE>
- 2 -
(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
(b) "After Acquired Properties" mean any and all mineral interests staked,
located, granted or acquired by or on behalf of any party during the
currency of this Agreement which are located, in whole or in part,
within one (1) kilometre of the perimeter of the Property;
(c) "Agreement" means this agreement, as amended from time to time;
(d) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(e) "Effective Date" means the date this Agreement is deemed to take
effect, being the date that all of the conditions precedent described
in Section 11.1 herein have been satisfied, or such other date as
shall be agreed to, in writing, by the parties;
(f) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(g) "Exploration Permit" means the exploration permit (permis de
recherche) dated January 8, 1998 issued by the Minister of Industry of
Tunisia granting to ONM the right to explore for base and precious
metals (3rd group as described in the Mining Law Decree of the
Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit is attached hereto as
Schedule "C";
(h) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes
<PAGE>
- 3 -
assessment work, geophysical, geochemical and geological surveying,
studies and mapping, investigating, trenching, drilling, designing,
examining, equipping, improving, surveying, shaft sinking, raising,
crosscutting and drifting, searching for, digging, trucking, sampling,
working and procuring minerals, ores, metals and concentrates,
surveying and bringing any mineral claims or other interests to lease
or patent, reporting and all other work usually considered to be
prospecting, exploration, development and mining work;
(i) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "D";
(j) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(k) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto, and any After-Acquired
Properties;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or
<PAGE>
- 4 -
agreements contained in or constitute a default under, or result in
the creation of any encumbrance, lien or charge under the provisions
of its constating or initiating documents or any indenture, agreement
or other instrument whatsoever to which it is a party or by which it
is bound or to which it may be subject and will not contravene any
applicable laws.
2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property, subject to the interests of ONM under the ONM Agreement;
(b) the ONM Agreement is in full force and effect, no interest therein has
been assigned or otherwise disposed of by either ONM or the Optionor,
the Optionor has complied with all its obligations thereunder and ONM
has received written consent to the ONM Agreement from the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, pursuant to the
provisions of Article 25 of the Mining Law Decree of the Republic of
Tunisia dated January 1, 1953;
(c) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(d) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other person
other than ONM pursuant to the terms of the ONM Agreement;
(e) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(f) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be
<PAGE>
- 5 -
entitled, in addition to any other remedy to which it may be entitled, to set
off any such loss, damage or costs suffered by it as a result of any such breach
against any payment required to be made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which Expenditures will not be less than $250,000, in aggregate, to be incurred
in the following manner:
(a) $25,000 on or by the first anniversary of the Effective Date;
(b) an additional $25,000 on or by the second anniversary of the Effective
Date;
(c) an additional $37,500 on or by the third anniversary of the Effective
Date;
(d) an additional $75,000 on or by the fourth anniversary of the Effective
Date; and
(f) an additional $87,500 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $37,500 to the Optionor, in the
following manner:
(a) the sum of $2,500 on the Effective Date;
(b) the sum of $5,000 on the first anniversary of the Effective Date;
(c) the sum of $7,500 on the second anniversary of the Effective Date;
(d) the sum of $10,000 on the third anniversary of the Effective Date; and
(e) the sum of $12,500 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns
<PAGE>
- 6 -
Royalty payments by offering to transfer the Property back to the Optionor, or
its assignee as the case may be, for nominal consideration. All advance Net
Smelter Return Royalty payments shall be credited against the Optionee's
obligation to pay Net Smelter Return Royalties following the commencement of
Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of the notice exercising the NSR
Option.
3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the
<PAGE>
- 7 -
purpose of inspecting work being done thereon but at their own risk
and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred without gross negligence or bad faith
by the Optionee directly or indirectly as a result of its exercise of
its powers pursuant to this Subsection 5.1(c); and
(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(g)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee engaged in
the operations hereunder to the extent of $1,000,000;
<PAGE>
- 8 -
(ii) comprehensive general liability insurance in such form as may be
customarily carried by a prudent operator for similar operations
with a bodily injury, death and property damage limit of
$1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned, operated
and/or licensed by the Optionee, with a bodily injury, death and
property damage limit of $5,000,000 inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written notice of any reduction or termination of
such coverage;
(e) maintain true and correct books, accounts and records of operations
hereunder.
5.3 During the term of this Agreement, the Optionor shall maintain the ONM
Agreement in good standing by making all payments due to ONM in accordance with
the terms of the ONM Agreement, and otherwise ensuring compliance with the
Optionor's obligations thereunder. Furthermore, the Optionor shall not assign or
dispose of any interest in the ONM Agreement to any third party during the term
of this Agreement. In the event the Optionor for whatever reason fails to comply
with any provision of the ONM Agreement, the Optionee shall have the right, but
not the obligation, to take such action as may be necessary to ensure the
Optionor's compliance with the ONM Agreement, including but not limited to
making any payments due thereunder, and any such payments made by the Optionee
on behalf of the Optionor shall for the purposes of this Agreement be considered
to be Expenditures and credited towards the Optionee's obligations under Section
3.1 herein.
5.4 During the term of this Agreement, the Optionor shall deliver to the
Optionee copies of all written correspondence between the Optionor and ONM and
evidence of all payments made by the Optionor to ONM pursuant to the terms of
the ONM Agreement or otherwise.
6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee. Thereafter, the Optionor shall take all
steps necessary to cause ONM to transfer the Permit to the Optionee as soon as
practicable.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
<PAGE>
- 9 -
7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Sections
3.1 and 3.2, then subject to the provisions of Sections 7.3 and 17.1 of this
Agreement, the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
<PAGE>
- 10 -
9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. AFTER ACQUIRED PROPERTIES
10.1 The parties covenant and agree, each with the other, that any and all After
Acquired Properties shall be subject to the terms and conditions of this
Agreement and shall be added to and deemed, for all purposes hereof, to be
included in the Property. Any costs incurred by the Optionee in staking,
locating, recording or otherwise acquiring any After Acquired Properties shall
be included in the calculation of its Expenditures hereunder.
11. CONDITIONS PRECEDENT
11.1 This Agreement and the obligations of the parties hereunder are in each
case subject to the following conditions precedent:
(a) receipt by each of the parties of the written consent of ONM to the
Agreement in the form attached hereto as Schedule "E"; and
(b) receipt by each of the parties of the written consent of the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, to this
Agreement.
11.2 In the event the conditions precedent described in Section 11.1 are not
satisfied on or before July 31, 2000, this Agreement shall terminate and be of
no further force or effect.
<PAGE>
- 11 -
12. NOTICE
12.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
12.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only when actually
received and, if sent by telegram, telecommunication or other similar form of
communication, be deemed to have been given and received on the day it was
actually received.
12.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
13. FURTHER ASSURANCES
13.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
14. RULE AGAINST PERPETUITIES
14.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
15. TIME OF THE ESSENCE
15.1 Time shall be of the essence in the performance of this Agreement.
16. ENUREMENT
16.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
<PAGE>
- 12 -
17. FORCE MAJEURE
17.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
17.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
17.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to all other
parties as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
18. DEFAULT
18.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
19. SEVERABILITY
19.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
<PAGE>
- 13 -
20. AMENDMENT
20.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
21. ENTIRE AGREEMENT
21.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
22. OPTION ONLY
22.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
23. GOVERNING LAW AND ARBITRATION
23.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
23.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
23.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
<PAGE>
- 14 -
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH )
HOLDINGS LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Lester Kemp )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- -------------------------------------------- )
Authorized Signatory )
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto )
affixed in the presence of: )
)
)
/s/ David Jenkins )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- -------------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Number Area Exploration Permit
================================================================================
El Mohguer 635992 400 hectares January 7, 2001
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "C" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "D" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "D" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
<PAGE>
THIS IS SCHEDULE "E" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
CONSENT
To: High Marsh Holdings Ltd.
11 Bath Street
P.O. Box 398
Jersey, Channel Islands
JE4 8UT
And to: Aurora Gold Corporation
Suite 1505 1060 Alberni Street
Vancouver, British Columbia
V6E 4K2
Re: Grant of Option by High Marsh Holdings Ltd. to Aurora
Gold Corporation in respect of El Mohguer Exploration Permit
(the "Property")
Pursuant to Article IV - 2.7 of that certain agreement pertaining to the
Property made between L'office National des Mines ("ONM") and High Marsh
Holdings Ltd. ("High Marsh") dated _______________________, 2000 (the
"Agreement"), ONM hereby consents to the grant by High Marsh to Aurora Gold
Corporation ("Aurora") of an option to acquire 100% of High Marsh's interest in
the Property on the terms and conditions contained in the Option Agreement
entered into between High Marsh and Aurora dated January _______, 2000, a copy
of which ONM acknowledges having received and reviewed (the "Option").
Notwithstanding the provisions of Article VII of the Agreement, ONM hereby also
consents to High Marsh disclosing to Aurora all confidential information
relating to the Property which High Marsh has obtained from either ONM or other
sources.
Dated at _____________________________, this ______ day of ______________, 2000.
L'OFFICE NATIONAL DES MINES
Per: __________________________
Authorized Signatory
DATED: January 20, 2000
BETWEEN:
HIGH MARSH HOLDINGS LTD.
OF THE FIRST PART
AND:
AURORA GOLD CORPORATION
OF THE SECOND PART
- --------------------------------------------------------------------------------
O P T I O N A G R E E M E N T
- --------------------------------------------------------------------------------
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750 - 1185 West Georgia Street
Vancouver, B.C.
V6E 4E6
<PAGE>
OPTION AGREEMENT
TABLE OF CONTENTS
Article Page
- ------- ----
INTERPRETATION............................................................... 1
REPRESENTATIONS AND WARRANTIES............................................... 3
OPTION....................................................................... 5
RIGHT OF ENTRY............................................................... 6
POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR...................... 6
VESTING OF INTEREST.......................................................... 8
TERMINATION OF OPTION........................................................ 9
CONFIDENTIALITY.............................................................. 9
RESTRICTIONS ON ALIENATION................................................... 10
AFTER ACQUIRED PROPERTIES.................................................... 10
NOTICE....................................................................... 11
FURTHER ASSURANCES........................................................... 11
RULE AGAINST PERPETUITIES.................................................... 11
TIME OF THE ESSENCE.......................................................... 11
ENUREMENT.................................................................... 11
FORCE MAJEURE................................................................ 12
DEFAULT...................................................................... 12
SEVERABILITY................................................................. 12
AMENDMENT.................................................................... 13
ENTIRE AGREEMENT............................................................. 13
OPTION ONLY.................................................................. 13
GOVERNING LAW AND ARBITRATION................................................ 13
<PAGE>
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 20th day of January, 2000.
BETWEEN:
HIGH MARSH HOLDINGS LTD., a body corporate incorporated
pursuant to the laws of the British Virgin Islands and
having an office at 11 Bath Street, P.O. Box 398, Jersey,
Channel Islands, JE4 8UT
(the "Optionor")
OF THE FIRST PART
AND
AURORA GOLD CORPORATION, a body corporate incorporated
pursuant to the laws of the State of Delaware, one of the
United States of America, and having an office at Suite
1505, 1060 Alberni Street, Vancouver, British Columbia, V6E
4K2
(the "Optionee")
OF THE SECOND PART
W H E R E A S:
A. The Optionor holds certain interests in the Property as more particularly
described in Schedule "A" attached to and made a part of this Agreement;
B. The Optionor's interests in the Property are held pursuant to an agreement
dated January 18, 2000 made between the Optionor and L'office National des Mines
("ONM"), a copy of which is attached hereto as Schedule "B" and made part of
this Agreement (the "ONM Agreement");
C. The Optionor wishes to grant and the Optionee wishes to acquire the Property
on the terms and subject to the conditions set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and of the mutual promises, covenants, conditions, representations and
warranties herein set out, the parties hereto agree as follows:
1. INTERPRETATION
1.1 For the purposes of this Agreement, including the recitals and any schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and expressions shall have the following
meanings:
<PAGE>
- 2 -
(a) "Affiliate" shall have the meaning attributed to it by the Company Act
(British Columbia);
(b) "After Acquired Properties" mean any and all mineral interests staked,
located, granted or acquired by or on behalf of any party during the
currency of this Agreement which are located, in whole or in part,
within one (1) kilometre of the perimeter of the Property;
(c) "Agreement" means this agreement, as amended from time to time;
(d) "Commercial Production" means the operation of the Property or any
portion thereof as a producing mine and the production of mineral
products therefrom (excluding bulk sampling, pilot plant or test
operations);
(e) "Effective Date" means the date this Agreement is deemed to take
effect, being the date that all of the conditions precedent described
in Section 11.1 herein have been satisfied, or such other date as
shall be agreed to, in writing, by the parties;
(f) "Expenditures" mean all cash, expenses, obligations and liabilities,
other than for personal injury or property damage, of whatever kind or
nature spent or incurred directly or indirectly in connection with the
exploration, development or equipping of the Property or any portion
thereof for Commercial Production including, without limiting the
generality of the foregoing, monies expended in constructing, leasing
or acquiring all facilities, buildings, machinery and equipment in
connection with Mining Work, in paying any taxes, fees, charges,
payments or rentals (including payments in lieu of assessment work) or
otherwise to keep the Property or any portion thereof in good standing
(including any payment to or in respect of acquiring any agreement or
confirmation from any holder of surface rights respecting the Property
or any portion thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and geological
surveys, in trenching, drilling, assaying, metallurgical testing, bulk
sampling and pilot plant operations, in paying the fees, wages,
salaries, travelling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, in paying for
the food, lodging and other reasonable needs of such persons, in
preparing any reports and in supervising and managing any work done
with respect to and for the benefit of the Property or any portion
thereof, or in any other respects necessary for the due carrying out
of Mining Work, including any operator's overhead fees;
(g) "Exploration Permit" means the exploration permit (permis de
recherche) dated January 8, 1998 issued by the Minister of Industry of
Tunisia granting to ONM the right to explore for base and precious
metals (3rd group as described in the Mining Law Decree of the
Republic of Tunisia dated January 1, 1953) within the area covered
thereby, a copy of which exploration permit is attached hereto as
Schedule "C";
(h) "Mining Work" means every kind of work done on or in respect of the
Property or the products therefrom by or under the direction of or on
behalf of or for the benefit of a party and, without limiting the
generality of the foregoing, includes
<PAGE>
- 3 -
assessment work, geophysical, geochemical and geological surveying,
studies and mapping, investigating, trenching, drilling, designing,
examining, equipping, improving, surveying, shaft sinking, raising,
crosscutting and drifting, searching for, digging, trucking, sampling,
working and procuring minerals, ores, metals and concentrates,
surveying and bringing any mineral claims or other interests to lease
or patent, reporting and all other work usually considered to be
prospecting, exploration, development and mining work;
(i) "Net Smelter Returns Royalty" means that charge on proceeds from
production as described in Schedule "D";
(j) "Option" means the option granted by the Optionor to the Optionee
under Section 3.1 of this Agreement;
(k) "Property" means the Exploration Permit more particularly described in
Schedule "A" hereto together with the surface rights, mineral rights,
personal property and consents and authorizations associated
therewith, and shall include any renewal thereof and any other form of
successor or substitute title thereto, and any After-Acquired
Properties;
1.2 In this Agreement, all dollar amounts are expressed in lawful currency of
the United States of America, unless specifically provided to the contrary.
1.3 The titles to the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, and words importing the masculine gender shall include the
feminine and neuter genders, and vice-versa, and words importing persons shall
include firms, partnerships and corporations.
2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) if a company, it is a company duly incorporated, validly subsisting
and in good standing with respect to filing of annual reports under
the laws of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property in
the jurisdiction in which the Property is located;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to in or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all authorizations for the execution, delivery
and performance of this Agreement, and such execution, delivery and
performance and the consummation of the transactions herein
contemplated will not conflict with, or accelerate the performance
required by or result in any breach of any covenants or
<PAGE>
- 4 -
agreements contained in or constitute a default under, or result in
the creation of any encumbrance, lien or charge under the provisions
of its constating or initiating documents or any indenture, agreement
or other instrument whatsoever to which it is a party or by which it
is bound or to which it may be subject and will not contravene any
applicable laws.
2.2 The Optionor represents and warrants to the Optionee that:
(a) it is the sole beneficial owner of a 100% interest in and to the
Property, subject to the interests of ONM under the ONM Agreement;
(b) the ONM Agreement is in full force and effect, no interest therein has
been assigned or otherwise disposed of by either ONM or the Optionor,
the Optionor has complied with all its obligations thereunder and ONM
has received written consent to the ONM Agreement from the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, pursuant to the
provisions of Article 25 of the Mining Law Decree of the Republic of
Tunisia dated January 1, 1953;
(c) the Property is in good standing under the laws of the jurisdiction in
which the Property is located, until and including the expiry date set
forth in Schedule "A" hereto;
(d) the Property is free and clear of all liens, charges and encumbrances
and is not subject to any right, claim or interest of any other person
other than ONM pursuant to the terms of the ONM Agreement;
(e) it has complied with all laws in effect in the jurisdiction in which
the Property is located with respect to the Property and such Property
has been duly and properly staked and recorded in accordance with such
laws and that the Optionee may enter in, under or upon the Property
for all purposes of this Agreement without making any payment to, and
without accounting to or obtaining the permission of, any other person
other than any payment required to be made under this Agreement; and
(f) there is no adverse claim or challenge against or to the ownership of
or title to the Property, or any portion thereof nor is there any
basis therefor and there are no outstanding agreements or options to
acquire or purchase the Property or any portion thereof or interest
therein and no person has any royalty or interest whatsoever in
production or profits from the Property or any portion thereof, and
the Property is not the whole or substantially the whole of the
Optionor's assets or undertaking.
2.3 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement, are to be
construed as both conditions and warranties and shall, regardless of any
investigation which may have been made by or on behalf of any party as to the
accuracy of such representations and warranties, survive the closing of the
transaction contemplated hereby and each of the parties will indemnify and save
the other harmless from all loss, damage, costs, actions and suits arising out
of or in connection with any breach of any representation or warranty contained
in this Agreement, and each party shall be
<PAGE>
- 5 -
entitled, in addition to any other remedy to which it may be entitled, to set
off any such loss, damage or costs suffered by it as a result of any such breach
against any payment required to be made by it to any other party hereunder.
3. OPTION
3.1 The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a one hundred percent (100%) interest in and to the Property,
free and clear of all liens, charges, encumbrances, claims, rights or interest
of any person, subject to the terms of the Exploration Permit, such option to be
exercisable by the Optionee by funding 100% of the cost of carrying out the
Expenditures required under the terms of the Exploration Permit to fulfill the
requirements thereunder and to keep the Exploration Permit in good standing,
which Expenditures will not be less than $250,000, in aggregate, to be incurred
in the following manner:
(a) $25,000 on or by the first anniversary of the Effective Date;
(b) an additional $25,000 on or by the second anniversary of the Effective
Date;
(c) an additional $37,500 on or by the third anniversary of the Effective
Date;
(d) an additional $75,000 on or by the fourth anniversary of the Effective
Date; and
(f) an additional $87,500 on or by the fifth anniversary of the Effective
Date;
provided that, to the extent that Expenditures in any year exceed the minimum
amounts set forth above, such excess Expenditures shall be a credit towards the
minimum Expenditure commitment in subsequent years.
3.2 As additional consideration for the exercise of the Option granted
hereunder, the Optionee shall pay an aggregate $37,500 to the Optionor, in the
following manner:
(a) the sum of $2,500 on the Effective Date;
(b) the sum of $5,000 on the first anniversary of the Effective Date;
(c) the sum of $7,500 on the second anniversary of the Effective Date;
(d) the sum of $10,000 on the third anniversary of the Effective Date; and
(e) the sum of $12,500 on the fourth anniversary of the Effective Date.
3.3 The Optionee acknowledges that on commencement of Commercial Production, the
Property will be subject to the Net Smelter Returns Royalty. After vesting of
the Property in the Optionee pursuant to the provisions of Section 6, the
Optionee shall pay to the Optionor an advance Net Smelter Returns Royalty
payment of $25,000 on each anniversary of the Effective Date, the first of such
advance Net Smelter Returns Royalty payment to be made on the fifth anniversary
of the Effective Date. At any time following vesting of the Property in the
Optionee, the Optionee may terminate its obligation to pay any further advance
Net Smelter Returns
<PAGE>
- 6 -
Royalty payments by offering to transfer the Property back to the Optionor, or
its assignee as the case may be, for nominal consideration. All advance Net
Smelter Return Royalty payments shall be credited against the Optionee's
obligation to pay Net Smelter Return Royalties following the commencement of
Commercial Production.
3.4 At any time following the vesting of the Property in the Optionee, the
Optionee may elect, and the Optionor hereby grants to the Optionee an option
(the "NSR Option"), to purchase one-half (1/2) of the Net Smelter Returns
Royalty (constituting one percent (1%) of the Net Smelter Returns). The NSR
Option may be exercised by the Optionee by notice delivered to the Optionor, and
upon such notice having been delivered, the Optionor will sell one-half (1/2) of
the Net Smelter Returns Royalty (constituting one percent (1%) of Net Smelter
Returns) to the Optionee, for and in consideration of the sum of One Million
Dollars ($1,000,000), payable to the Optionor by way of certified cheque or bank
draft within thirty (30) days of the delivery of the notice exercising the NSR
Option.
3.5 In the event that, at any time following the vesting of the Property in the
Optionee, the Optionor intends to dispose of all of any portion of its Net
Smelter Returns Royalty or receives an offer to acquire all or any portion of
its Net Smelter Returns Royalty, which it intends to accept, the Optionee shall,
for a period of 30 days, have the exclusive first right to acquire such Net
Smelter Returns Royalty or portion thereof, upon the same terms and conditions
as those intended or received by the Optionor.
4. RIGHT OF ENTRY
4.1 Except as otherwise provided in this Agreement, until the Option is
exercised or terminated in accordance with the terms of this Agreement, the
Optionee, its servants and agents shall have the sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such mining facilities as
it may consider advisable; and
(d) remove from the Property ore or mineral products for the purpose of
bulk sampling, pilot plant or test operations.
5. POWERS, DUTIES AND OBLIGATIONS OF OPTIONEE AND OPTIONOR
5.1 The Optionee shall have full right, power and authority to do everything
necessary or desirable to carry out an exploration program on the Property and
to determine the manner of exploration and development of the Property and,
without limiting the generality of the foregoing, the right, power and authority
to:
(a) regulate access to the Property, subject only to the right of the
Optionor and its representatives to have access to the Property at all
reasonable times for the
<PAGE>
- 7 -
purpose of inspecting work being done thereon but at their own risk
and expense;
(b) employ and engage such employees, agents and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder but
the Optionee shall not enter into contractual relationships except on
terms which are commercially competitive;
(c) execute all documents, deeds and instruments, do or cause to be done
all such acts and things and give all such assurances as may be
necessary to maintain good and valid title to the Property and each
party hereby irrevocably constitutes the Optionee its true and lawful
attorney to give effect to the foregoing and hereby agrees to
indemnify and save the Optionee harmless from any and all costs, loss
or damage sustained or incurred without gross negligence or bad faith
by the Optionee directly or indirectly as a result of its exercise of
its powers pursuant to this Subsection 5.1(c); and
(d) conduct such title examinations and cure such title defects as may be
advisable in the reasonable judgment of the Optionee.
5.2 The Optionee shall have the duties and obligations to:
(a) keep the Property free and clear of all liens and encumbrances arising
from its operations hereunder (except liens contested in good faith by
the Optionee) and in good standing by the doing and filing, or payment
in lieu thereof, of all necessary assessment work and payment of all
taxes required to be paid and by the doing of all other acts and
things and the making all other payments required to be made which may
be necessary in that regard;
(b) permit the Optionor and its representatives, duly authorized by it, in
writing, at their own risk and expense, access to the Property at all
reasonable times and to all records prepared by the Optionee in
connection with Mining Work. The Optionee shall prepare and deliver to
the Optionor at reasonable intervals, but in any event not less
frequently than once annually, a report on all Mining Work conducted
by the Optionee, which annual report shall be delivered to the
Optionor sixty (60) days prior to each anniversary of the date of the
grant of the Exploration Permit as set out in subsection 1.1(g)
hereof;
(c) conduct all work on or with respect to the Property in a careful and
minerlike manner and in accordance with the applicable laws of the
jurisdiction in which the Property is located and indemnify and save
the Optionor harmless from any and all claims, suits or actions made
or brought against the Optionor as a result of work done by the
Optionee on or with respect to the Property;
(d) obtain and maintain or cause any contractor engaged by it hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, not less than the following:
(i) employer's liability insurance covering each employee engaged in
the operations hereunder to the extent of $1,000,000;
<PAGE>
- 8 -
(ii) comprehensive general liability insurance in such form as may be
customarily carried by a prudent operator for similar operations
with a bodily injury, death and property damage limit of
$1,000,000 inclusive;
(iii) vehicle, aircraft and watercraft insurance covering all
aircraft, vehicles and watercraft owned and non-owned, operated
and/or licensed by the Optionee, with a bodily injury, death and
property damage limit of $5,000,000 inclusive;
and will forward to the Optionor, a certificate of insurance for each
of such amounts showing the Optionor as a named insured, and will give
the Optionor advance written notice of any reduction or termination of
such coverage;
(e) maintain true and correct books, accounts and records of operations
hereunder.
5.3 During the term of this Agreement, the Optionor shall maintain the ONM
Agreement in good standing by making all payments due to ONM in accordance with
the terms of the ONM Agreement, and otherwise ensuring compliance with the
Optionor's obligations thereunder. Furthermore, the Optionor shall not assign or
dispose of any interest in the ONM Agreement to any third party during the term
of this Agreement. In the event the Optionor for whatever reason fails to comply
with any provision of the ONM Agreement, the Optionee shall have the right, but
not the obligation, to take such action as may be necessary to ensure the
Optionor's compliance with the ONM Agreement, including but not limited to
making any payments due thereunder, and any such payments made by the Optionee
on behalf of the Optionor shall for the purposes of this Agreement be considered
to be Expenditures and credited towards the Optionee's obligations under Section
3.1 herein.
5.4 During the term of this Agreement, the Optionor shall deliver to the
Optionee copies of all written correspondence between the Optionor and ONM and
evidence of all payments made by the Optionor to ONM pursuant to the terms of
the ONM Agreement or otherwise.
6. VESTING OF INTEREST
6.1 Forthwith upon the Optionee exercising the Option by performing the
requirements of Sections 3.1 and 3.2, an undivided one hundred percent (100%)
interest in and to the Property shall vest, and shall be deemed for all purposes
hereof to have vested, in the Optionee. Thereafter, the Optionor shall take all
steps necessary to cause ONM to transfer the Permit to the Optionee as soon as
practicable.
6.2 The parties acknowledge the right and privilege of the Optionor and Optionee
to file, register and/or to otherwise deposit a copy of this Agreement in the
appropriate recording office for the jurisdiction in which the Property is
located and with any other governmental agencies to give third parties notice of
this Agreement, and hereby agree, each with the others, to do or cause to be
done all acts or things reasonably necessary to effect such filing, registration
or deposit.
<PAGE>
- 9 -
7. TERMINATION OF OPTION
7.1 In the event of default in the performance of the requirements of Sections
3.1 and 3.2, then subject to the provisions of Sections 7.3 and 17.1 of this
Agreement, the Option and this Agreement shall terminate.
7.2 The Optionee shall have the right to terminate this Agreement by giving 30
days' written notice of such termination to the Optionor and upon the effective
date of such termination this Agreement shall be of no further force and effect,
except the Optionee shall be required to perform any obligations which are the
responsibility of the Optionee as specified under the provisions of this
Agreement and which have not been satisfied.
7.3 Notwithstanding any other provisions of this Agreement, in the event of
termination of this Agreement, the Optionee shall:
(a) deliver to the Optionor any and all reports, samples, drill cores and
engineering data of any kind whatsoever pertaining to the Property or
related to Mining Work which has not been previously delivered to the
Optionor;
(b) perform or secure the performance of all reclamation and environmental
rehabilitation as may be required by all applicable legislation; and
(c) upon notice from the Optionor, remove all materials, supplies and
equipment from the Property, provided however, that the Optionor may
dispose of any such materials, supplies or equipment not removed from
the Property within one hundred and eighty (180) days of receipt of
such notice by the Optionee.
8. CONFIDENTIALITY
8.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed to any person other than a party's professional advisors or an
Affiliate without the prior written consent of the other party or parties, which
consent shall not unreasonably be withheld.
8.2 The text of any news releases or other public statements which a party
desires to make with respect to the Property shall be made available to the
other party or parties prior to publication and the other party or parties shall
have the right to make suggestions for changes therein within twenty four (24)
hours of delivery.
<PAGE>
- 10 -
9. RESTRICTIONS ON ALIENATION
9.1 No party (the "Selling Party") shall sell, transfer, convey, assign,
mortgage or grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate all or any portion of its interest or rights under
this Agreement without the prior consent in writing, within 30 days of receipt
of notice thereof, of the other party, such consent not to be unreasonably
withheld, and the failure to notify the Selling Party within the said 30 days
that such consent has been withheld shall be deemed to constitute the consent of
the other party.
9.2 Before the completion of any sale or other disposition by any party of its
interests or rights or any portion thereof under this Agreement, the Selling
Party shall require the proposed acquirer to enter into an agreement with the
party not selling or otherwise disposing on the same terms and conditions as set
out in this Agreement.
9.3 The provisions of Sections 9.1 and 9.2 shall not prevent a party from
entering into an amalgamation or corporate reorganization which will have the
effect in law of the amalgamated or surviving company possessing all the
property, rights and interests and being subject to all the debts, liabilities
and obligations of each amalgamating or predecessor company, or prevent a party
from assigning its interest to an Affiliate of such party provided that the
Affiliate first complies with Section 9.2 and agrees in writing with the other
party to re-transfer such interest to the originally assigning party immediately
before ceasing to be an Affiliate of such party.
10. AFTER ACQUIRED PROPERTIES
10.1 The parties covenant and agree, each with the other, that any and all After
Acquired Properties shall be subject to the terms and conditions of this
Agreement and shall be added to and deemed, for all purposes hereof, to be
included in the Property. Any costs incurred by the Optionee in staking,
locating, recording or otherwise acquiring any After Acquired Properties shall
be included in the calculation of its Expenditures hereunder.
11. CONDITIONS PRECEDENT
11.1 This Agreement and the obligations of the parties hereunder are in each
case subject to the following conditions precedent:
(a) receipt by each of the parties of the written consent of ONM to the
Agreement in the form attached hereto as Schedule "E"; and
(b) receipt by each of the parties of the written consent of the Secretary
of State for Planning and Finance or such other authority of the
Republic of Tunisia having jurisdiction in the matter, to this
Agreement.
11.2 In the event the conditions precedent described in Section 11.1 are not
satisfied on or before July 31, 2000, this Agreement shall terminate and be of
no further force or effect.
<PAGE>
- 11 -
12. NOTICE
12.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same or by mailing same by prepaid registered or certified mail or
by sending same by telegram, telex, telecommunication or other similar form of
communication, in each case addressed to the intended recipient at the address
of the respective party set out on the first page hereof.
12.2 Any notice, direction, or other instrument aforesaid will, if delivered, be
deemed to have been given and received on the day it was delivered, and if
mailed, be deemed to have been given and received on the tenth business day
following the day of mailing, except in the event of disruption of the postal
service in which event notice will be deemed to be received only when actually
received and, if sent by telegram, telecommunication or other similar form of
communication, be deemed to have been given and received on the day it was
actually received.
12.3 Any party may at any time give notice in writing to the others of any
change of address, and from and after the giving of such notice, the address
therein specified will be deemed to be the address of such party for the
purposes of giving notice hereunder.
13. FURTHER ASSURANCES
13.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as may be reasonably required in order to fully
perform and carry out the terms and intent of this Agreement.
14. RULE AGAINST PERPETUITIES
14.1 If any right, power or interest of any party in property under this
Agreement would violate the rule against perpetuities, then such right, power or
interest shall terminate at the expiration of twenty (20) years after the death
of the last survivor of all the lineal descendants of Her Majesty, Queen
Elizabeth II of England, living on the date of the execution of this Agreement.
15. TIME OF THE ESSENCE
15.1 Time shall be of the essence in the performance of this Agreement.
16. ENUREMENT
16.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
<PAGE>
- 12 -
17. FORCE MAJEURE
17.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or nonavailability of
materials or transportation (each an "Intervening Event").
17.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
17.3 A party relying on the provisions of Section 16.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to all other
parties as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
18. DEFAULT
18.1 If a party (the "Defaulting Party") is in default of any requirement herein
set forth, the party affected by such default (the "Non-Defaulting Party") shall
give written notice to all other parties within thirty (30) days of becoming
aware of such default, specifying the default, and the Defaulting Party shall
not lose any rights under this Agreement, nor shall the Agreement or the Option
terminate, nor shall the Non-Defaulting Party have any rights, remedies or cause
of action pursuant to this Agreement, or otherwise hereunder as a result of such
default, unless within thirty (30) days after the giving of notice of default by
the Non-Defaulting Party, the Defaulting Party has failed to cure the default by
the appropriate performance, and if the Defaulting Party fails within such
period to cure such default, the Non-Defaulting Party shall only then be
entitled to seek any remedy it may have on account of such default.
19. SEVERABILITY
19.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
<PAGE>
- 13 -
20. AMENDMENT
20.1 This Agreement may not be changed orally but only by an agreement in
writing, signed by the party against which enforcement, waiver, change,
modification or discharge is sought.
21. ENTIRE AGREEMENT
21.1 This Agreement constitutes and contains the entire agreement and
understanding between the parties and supersedes all prior agreements,
memoranda, correspondence, communications, negotiations and representations,
whether oral or written, express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter hereof.
22. OPTION ONLY
22.1 This Agreement provides for an option only, and except as specifically
provided otherwise, nothing herein contained shall be construed as obligating
the Optionee to do any acts or make any payments hereunder and any act or acts
or payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment.
23. GOVERNING LAW AND ARBITRATION
23.1 This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia.
23.2 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre.
23.3 The appointing authority shall be the British Columbia International
Commercial Arbitration Centre and the case shall be administered by the British
Columbia International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules" at Vancouver, British Columbia.
<PAGE>
- 14 -
IN WITNESS WHEREOF the parties have executed this Agreement as of the day,
month and year first above written.
THE COMMON SEAL of HIGH MARSH )
HOLDINGS LTD. was hereto affixed in )
the presence of: )
)
)
/s/ Lester Kemp )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
Lester Kemp )
- -------------------------------------------- )
Authorized Signatory )
)
THE COMMON SEAL of AURORA )
GOLD CORPORATION was hereto )
affixed in the presence of: )
)
)
/s/ David Jenkins )
- -------------------------------------------- )
Authorized Signatory ) c/s
)
)
David Jenkins )
- -------------------------------------------- )
Authorized Signatory )
)
<PAGE>
THIS IS SCHEDULE "A" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Description of Property
================================================================================
Name of Exploration Exploration Expiry Date of
Permit Area Permit Number Area Exploration Permit
================================================================================
Jebel Oum Edeboua 622363 400 hectares December 22, 2000
================================================================================
<PAGE>
THIS IS SCHEDULE "B" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "C" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
<PAGE>
THIS IS SCHEDULE "D" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
Net Smelter Returns Royalty Calculation
1. As additional consideration the Optionee acknowledges and agrees that its
interest in the Property shall be subject to a royalty or charge in the
amount of two percent (2%) of Net Smelter Returns in favour of the
Optionor, subject to the provisions of sections 3.4 and 3.5 of the Option
Agreement to which this Schedule "D" is appended.
2. For the purpose of this Agreement, "Net Smelter Returns" shall mean the
actual proceeds received by the Optionee from a smelter or other place of
sale or treatment with respect to all ore removed by the Optionee from the
Property as evidenced by its returns or settlement sheets after deducting
from the said proceeds all freight or other transportation costs from the
shipping point to the smelter or other place of sale or treatment but
without any other deduction whatsoever.
3. Net Smelter Returns due and payable to the Optionor hereunder shall be paid
within thirty (30) days after receipt of the said actual proceeds by the
Optionee.
4. Within ninety (90) days after the end of each fiscal year of the Optionee
during which the Property was in commercial production, the records
relating to the calculation of Net Smelter Returns during that fiscal year
shall be audited and any adjustments shall be made forthwith. The audited
statements shall be delivered to the Optionor who shall have sixty (60)
days after receipt of such statements to question in writing their accuracy
and, failing such question, the statements shall be deemed correct.
5. The Optionor or his representative duly appointed in writing shall have the
right at all reasonable times, upon written request, to inspect such books
and financial records of the Optionee as are relevant to the determination
of Net Smelter Returns and at his own expense, to make copies thereof.
<PAGE>
THIS IS SCHEDULE "E" TO THE OPTION AGREEMENT DATED
JANUARY 20, 2000 BETWEEN HIGH MARSH HOLDINGS LTD.
AND AURORA GOLD CORPORATION
CONSENT
To: High Marsh Holdings Ltd.
11 Bath Street
P.O. Box 398
Jersey, Channel Islands
JE4 8UT
And to: Aurora Gold Corporation
Suite 1505 1060 Alberni Street
Vancouver, British Columbia
V6E 4K2
Re: Grant of Option by High Marsh Holdings Ltd. to Aurora
Gold Corporation in respect of Jebel Oum Edebou Exploration
Permit (the "Property")
Pursuant to Article IV - 2.7 of that certain agreement pertaining to the
Property made between L'office National des Mines ("ONM") and High Marsh
Holdings Ltd. ("High Marsh") dated ________________________, 2000 (the
"Agreement"), ONM hereby consents to the grant by High Marsh to Aurora Gold
Corporation ("Aurora") of an option to acquire 100% of High Marsh's interest in
the Property on the terms and conditions contained in the Option Agreement
entered into between High Marsh and Aurora dated January _____, 2000, a copy of
which ONM acknowledges having received and reviewed (the "Option").
Notwithstanding the provisions of Article VII of the Agreement, ONM hereby also
consents to High Marsh disclosing to Aurora all confidential information
relating to the Property which High Marsh has obtained from either ONM or other
sources.
Dated at ___________________________, this _____ day of _________________, 2000.
L'OFFICE NATIONAL DES MINES
Per: __________________________
Authorized Signatory
Aurora Gold Corporation
Suite 1505 - 1060 Alberni Street,
Vancouver, B.C. Canada E 4K2
Telephone: (604) 687-4432
Facsimile: (604) 687-4709
October 1, 1999
Patagonia Gold Corporation
Suite 1505- 1060 Alberni Street,
Vancouver, B.C. Canada
V6E 4K2
Attention: David Jenkins,
Dear Sirs:
Re: Aurora Gold Corporation (the "Company")
Letter of Intent: San Diego Exploration Reconnaissance Concession Joint
Venture Guatemala, Central America
This letter is intended to document our mutual understanding prior to a
commitment of funds from Patagonia Gold Corporation and/or associated companies
for the acquisition of the San Diego mineral exploration reconnaissance licence
and the exploration of the San Diego mineral exploration reconnaissance
concession, Guatemala Central America.
Aurora Gold Corporation has been awarded exclusive title to the San Diego
mineral exploration reconnaissance licence by the government of Guatemala. The
mineral exploration reconnaissance license confers on the titleholder the
exclusive rights to identify and locate possible areas for exploration, within
the licenses territorial limits and to unlimited depth in the subsoil. The
license was awarded to Aurora Gold Corporation in September 1999.
Patagonia Gold Corporation and/or associated companies shall have the right to
earn a fifty percent (50%) interest in the San Diego mineral exploration
reconnaissance licence upon payment of the following amounts:
1. The payment of USD Nine Thousand Two Hundred and Fifty (USD 9,250)
Guatemala government fee for the acquisition of the San Diego mineral
exploration reconnaissance license and
1
<PAGE>
2. The payment of USD Eighteen Thousand Six Hundred Seventeen and 25/100 (USD
18,617.25) for a Phase 1 exploration program to be conducted between
November 1, 1999 and March 31, 2000 on the San Diego mineral exploration
reconnaissance concession. The work program shall consist of geological
reconnaissance, sampling of rock outcrops and stream sediment sampling.
Yours truly,
Aurora Gold Corporation
/s/ Cameron Richardson October 1, 1999
- ----------------------------------
Cameron Richardson
Controller and Corporate Secretary
(Authorized Representative)
Acceptance of these terms by Patagonia Gold Corporation
For and on behalf of Patagonia Gold Corporation
/s/ David Jenkins October 1, 1999
- ----------------------------------
David Jenkins
President
Patagonia Gold Corporation
(Authorized Representative)
2
[LOGO] Billiton UK Resources B.V.
Mariahoeve Plein 16
The Hague
The Netherlands
- --------------------------------------------------------------------------------
February 25, 2000
Mr. David Jenkins
President,
Aurora Gold Corp.
Suite 1505, 1060 Alberni Street
Vancouver, BC
V6E 4K2
RE: Letter of Intent - Private Placement and Property Option, Hammala Property,
Kebbouch District, Tunisia.
- --------------------------------------------------------------------------------
Dear David,
Further to your recent discussions with our Steve Parry, this is to confirm that
Billiton UK Resources B.V., or a designated affiliate of Billiton UK Resources
B.V. (hereafter Billiton), a subsidiary of Billiton Plc, hereby proposes with
this Letter of Intent ("LOI") a private placement and option agreement regarding
your Hammala property, Tunisia, as described in the attached Schedule A (the
"Property"). The terms of this offer are subject to the review and approval of
the Board of Directors of Billiton and relevant regulatory authorisations.
Under the proposed agreement, Billiton would purchase an initial US$600,000
private placement in Aurora, with private placement funds used to complete a
surface mapping and drill programme on the Property. Part of the placement would
also be used to investigate and acquire other zinc prospects, as part of a more
comprehensive strategic alliance in Tunisia between Aurora and Billiton.
Following delivery of results of this programme, Billiton would have a right to
earn an initial 51% interest, and a subsequent 19% interest (aggregate 70%) in
the Property through work expenditures of $2 million and project financing,
under the terms proposed in this letter.
Details of the offer are presented below. All figures are in US currency.
1. Private Placement: Billiton would purchase 857,143 common shares of Aurora
at a price of $.70 per share for proceeds of $600,000. A full warrant would
be attached to each share for an aggregate of 857,143 warrants, exercisable
for one year after issue at a price of $.85 per share. Exercise of the
<PAGE>
warrants would be at Billiton's election, and failure to exercise would not
result in termination of the Farm-in Rights or Joint Venture contemplated
herein.
2. Use of Proceeds: Funds from the private placement totalling $475,000 would
be used to conduct a geological programme including drilling at Hammala,
pursuant to a programme and budget recommended by Aurora, and approved by
Billiton. The remaining $125,000 would be utilised by Aurora to search for
other zinc projects in Tunisia, and for general corporate purposes.
3. First Farm-in Right: Up to one year from closing of the private placement,
Billiton (or a designated assignee which is an affiliate of Billiton) would
have the right to exercise an option to earn a 51% working interest in the
Property through an expenditure of $1 million over a 2 year period as per
the following schedule:
--------------------------------------------------------------------------
COMPLETION DATE AMOUNT CUMULATIVE AMT
--------------------------------------------------------------------------
JUNE 1, 2002 $500,000 $500,000
--------------------------------------------------------------------------
JULY 1, 2003 $500,000 $1,000,000
--------------------------------------------------------------------------
Funds expended in the first year of the farm-in right in excess of $500,000
would be attributable to the second year requirement. Billiton would have
the right to terminate the option at any time during operation of the First
Farm-in Right subject only to prior notification in writing to Aurora of 90
days.
4. Joint Venture: Upon completion of the First Farm-in Right, a joint venture
("Hammala JV") would be established with the participants contributing
their share of programme costs according to their percentage working
interests, subject to a standard dilution formula for non-contribution.
5. Second Farm-in Right: Upon completion of the First Farm-in Right, but prior
to an additional expenditure of $2 million on the Property by the parties,
Billiton would have the right to elect to earn a further 19% working
interest (for an aggregate 70% interest) by providing Aurora with project
financing for all further expenditures to the start of commercial
production from the Property. Billiton would recoup its investment on
behalf of Aurora from 90% of Aurora's net project cash flow at a rate of
LIBOR plus 4%. This rate reflects risk conditions anticipated for Tunisian
projects in the medium to long term.
6. Operator: Aurora would be Operator of the project from closing of the
Private Placement. Billiton would have the right to become Operator at any
time following its election to participate in the First Farm-in Right
subject to giving Aurora 90 days notice of its intention. In the event that
Billiton assumes operatorship prior to vesting, Billiton will pay Aurora 5%
of expenditures up till vesting to a maximum of $25,000. In the event that
Billiton assumes operatorship after vesting no payment shall apply.
7. Overhead/Management Fees: The Operator would have the right to charge a 10%
fee for administrative and management services to the project. During the
two farm-in phases of the agreement, the intent of this is to provide
Aurora with significant coverage for its annual administrative costs.
8. Approval of Programmes and Budgets: The Operator would have the
responsibility to propose programmes and budgets. During the first farm-in
phase of the project, Billiton would have the right to modify and approve
the annual programme and budget. During the joint venture phase, the
Operator would propose the programme and budget each year, and the
participants would have 60 days to review, modify and vote on each
programme and budget, pro rata with their respective interest. In case of
deadlock, Billiton would hold a deciding vote while its interest was 51% or
greater.
9. Pre-emptive Rights: Should one participant decide to encumber or sell its
interest in the project to a third party, not including a transfer to an
affiliate, the non-selling participant would have the right to
<PAGE>
purchase the seller's interest on terms no less advantageous to those
offered by the third party, or for cash where there is a non-cash
component.
10. Future Financing: Billiton would have the right to participate in future
Aurora financings pro rata with its percentage interest in Aurora at the
time of the future financing.
11. Timing: This LOI expires at 5pm Vancouver time on Friday March 17, 2000.
Unless otherwise agreed by the parties, this LOI, once signed, would
terminate by June 15, 2000 unless replaced by a signed formal agreement.
12. Additional Properties: Aurora will attempt to acquire additional zinc
properties in Tunisia. Aurora agrees to offer any additional properties to
Billiton under similar terms as presented in this LOI as long as it remains
a party to the agreements contemplated in this LOI. In exchange Billiton
agrees to work exclusively with Aurora in Tunisia in terms of
identification and acquisition of new claims, and agrees not to acquire
properties in Tunisia without first offering said properties to Aurora
under similar terms to those presented herein for Hammala. Both Aurora and
Billiton will provide each other a schedule for inclusion in the formal
agreements identifying specific projects which will be excluded from this
provision.
13. Area of Interest: Following the establishment of the Hammala JV as
contemplated in this LOI, a two-kilometre area of interest ("AOI") will be
established around the Property. Land acquired by either party within this
AOI will be offered by the acquiror to the other party at cost for
inclusion in the Hammala JV.
14. Domicile: Aurora agrees to move its domicile outside of the United States
of America as a condition precedent to closing the private placement and
the related property deal.
15. Registration Rights: Aurora will agree to provide Billiton with demand
registration rights together with piggyback rights, with respect to the
securities issued to Billiton under the private placement in order that
Billiton may resell such securities in the United States in a timely
fashion. This provision is intended to replace the 4-month hold normally
created through the AIF process on Canadian exchanges. The rights would
last for a period of two years or until Aurora's shares become tradable on
a Canadian exchange, whichever is earlier
In terms of process, we would like to come to agreement on terms of a deal,
subject to the board and regulatory approvals noted above. Non-binding agreement
would be acknowledged by signing of this letter. We would then ask for a period
of up to 7 business days to inform our senior management group of the final
version of the deal. A news release, and filing of the proposed agreement with
regulatory authorities would then be made, with approval of the news release
contents by both Billiton and Aurora within the 7 day business window. The
parties would then have 45 days to complete a binding option/joint venture
agreement and subscription document. Failure to complete and sign these
documents within the 45-day window would result in termination of the terms of
this offer, unless agreed otherwise by the parties. We have the templates of
both documents essentially in place now, and would expect to deliver first
drafts to you within 5 business days.
For clarity, no press release or public disclosure of this offer will be made by
either party until the filing and news release noted above. This issue is highly
critical to Billiton and we consider maintenance of the information embargo as
critical to closing the deal.
In closing, I want to communicate that our goal is to develop significant
"strategic alliances" with a number of professional exploration groups during
the coming year. We see these alliances as larger than a single venture, with
the potential for property transactions both in and out of the associated
company. We would very much like to see Aurora as one our partners.
<PAGE>
If you are in agreement with the terms of this offer, please so indicate by
signing and dating a copy of the offer in the space provided below, and
returning one copy to the Billiton Vancouver office.
I trust this letter reflects our discussion, and I look forward to working with
you and the Aurora group this summer.
Yours Truly,
Per: Billiton UK Resources B.V.
/s/ Eric B Tweedie
Eric B Tweedie
Director
Agreed and acknowledged this 25th day of February 2000 on behalf of Aurora Gold
Corp.
/s/ David E. Jenkins February 25, 2000
- --------------------------------------------------------------------------------
Name Date
David E. Jenkins, President
- --------------------------------------------------------------------------------
Title
<PAGE>
SCHEDULE A
Property Description and Map with UTM Co-ordinates
EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY
SUBSIDIARIES OF THE COMPANY
Percentage of Voting
Name Jurisdiction of Incorporation Securities Owned
- ---- ----------------------------- ----------------
Aurora Gold (BVI) Limited The British Virgin Islands 100 (a)
Aurora Gold, S. A. Guatemala 100 (a)
Deltango Gold Limited Yukon, Canada 100 (a)
(a) Included in the consolidated financial statements filed herein.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,109
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,109
<PP&E> 148,571
<DEPRECIATION> 0
<TOTAL-ASSETS> 150,680
<CURRENT-LIABILITIES> 214,083
<BONDS> 0
0
0
<COMMON> 11,461
<OTHER-SE> (74,864)
<TOTAL-LIABILITY-AND-EQUITY> 150,680
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 855,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (855,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> (855,391)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (855,391)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
