SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
|X| Registration Statement Pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934
|_| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number ___________
APAC MINERALS INC.
(Exact name of registrant as specified in its charter)
Province of British Columbia (Canada)
(Jurisdiction of incorporation or organization)
808 Nelson Street - Suite 1208
Vancouver, British Columbia V6Z 2H2, Canada
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Number of capital shares outstanding as of September 30, 1999, was 8,512,500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 x Item 18
------ -----
<PAGE>2
APAC MINERALS INC.
The following discussion contains forward-looking statements regarding
events and financial trends which may affect the Company's future operating
results and financial position. Such statements are subject to risks and
uncertainties that could cause the Company's actual results and financial
position to differ materially from those anticipated in forward looking
statements. These risks and uncertainties include, but are not limited to the
following: (i) lack of profits; (ii) the Company's principal assets and
exploration activities are located in Portugal and Argentina, and therefore the
Company or its operations could be materially affected by any adverse change in
the political or economic stability of those countries, or changes in laws
governing foreign investment or currency exchange controls in those countries;
(iii) the exploration for minerals and mining involves a high degree of risk,
and few properties that are explored are ultimately developed into producing
mines; (iv) the Company does not presently have sufficient funding for it for
further exploration and development of its properties or to fulfil its
obligations under any applicable agreements; (v) fluctuations in foreign
exchange rates compared to the Canadian dollar may adversely affect the
Company's operations; (vi) the Company's operations are subject to environmental
regulations which include fines and penalties for non-compliance; (vii) the
mining industry is intensely competitive in all its phases and the Company
competes with many companies possessing greater financial resources and
technical facilities; (vii) the Company depends to a large extent on key
management personnel, the loss of which could severely impair the Company's
business prospects; and (ix) the market prices of precious metals have
historically fluctuated widely and are affected by numerous global factors
beyond the control of the Company.
Introduction
APAC MINERALS INC. (the "Company") was incorporated pursuant to the laws of the
Province of British Columbia on September 9, 1996. The Company is a junior
natural resource company engaged in the acquisition, exploration and if
warranted, the development of mineral resource properties. The Company's
principal resource properties are primarily in the exploration stage. The
Company owns or has interests in the mineral properties described below, and
intends to explore and develop these properties on its own or through joint
ventures and to acquire additional properties worthy of exploration and
development.
The Company owns 100% of the issued equity shares of Prospectus -
Empreendimentos Mineiros, Ltda., a company incorporated under the laws of
Portugal ("PEML"). PEML holds an exploration concession covering lands located
in the Alentejo region, southeast Portugal (the "Portel-Moura-Ficalho
Concession"), which comprises an area of approximately 520 km2. The
Portel-Moura-Ficalho Concession was granted in 1998 and has a term of two (2)
years, with the right to renew for a further three (3) years thereafter.
The Company also holds the exclusive options to purchase up to an aggregate
fifty one percent (51%) equity interest in Arminex S.A., a company incorporated
under the laws of Argentina ("Arminex"), and the Company holds an additional
option to purchase the remaining forty-nine percent (49%) equity interest in
Arminex. Arminex has applied for six exploration concessions totaling 24,000 Ha.
in the Catamarca province; has three exploration concessions totaling 9,000 Ha.
granted and seven exploration concessions totaling 21,000 Ha. applied for in San
Juan province; has 25 exploration concessions totaling 93,000 Ha. granted and
six exploration concessions totaling 18,000 Ha. applied for in Mendoza province;
has 13 exploration concessions totaling 36,000 Ha. granted in La Pampa province;
and has 21 exploration concessions totaling 67,994 Ha. granted and 13
<PAGE>3
exploration concessions, totaling 57,250 Ha. applied for in the Rio Negro
province.
For fiscal years ended February 28, 1999, 1998 and 1997, the Company expended
$357,712, $161,516, and $102,987, respectively, in exploration costs, and as of
the end the last fiscal quarter, August 31, 1999, the Company had $1,634,480 in
accumulated deferred development and acquisition costs.
In this Registration Statement, all dollar amounts are expressed in Canadian
dollars unless otherwise expressly stated.
Item 1. Description of Business
Portel-Moura-Ficalho Concession, Portugal
Acquisition
By a binding Letter of Intent dated April 15, 1998, between the Company and
EXMINCO Exploration and Mining Investment Company Establishment ("EXMINCO"), the
Company acquired from EXMINCO an 100% interest in an exploration concession
covering lands located in the Alentejo region, southeast Portugal, known as the
"Portel-Moura-Ficalho Concession," which comprises an area of approximately 520
km2 in three separate parcels. The Portel-Moura-Ficalho Concession was granted
in 1998 and has a term of two (2) years, with the right to renew for a further
three (3) years thereafter.
In consideration of the acquisition, the Company has paid to EXMINCO a $10,000
non-refundable deposit, and has issued to EXMINCO 2,000,000 common shares in the
capital stock of the Company, upon transfer of the Portel-Moura-Ficalho
Concession to a wholly-owned subsidiary of the Company incorporated in Portugal
under the name Prospectus - Empreendimentos Mineiros, Ltda. ("PEML"). PEML is
the operator of the Portel-Moura-Ficalho Concession. In addition, in order to
maintain the concession in good standing, PEML is required by the mining laws of
Portugal to perform minimum exploration work on the Portel- Moura-Ficalho
Concession of approximately US$550,000 over the next two (2) years, and pay a
surface tax of US$14,500 per year. The Portuguese government retains a net
smelter royalty of no more than 3% on any production from the
Portel-Moura-Ficalho Concession.
Location and Geology
The Portel-Moura-Ficalho Concession is located approximately 160 km
east-southeast of Lisbon and is accessible via road and all terrain vehicle. The
area is characterized by gently rolling hills with more rugged relief towards
the southwest where the anticlinal structures form hills up to 300 metres.
Inside the Concession there is a wide variety of lithologic and stratigraphic
units. These units includes sedimentary, metamorphic and igneous rocks from
Recent to Precambrian in age. Structurally, three (3) main anticlines run from
north-west to south-east from Moura to Ficalho, with a vergency to the
southwest, the result of a second folding phase during the Hercynian. The
Concession comprises a northwest-southeast striking Cambrian-Ordovician belt of
syngenetic carbonate hosted Zn-Pb mineralization which can be followed for more
than 60 km.
<PAGE>4
Previous History and Results of Work
Previous drilling in the northern part of the Concession (in the Portel
district) has outlined inferred resources of 9-13 million tonnes grading at 3-4%
Zn and 0.5% Pb. Several large geochemical and geophysical anomalies remain to be
tested by drilling. The lenticular mineralization occurs at shallow depths
(100-200 metres). The Company has analyzed in detail all available drilling
data. No significant drill intersections were discovered. Therefore, for the
time being, the Portel area will be given lower priority for exploration work.
In the central part of the Concession (in the Moura district), geochemical and
geophysical surveys carried out by the government have revealed several
anomalies. Some of these have been tested by widely spaced (200 metres) drill
holes resulting in the discovery of the Enfermerias deposit at a depth of
300-400 metres. Some of the drill hole (SDM 1-3) intersections were assayed at
7-10% Zn.
In the southern part of the Concession (in the Ficalho district) mineralization
occurs in two (2) dolomite anticlines. The Serra-Preguica anticline can be
followed for 6 km. A limited drilling program in the north intersected the
Carrasca mineralization. In the south, about 13,000 tonnes of high grade
Zn-gossan ore has been mined in the past with an average grade of 42% Zn. About
1,000,000 tonnes of resources grading 7.3% Zn and 2.2% Pb have been reported in
the previous drilling program. This deposit is open both along strike and at
depth. Only one limb of the anticline has been tested by drilling, while
geochemical and geophysical anomalies show that both limbs are mineralized.
The parallel anticlines Ficalho-Andicia can be followed for more than 10 km and
contained the most extensive and strongest geochemical anomalies within the
Concession with soil values of up 7.5% Zn and 4.15% Pb. No drilling or trenching
program has been carried out on this portion of the property.
In 1998, the Company trenched one of the main geochemical Pb-Zn anomalies near
the road in the Palhais area. The trenches totaled 1,326 metres in length,
divided into 6 trenches perpendicular to the anomaly. The trenches revealed
outcropping gossanous rocks which can be followed for at least 500 metres with
maximum width of 75 metres.
The two main intersections gave the following results by sampling: 2.77% Pb,
2.75% Zn over 40 metres including 4.9% Pb, 5.4% Zn over 4 metres and 3.72% Pb,
14.72% Zn over 2 metres, in trench A; and 0.59% Pb, 7.48% Zn over 4 metres, as
well as 0.11% Pb, 4.08% Zn over 2 metres in trench B.
A limited drill program of 250 metres tested the depth extension of the
mineralization in the trenches. Below 50 metres no further mineralization was
encountered. The conclusion is that the mineralization is a karst filling in
dolomite. Therefore, no further work is planned in this area.
<PAGE>5
Proposed Work
A program is now in progress to evaluate all results from the government's
previous work on the concession. The Company intends to test at least one target
with a limited drill program within the next few months. The proposed drill
program has the following estimated costs:
Drilling $100,000
General exploration
costs and reports $ 50,000
--------
$150,000
========
Acquisition of Equity Interest in Arminex S.A. and Argentina Concessions
Acquisition
By an Option to Purchase and Shareholders' Agreement dated October 24, 1998, as
amended November 27, 1998, February 6, 1999, March 25, 1999, and June 4, 1999
(the "Option Agreement"), between the Company and Arminex S.A., an Argentinean
company ("Arminex"), and Lafayette Limited of Kingstown, St. Vincent and Ilmars
Gemuts of Mahopak, New York (collectively the "Optionors"), the Company was
granted the option to purchase up to an aggregate fifty one percent (51%) equity
interest in Arminex, in consideration of the payment of $50,000. In order to
earn the first 40% interest in Arminex, the Company is required to expend
$650,000 on Arminex's concessions on or before December 14, 1999 (which has been
spent), and issue 800,000 shares to the Optionors after filing a technical
report acceptable to the Vancouver Stock Exchange (which is in the process of
being prepared and filed).
After earning a 40% equity interest in Arminex, the Company may acquire an
additional 11% interest in Arminex by expending a further $1,500,000 on
Arminex's concessions in Argentina within the next two year period. In addition,
if at any time before December 14, 2003, exploration work on any of the
concessions in which Arminex has an interest results in proven and probable
reserves equal to or greater than 1,000,000 ounces of gold or gold equivalents,
the Optionors shall be entitled to receive a performance bonus calculated at
US$5.00 per ounce, which will be paid to the Optionors pro rata based on their
then current equity interest (if any) in Arminex. The Company will have the
option to pay the performance bonus in US dollars or in free trading common
shares of the Company valued at the 30 day weighted average closing price of the
Company's shares prior to the date of the public disclosure of the proven and
probable reserves.
Under the terms of the latest amendment to the Option Agreement, the Optionors
and Arminex have irrevocably granted to the Company the exclusive option to
purchase the remaining 49% interest in Arminex, provided of course that the
Company has first exercised its options to acquire the first 51% equity interest
in Arminex. The Company may exercise the option within 6 months of earning its
51% interest in Arminex by paying to the Optionors the additional sum of
$500,000 and issuing to the Optionors a further 5,000,000 common shares of the
Company, provided that:
<PAGE>6
(i) the average closing price of the common shares of the Company
on any public stock exchange which trades the highest volume
of such shares for twenty (20) trading days preceding the date
of exercise is at least $1.00 per share; and
(ii) the Company has filed a current Annual Information Form with
the British Columbia Securities Commission (which has been
filed, but must be updated annually).
The Company's issue of the 5,000,000 common shares is first subject to the prior
acceptance for filing by the Vancouver Stock Exchange of an independent
technical report which establishes a minimum value of not less than $5,500,000
for the remaining 49% equity interest in Arminex. In the event that the Company
acquires a 100% interest in Arminex, then any further obligation of the Company
to pay the US$5.00/oz performance bonus described above will of course be
eliminated.
Arminex has applied for six exploration concessions totaling 24,000 Ha. in the
Catamarca province; has three concessions totaling 9,000 Ha. granted and seven
concessions totaling 21,000 Ha. applied for in San Juan province; has 25
concessions totaling 93,000 Ha. granted and six concessions totaling 18,000 Ha.
applied for in Mendoza province; has 13 concessions totaling 36,000 Ha. granted
in La Pampa province; and has 21 concessions totaling 67,994 Ha. granted and 13
concessions, totaling 57,250 Ha. applied for in the Rio Negro province. Each of
these areas are discussed in more detail below.
Location and Geology
Catamarca Concessions
The Catamarca concessions contain Pb-Zn-Ag mineralization, which is believed to
be the outer limb of a porphyry system.
These concessions are speculative exploration properties, as to date there has
been very little exploration work conducted on these concessions.
San Juan Concessions
The El Leoncito prospect is the principal exploration target within the San Juan
concessions. This prospect was first tested in 1969 by the United Nations. It is
located 35 km to the southwest of Barreal, in San Juan Province. Access to the
prospect is from Barreal along the Pachon Road. The prospect area consists of
Permo-Triassic rhyolitic and granitic Choiyoy Formation, intruded by andesitic
hornblende porphyry which has been propylitically and physically altered over a
1 km2 surface area. The porphyry is limited by an oval breccia ring dyke 1 km
across in the long axis.
The system is cut by NNE fractures superimposed on a northwest set. There is
relict disseminated chalcopyrite, pyrite and molybdenite mineralization within
altered zones. The alteration consists of sericite, kaolin and silica, and it is
irregularly distributed at the surface. The most altered areas contain
malachite, turquoise and black limonite with jarosite at the surface. Induced
Polarization (I.P.) surveys of the area indicated that there are sulfides at
depth (at about 200 metres). Three diamond drill holes were drilled by the
United Nations. These did not intersect any mineralization of any significance.
Each hole was +/-100 metres deep. One hole (No. 3) contained 40 - 1600 ppm Cu
and 6 to 112 ppm Mo. In the Company's view, the location of these holes was not
<PAGE>7
wisely chosen because there was no road network in the area, and each hole was
placed where there was easier access.
Argentina Minerals Development S.A., a subsidiary of an Australian resource
company, drilled a hole to the east of the prospect, to check out a magnetic
anomaly. This drill hole intersected anomalous molybdenum values (up to 0.3% Mo)
and bornite.
Mendoza and La Pampa Concessions
The Mendoza and La Pampa concessions cover mainly outcropping rocks from the
Permo-Triassic Choiyoy Group, which are believed to contain both porphyry and
epithermal mineralizations related to young Tertiary intrusives into the Choiyoy
group of rocks.
The concessions were claimed based on the above geological relations combined
with major alterations. Some of these concessions have high grade gold bearing
quartz veins.
These concessions are also speculative exploration properties.
Rio Negro Concessions
The Rio Negro concessions comprise Arminex's most interesting properties, and
are where Arminex has concentrated most of its previous exploration efforts. The
Company also intends to conduct the main part of it's the exploration work for
the next six to twelve months on these concessions.
The most promising properties are in the Los Menucos district, which is situated
in the centre of Rio Negro Province within the physiographic division of the
Somuncura Massif. This plateau consists of a Proterozoic metamorphic basement
with younger igneous rocks and complexes above it. The most favourable rocks for
mineralization are the Permo-Triassic Choiyoy Formation (and equivalents i.e.
Garanilla, Los Menucos and Sierra Colorada Formations). In Rio Negro, the
Permo-Triassic Choiyoy and older rocks are intruded by many plutons.
The Los Menucos district has the largest significant concentration of advance
argillic altered Choiyoy-age ignimbrites and rhyolites in Argentina. The
Company's interpretation of the geology is that much of the alteration is
related to the intrusion of rhyolite dome fields below the multitudinous felsic
volcanic rocks. Large bodies of phreatic breccias and also hematite-rich
hypogene altered zones are associated with this alteration. Characteristic of
this alteration regime are vuggy silica, quartz-stockwork, kaolin and
pyrophyllite concentrations. The Los Menucos district has potential for acid
sulfate (high sulfidation) type gold mineralization. The first significant
discovery of this type is Arminex's El Puesto prospect.
The central part of the Los Menucos district is underlain by a thick sequence of
Permo-Triassic, Choiyoy age, rhyolite, ignimbrite, dacite and rhyo-dacitic tuff
sequences. The area is cut by literally hundreds of east-west trending faults
which in many parts control base and precious metal mineralization. The Permo-
Triassic Choiyoy rocks are intruded by granitic and monzonitic plutons. This
igneous platform is overlain by Cretaceous and Tertiary (Miocene) basalts. Along
the edges of the main basalt flows there are latite- cinder cone fields
controlled by north-south trending faults. Potential gold and base metal
exploration prospects are located at the intersections of east-west, north-south
and north-westerly trending fault trends.
<PAGE>8
There are many old workings (fluorite and base metals) next to or within the
well developed east-west trending fault systems, which appear to be
post-Miocene. The faults cut the younger granitoids, but are covered by younger
Tertiary basalt. All mineralization in the Los Menucos district appears to be
pre- basaltic in age.
A Landsat image of the Lost Menucos district was used to discover new
mineralization. All white, whitish blue and cyan anomalies were checked on the
ground. One hundred and six anomalies were checked. Of these, six were
anomalous, containing alteration and significant gold and trace elements.
Further fieldwork disclosed a zone 50km long and 10km wide, containing numerous
showings of high- sulfidation disseminated gold mineralization. This zone trends
from southeast to northwest. The main prospects within this zone are El Puesto
(4 sq. km.), Caltrauna, where silification and strong alteration can be seen
over an area of 20 sq. km, and Cuya/Aguadita, where new exploration discoveries
of mineralization have expanded the potential area to nearly 30 sq. km.
El Puesto Prospect
El Puesto Prospect outcrops over an area comprising 1.5 x 1.5 kms. To the north,
the mineralization disappears under a large clay pan (or lake?). Ground magnetic
surveys indicate that the bedrock below the "lake" consists of rocks which may
be similar to that in the main prospect area. If this is the case, the
dimensions of prospect would be increased to 2.1 x 1.5 kilometers. In the
south-east sector of the prospect, the mineralization is unconformably overlain
by post-mineral ignimbrite and quartz-eye crystal tuff.
The best potential gold mineralization is within the north-central part of the
prospect area. It consists of light to dark grey vuggy silica with rare, thin
quartz vein networks, interbedded with or ramified with
sericite-pyrophyllite-dickite rocks. In some areas the vuggy silica appears to
be "dyke-like" and in other areas it forms beds, as if SiO2 rich solutions had
replaced a particular lithic or crystal tuff unit. It appears that the original
rock type in the prospect area was a rhyolitic or dacitic tuff with quartz-eye
crystals. All the rocks have been altered, from advanced argillic in the centre
through phyllic to propylitic on the outer margins.
There is much hematite and limonite veining throughout the property; some of
which may indicate hypogene oxidation. In the areas where there is much
sericite, jarosite coats joint and fracture surfaces. Locally there are
limonite/hematite beds and gossans. There is minor alunite in the southern part
of the prospect.
The potential gold mineralization is assumed to be very fine-grained, because it
is impossible to pan gold in the streams. There is visible gold on the surface,
in particular within limonitic vuggy SiO2 units. This gold is extremely fine and
occurs as paint on joint surfaces. It may be of supergene origin. The highest
gold assays come from hematitic/limonitic gossans in the eastern part of the
area. These appear to be within vuggy SiO2 and sericite beds which originally
may have been very sulfide-rich. The Ag/Au ratio is 8:1.
The eastern sector is cut by thin rhyolite-dyke swarms. All dykes have wide
phyllic alteration halos which contain up to 0.5 gpt Au. It is possible that
some of the mineralization is related to these dykes which may originate from
rhyolitic domes at depth (below 200 metres).
All of the Company's field data indicate that the best gold values are within
the vuggy SiO2 units. Also the SiO2 forms beds, dykes and replacements in
quartz-eye crystal tuffs. The Company's interpretation indicates that there may
<PAGE>9
be a folded "favorable bed" target at this prospect. Only further drilling can
determine if this is the case.
479 samples were collected for assay. Each sample is a chip composite of
individual outcrops, which range in area from four to fifty square metres. Of
these samples, 144 assayed greater than 0.5 gpt Au. The average gold content of
these is 3.51 gpt and 91 samples contained more than 1 gpt Au. The average of
all these samples is 5.11 gpt Au. Practically all of the samples contain
anomalous gold values. No more than thirty samples contain gold below limits of
detection. The areas that do not have outcrop were soil sampled.
The Company completed geophysical surveys at the El Puesto and Caltrauna
Prospects in May 1999. A preliminary assessment of the results of the
geophysical surveys at El Puesto Prospect indicates that the following general
conclusions can be made:
1. There is a marked magnetic low (-50 nanoteslas) over the
altered parts of the prospect area. This indicates possible
hypogene oxidation and destruction of magnetite. This low
covers about one square kilometer. Other, smaller magnetic
lows have been outlined to the east of the prospect area.
2. One dipole-dipole line (10 600E) indicates that down to at
least 100 metres there is a resistive zone of 250-300 ohm
metres. Four strong, SiO2 altered zones can be seen on the
pseudo section. They extend down to 100 metres; all these
zones correspond to high gold contents on the surface.
3. The gradient array survey (data received from about 200 metres
below surface) indicates that the prospect area is underlain
by a low-resistivity and low-chargeability domain which may be
related to a rhyolitic dome at depth.
4. There is a near surface, strong chargeability and low
resistivity anomaly on line 10,400 N. this may represent a
thirty metre wide massive sulfide. It is located below the
lake. The source of this anomaly can only be determined by
drilling.
5. The strong correlation of magnetic low and resistivity high
and chargeability low down to 100 metres indicates that the El
Puesto prospect is very anomalous geophysically.
A total of 1,772m of reverse circulation drilling was carried out on El Puesto
in August 1999.
<PAGE>10
The drilling results are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
From To Length Value Length of
Drillhole
- ----------------------------------------------------------------------------------------------------------------------------------
EP 1 0 34 34m 0.96g/t 102m
Includes 12m 1.76g/t
- -----------------------------------------------------------------------------------------------------------------------------------
EP 2 2 38 36m 1.30g/t 90m
Includes 24m 1.76g/t
- -----------------------------------------------------------------------------------------------------------------------------------
62 68 6m 0.91g/t
Includes 2m 1.60g/t
- -----------------------------------------------------------------------------------------------------------------------------------
EP 3 0 46 46m 0.20g/t 54m
- -----------------------------------------------------------------------------------------------------------------------------------
EP 4 14 56 42m 0.23g/t 78m
- -----------------------------------------------------------------------------------------------------------------------------------
EP 5 6 16 10m 0.93g/t 78m
Includes 6m 1.20g/t
- -----------------------------------------------------------------------------------------------------------------------------------
EP 6 8 24 16m 0.88g/t 60m
Includes 8m 1.20g/t
- -----------------------------------------------------------------------------------------------------------------------------------
42 48 6m 1.20g/t
Includes 2m 2.70g/t
EP 7-10 had no significant intersections. Those holes were outside the main zone
of alteration and were sited to test an area were surface samples gave values up
to 58g/t. These holes hit less altered rocks with low gold values. The lengths
of these holes were from 40 to 108m.
EP 11 tested a geophysical target more than 1 km outside the main alteration
zone. No significant intersection of mineralization was encountered. The length
of the drill hole was 40m.
From To Length Value Length of
Drillhole
- -----------------------------------------------------------------------------------------------------------------------------------
EP 12 20 30 10m 0.86g/t 100m
Includes 4m 1.40g/t
- -----------------------------------------------------------------------------------------------------------------------------------
EP 13 2 18 16m 1.00g/t 100m
- -----------------------------------------------------------------------------------------------------------------------------------
EP 14 No significant intersections 78m
- -----------------------------------------------------------------------------------------------------------------------------------
EP 15 0 22 22m 0.56g/t 100m
Includes 4m 1.40g/t
- -----------------------------------------------------------------------------------------------------------------------------------
EP 16 No significant intersections 100m
- -----------------------------------------------------------------------------------------------------------------------------------
EP 17 6 12 6m 1.60g/t 84m
</TABLE>
<PAGE>11
EP 18 was drilled to test a small vuggy quartz outcrop in the far south of the
prospect area, but did not hit any vuggy quartz. No significant intersection of
mineralization was encountered. The length of the drill hole was 66m.
EP 19 and EP 20 were located to test soil-covered geochemical (M.M.I.) anomaly,
at the north end of the prospect and did not have any significant
mineralization. These holes were 102m and 108m long respectively.
<TABLE>
<S> <C> <C> <C> <C> <C>
From To Length Value Length of
drillhole
- -----------------------------------------------------------------------------------------------------------------------------------
EP 4 80 76m 0.50g/t 126
Includes 8m 2.30g/t
Includes 2m 4.50g/t
</TABLE>
All holes except EP 21 inclined at -50(degree), EP 21 inclined at -70(degree).
The higher gold values are from vuggy silica intercalated with
hematite/goethite. Within the main alteration zone the remaining parts of the
holes consist of sericite-illite rock with clay minerals. This rock is always
anomalous in gold, but contains lower values.
Caltrauna Prospect
The Caltrauna Prospect was discovered in March 1999. The Caltrauna Prospect
consists of an elliptical, basin shaped, vuggy silica structure 5 km long by 4
km across. The central part of this structure is overlain by ignimbrites and
quartz-eye crystal tuff. Preliminary chip sampling (200 samples) from the
southern end indicates anomalous gold (average 0.80 g/t Au) with barite (average
1000 ppm barium) and copper (average 300 ppm). Mineralized, altered breccias
were discovered along the western edge of the Caltrauna Prospect. Detailed
gridding, chip sampling and geological mapping in southern Caltrauna was
completed by the end of May 1999. Caltrauna has a weak Landsat anomaly. This is
related to the vuggy silica outcrops.
Caltrauna is located 5 kilometres north-west of Puesto Prospect. It is within a
circular structure shaped in the form of a Q; its dimensions are 4x5 kms. During
May 1999, the southern half of the area (2x2 kms) was gridded and mapped.
Along the western margin of the gridded area there is a concentration of vuggy
silica with "cores" of diapiric breccias. These intrusives and the concentration
of gold mineralization within the vuggy silica are controlled by two
north-westerly trending faults.
The diapiric breccias consist of matrix supported clasts of rhyolitic porphyry,
welded tuff and vuggy silica. The breccias are cut by a stockwork of limonitic
and silica-rich-veins. The breccias intrude lithic, crystal, airfall tuffs, with
quartz and K-spar phenocrysts. The matrix of the breccias and the wall rocks are
altered to quartz-sericite, quartz-sericite - pyrophyllite, or quartz-dickite
bearing assemblages.
<PAGE>12
The breccia diatremes intrude up to various stratigraphic levels of the
rhyodacitic, quartz crystal, lithic tuffs. Acid solutions emanating from the
magmatic fluids related to the breccias have altered certain units within the
quartz lithic tuff units. The most common alteration is silicification, and
locally argillitisation.
The distribution of SiO2 - rich rocks and geophysical data indicates that there
will be SiO2 rich rocks (sometimes with related rhyolite domes) below the
extensive crystal-lithic tuff unit.
All samples with anomalous gold contents are related to vuggy silica outcrops.
Values come from baryte- bearing, limonitic silica zones.
The Company has completed preliminary reconnaissance magnetic and I.P surveys
over southern area of the Caltrauna Prospect. Strong vuggy silica development is
related to areas where there is complete destruction of magnetite and where
there are strong magnetic lows. Two of these altered areas are:
o North-East Caltrauna Grid; and
o A 500 metre wide 2 km long trending belt north-northwesterly from
10,600 E.
Also, a dipole-dipole survey along 10,000 N indicates that the vuggy
SiO2/breccia units have very high resistivity and higher than normal I.P.
effect.
The August 1999 drill program on the Caltrauna Prospect had the following
results:
<TABLE>
<S> <C> <C> <C> <C> <C>
From To Length Value Length of
drillhole
- -----------------------------------------------------------------------------------------------------------------------------------
CT 1 0 10 10m 0.72g/t 100m
Includes 6m 1.10g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CT 5 12 32 20m 0.53g/t 78m
Includes 4m 1.34g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CT 7 104 114 10m 0.60g/t 120m
Includes 2m 1.20g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CT 8 2 30 28m 0.70g/t 96m
Includes 6 1.20g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CT 9 4 54 50m 1.40g/t 78m
Includes 12m 2.44g/t
</TABLE>
Five holes (CT 2,3,4,6 and 10) had anomalous gold (~0.2g/t), but no significant
intersection. The lengths of these holes vary from 72 to 100m.
CT11 was drilled into a silica fragment-rich breccia and contained 22m of 0.2g/t
Au.
CT12 through CT17 tested vuggy silica outcrops in a higher "stratigraphic" level
than previous drilling and did not encounter significant mineralization.
<PAGE>13
CT13 and CT18 were drilled to test geophysical resistivity anomalies, but there
were no positive results.
The lengths of the holes were from 54m to 96m and inclined at -50(degree). A
total of 1,532m of reverse circulation drilling has been carried out on
Caltrauna.
As the drilling results from El Puesto Prospect, the higher gold values are from
vuggy silica intercalated with hematite/goethite. The silica without vuggy
characteristics and the sericite-illite alteration only report lower gold
values, but still highly anomalous.
Detail mapping and sampling at Caltrauna has only covered an area of 1.5 sq. km,
of which only a small portion has been tested by these drillholes. The Caltrauna
prospect covers about 5 sq. km (as defined by abundant silica outcrops). The
wider zone with strong alteration and discontinuous silica outcrops covers
almost 20 sq. km., which has yet to be mapped and sampled in detail.
Cuya/Aguadita
The Cuya/Aguadita Prospects consist of an original discovery of an approximately
1 sq.km. large silica sinter, anomalous in gold with an underlying breccia
stockwork zone.
Recent work has shown widespread alteration and vuggy quartz, similar to El
Puesto and Caltrauna over a much larger area (30 sq.km.)
The August 1999 drill program on the Cuya Prospect had the following results:
Six holes were drilled in the southern margin of the prospect on the side of a
hill. The hill itself contains the main part of the prospect consisting of a
silicified and mineralized breccia (1 1/2 x 1 1/2 km). The results are as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
(m) (Au) (m)
- -----------------------------------------------------------------------------------------------------------------------------------
Hole No. From To Length Assay Length of
Drillhole
- -----------------------------------------------------------------------------------------------------------------------------------
CY 1 2 98 96 0.21g/t 132
Includes 2 0.60g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CY 2 0 82 82 0.23g/t 108
Includes 4 0.67g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CY 3 8 62 56 0.22g/t 144
98 116 18 0.25g/t
Includes 2 0.9g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CY 4 4 78 74 0.23g/t 130
Includes 4 0.50g/t
84 104 20 0.16g/t
<PAGE>14
- -----------------------------------------------------------------------------------------------------------------------------------
CY 5 4 102 98 0.23g/t 102
Includes 4 0.50g/t
- -----------------------------------------------------------------------------------------------------------------------------------
CY 6 42 66 24 0.15g/t 78
</TABLE>
The Company considers these results to be very encouraging, considering that all
drill holes had significant but low grade intersections and were located outside
the main part of the prospect. The major and central part of the prospect will
be covered by future drill programs.
CY to CY5 were on a line covering about 400m distance, while CY6 was located
200m south and further away from the hill.
The holes were all inclined at -50(degree).
A total of 694m reverse circulation drilling has been carried out on Cuya.
Proposed Work
The Company has completed the assessment of the results of its recent 4,000m
drilling program on the El Puesto, Caltrauna and Cuya epithermal gold prospects
within the Los Menucos District in Rio Negro Province, Southern Argentina. The
drilling program consisted of 21 reverse circulation drill holes at El Puesto,
18 at Caltrauna and 6 at Cuya. These scout holes were designed to test anomalous
geochemical and geophysical targets down to 50-80m depth.
Significant widths of economic mineralization were intersected at El Puesto
(e.g. EP 2: 36m of 1.3g/t Au including 24m of 1.76g/t Au) and Caltrauna (e.g. CT
9: 50 m of 1.4g/t Au including 12m of 2.44g/t Au).
Future drill programs in early 2000 will consist of 50m "stepouts" from these
holes by core drilling down to 200m, to outline lateral and depth extension of
potential mineable resources.
On Caltrauna only a small part of a 1.5 sq. km. area has been tested by drilling
so far. The Caltrauna prospect covers 5 sq. km defined by abundant silica. The
wider zone, with strong alteration and discontinuous silica outcrops, covers
almost 20 sq. km which is yet to be mapped and sampled in detail, followed by
drilling.
The five first drill holes on Cuya had very significant intersections (better
than 0.2g/t Au over 96m, 82m, 74m, 94m and 98m respectively) considering that
these holes were drilled outside the main part of the prospect.
The next drill program of Cuya will include deeper core drilling in the central
part of the Cuya prospect, an area of more intense alteration and higher
geochemical values.
<PAGE>15
All significant gold intersections contain traces of silver (1:7 = Au:Ag),
anomalous copper (average about 250 p.p.m.), arsenic (80 p.p.m.), barium (300
p.p.m.), lead (300 p.p.m.), antimony (25 p.p.m.), and mercury (250 p.p.b.).
Duplicate samples of all mineralized intersections were crushed and reassayed by
Geolab in Santiago. These assay results correspond (+/- 2%) with those of
American Assay Laboratory. The copper/arsenic mineralization is interpreted to
be associated with oxidized, disseminated and vein-like enargite.
A further drill program, which will include core drilling down to 200m depth,
will be designed after the Company has evaluated the geological information from
the recent reverse circulation drill program.
In conjunction with the drilling, further checking of Landstat anomalies within
Rio Negro and adjacent provinces will continue. Some reconnaissance work will
start on other concessions within Arminex property portfolio. The estimated
costs of the proposed drilling and reconnaissance work are as follows:
Estimated Costs
Cost of completing proposed drill program (included assaying) $ 650,000
Follow up field program with sampling and mapping $ 200,000
Property concession holding costs $ 60,000
Office and contingencies (in Argentina) $ 40,000
----------
TOTAL: $ 950,000
==========
Plan of Operations
During the six month interim period ending August 31, 1999, the Company
completed private placements of shares and warrants to raise net proceeds of
$1,100,544 out of which $777,522 was spent in exploration and $150,000 was used
to repay a loan received during the year ended February 28, 1999. Subsequent to
August 31, 1999, the Company completed a private placement to raise net proceeds
of about $800,000, which was mainly used for the August 1999 reverse circulation
drill program in Argentina. The management of the Company believes that there
will not be adequate funds to cover the proposed exploration and development
work on the Argentine concessions and on the Portel-Moura-Ficalho Concession in
Portugal, as more particularly discussed above, for the remainder of the fiscal
year and for the first six months of the next fiscal year. The Company proposes
to raise additional financing through the sale of equity securities during this
period, although there can be no assurance that such funding will be available.
In addition, the Company is pursuing discussions with several potential joint
venture participants for further exploration and development of the Rio Negro
concessions. In the event that future equity financing cannot be raised or the
negotiations for joint venture funding are not successful, the Company's
operations will be curtailed and this may adversely affect the Company's ability
to carry out the required level of expenditures to continue to earn a larger
equity interest in Arminex or ultimately to maintain its concessions in good
standing under the laws of Argentina or Portugal or both.
Item 2. Description of Property
For a description of the Company's properties, see Item 1, "Description of
Business."
Item 3. Legal Proceedings
<PAGE>16
The Company is not involved in any legal proceedings.
Item 4. Control of The Company
(a) As far as is known to the Company, it is not directly or
indirectly owned or controlled by any other corporation or by
the Canadian Government, or any other foreign government.
(b) The following table sets forth information as at October 31,
1999, the total amount of the Company's Common Shares owned by
the Company's officers and directors as a group. The Company
knows of no person who owned more than 10 percent of Common
Shares.
<TABLE>
<S> <C> <C>
Number of Shares of Percent
Name Common Shares Owned of Class
- ----------------------------------------- ------------------- --------
All Officers and directors as a Group (5
persons) 965,000 13.04%
</TABLE>
Item 5. Nature of Trading Market
The common shares of the Company are listed on the Vancouver Stock Exchange,
which is the principal trading market ("VSE"), under the symbol APC.
As of October 29, 1999, there was one shareholder of record resident in the
United States, representing approximately 1.17% of the total issued shares. The
Company's common shares are issued in registered form and the percentage of
shares reported to be held by record holders in the United States is taken from
the records of Pacific Corporate Trust Company in the City of Vancouver, British
Columbia, the Registrar and Transfer Agent for the common shares.
The high and low prices expressed in Canadian dollars on the VSE for the
Company's common shares for each quarter for the last two fiscal years, and the
first two quarters ended August 31, 1999, are as follows:
<TABLE>
<S> <C> <C>
Vancouver Stock
Exchange
(Canadian Dollars)
2000-1999 High Low
- -------------------------------------- ------- -------
First Quarter ended May 31, 1999 $1.50 $0.70
Second Quarter ended August 31, 1999 $1.40 $0.90
1999-1998 High Low
- --------------------------------------- ------- -------
First Quarter ended May 31, 1998 $0.75 $0.50
Second Quarter ended August 31, 1998 $0.85 $0.50
Third Quarter ended November 30, 1998 $0.65 $0.50
Fourth Quarter ended February 28, 1999 $0.75 $0.48
<PAGE>17
1998-1997 High Low
- --------------------------------------- ------- ------
First Quarter ended May 31, 1997* Nil Nil
Second Quarter ended August 31, 1997* Nil Nil
Third Quarter ended November 30, 1997 $0.70 $0.48
Fourth Quarter ended February 28, 1998 $0.65 $0.48
</TABLE>
* Unable to obtain information during this period.
Item 6. Exchange Controls and Other Limitations Affecting Security Holders.
Foreign Investment and Currency Regulations in Canada
There are no governmental laws, decrees or regulations in Canada relating to
restrictions on the export or import of capital, or affecting the remittance of
interest, dividends or other payments to non-resident holders of the Company's
common shares. Any remittances of dividends to United States residents are,
however, subject to a 15% withholding tax (5% if the shareholder is a
corporation owning at least 10% of the outstanding common shares of the Company)
pursuant to Article X of the reciprocal tax treaty between Canada and the United
States. See Item 7 - "Taxation."
Except as provided in the Investment Canada Act, there are no limitations under
the laws of Canada, the Province of British Columbia or in the Memorandum or
Articles of the Company on the right of foreigners to hold or vote the common
shares of the Company.
The Investment Canada Act requires a non-Canadian making an investment to
acquire control, directly or indirectly, of a Canadian business, the gross
assets of which exceed certain defined threshold levels, to file an application
for review with Investment Canada, the federal agency created by the Act.
Provisions of the Investment Canada Act are complex and any non-Canadian
contemplating an investment to acquire control of the Company should consult
professional advisors as to whether and how the Investment Canada Act might
apply.
For the purposes of the Investment Canada Act, direct acquisition of control
means a purchase of the voting interests of a corporation, partnership, joint
venture or trust carrying on a Canadian business, or any purchase of all or
substantially all of the assets used in carrying on a Canadian business. An
indirect acquisition of control means a purchase of the voting interest of a
corporation, partnership, joint venture or trust, whether a Canadian or foreign
entity, which controls a corporation, partnership, joint venture or trust
company carrying on a Canadian business in Canada.
Foreign Investment and Currency Regulations in Portugal
Portugal is a member of the European Union, and Portugal does not impose
restrictions on foreign investment in mining. There are no restrictions on
foreign currency exchange, but all foreign exchange must be registered or at
least submitted to an "after the fact" control by the Bank of Portugal.
The taxation of companies is fixed at a 36.5% rate, with an additional surplus
for local authorities of 10% over the 36.5% rate. Dividends paid to
non-residents are taxed at a rate of 25% which, in most cases, is
<PAGE>18
withheld at the source. Interest income is taxed at a 20% rate, and royalties
and fees at 15%. The current Value Added Tax (VAT) is generally 17%, with some
provinces being lower. There is no limitation on the deductibility of foreign
expenses, and there are no restrictions on intercompany transactions.
Foreign Investment and Currency Regulations in Argentina
Argentina is part of MERCOSUR, a free trade bloc also including Brazil, Chile,
Paraguay and Uruguay. Although there is an officially fixed US dollar-peso
exchange rate, there are presently no other restrictions on the exchange of
currency or repatriation of profits or capital in Argentina. Foreign investment
in mining is encouraged under the Investment Promotion Program, and legislation
enacted in 1993 and 1994 providing for special tax incentives. Mining related
laws to encourage investment in mining include equal tax treatment for foreign
and domestic investors; allowing accelerated depreciation allowances; and the
recent implementation of a mining law which guarantees fiscal stability for 30
years after the presentation of a final feasibility study.
Foreign and domestic companies face the same tax liabilities, and Argentine tax
law caps the income tax rate at thirty percent (30%). There are no duties on
imported equipment, and there is no tax on dividends. Production royalties to
the provinces are capped at three percent (3%), with some provinces waiving the
royalty entirely.
Item 7. Taxation
Certain Canadian Federal Income Tax Consequences
The following is a summary that describes the material Canadian federal income
tax consequences applicable to a holder of common shares of the Company who is a
resident of the United States and who is not a resident of Canada and who does
not use or hold, and is not deemed to use or hold, his common shares of the
Company in connection with carrying on a business in Canada (a "non-resident
shareholder").
This summary is based upon the current provisions of the Income Tax Act (Canada)
(the "ITA"), the regulations thereunder (the "Regulations"), the current
publicly announced administrative and assessing policies of Revenue Canada,
Taxation, and all specific proposals (the "Tax Proposals") to amend the ITA and
Regulations announced by the Minister of Finance (Canada) prior to the date
hereof. This description is not exhaustive of all possible Canadian federal
income tax consequences and, except for the Tax Proposals, does not take into
account or anticipate any changes in law, whether by legislative, governmental
or judicial action, nor does it take into account provincial or foreign tax
considerations which may differ significantly from those discussed herein.
Dividends
Dividends paid on the common shares of the Company to a non-resident holder will
be subject to withholding tax. The Canada-U.S. Income Tax Convention (1980) (the
"Treaty") provides that the normal 25% withholding tax rate is reduced to 15% on
dividends paid on shares of a corporation resident in Canada (such as the
Company) to residents of the United States, and also provides for a further
reduction of this rate to 5% where the beneficial owner of the dividends is a
corporation which is a resident of the United States which owns at least 10% of
the voting shares of the corporation paying the dividend.
<PAGE>19
Capital Gains
A non-resident of Canada is not subject to tax under the ITA in respect of a
capital gain realized upon the disposition of a share of a Canadian resident
corporation that is listed on a prescribed stock exchange, unless the share
represents "taxable Canadian property" to the holder thereof. The Company is a
Canadian resident corporation and the Vancouver Stock Exchange is a prescribed
stock exchange for purposes of the ITA. A common share of the Company will be
taxable Canadian property to a non-resident holder if, at any time during the
period of five years immediately preceding the disposition, the non-resident
holder, persons with whom the non-resident holder did not deal at arm's length,
or the non-resident holder and persons with whom he did not deal at arm's length
owned not less than 25% of the issued shares of any class or series of the
Company. In the case of a non-resident holder to whom shares of the Company
represent taxable Canadian property and who is resident in the United States, no
Canadian taxes will be payable on a capital gain realized on such shares by
reason of the Canada-U.S. Income Tax convention (1980) (the "Treaty") unless the
value of such shares is derived principally from real property situated in
Canada. However, in such a case, certain transitional relief under the Treaty
may be available.
Certain United States Federal Income Tax Consequences
The following is a summary of United States federal income tax considerations
material to a holder of Common Shares and who is a United States citizen or
resident or a United States domestic corporation who owns the Common Shares as a
capital asset ("United States Investor"). The summary is of a general nature
only and is not exhaustive of all possible income tax consequences applicable to
United States Investors and does not address the tax consequences of United
States Investors subject to special provisions of federal income tax law such as
tax exempt organizations, trusts and significant shareholders. Prospective
investors are advised to consult their own tax advisors with respect to their
particular circumstances and with respect to the effects of state, local or
foreign tax laws to which they may be subject.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations, court decisions and current administrative
rulings and pronouncements of the United States Internal Revenue Service ("IRS")
that are currently applicable, all of which are subject to change, possibly with
retroactive effect. There can be no assurance that future changes in applicable
law or administrative and judicial interpretations thereof will not adversely
affect the tax consequences discussed herein. Investors are advised to consult
their own tax advisors regarding the tax consequences of acquiring, holding or
disposing of the Common Share in light of their particular circumstances.
Basis. A United States Investor will have a basis in the Common Share equal to
his or her purchase price for United States federal tax purposes.
Dividends. Cash dividends paid out of the Company's current and accumulated
earnings and profits to a holder of Common Share who is a United States Investor
will be taxed as ordinary income for United States federal income tax purposes.
Cash distributions in excess of the current and accumulated earnings and profits
of the Company will first be treated, for United States federal income tax
purposes, as a nontaxable return on capital to the extent of the United States
Investor's basis in the Common Share and then as gain from the sale or exchange
of a capital asset.
<PAGE>20
As discussed above in "Certain Canadian Federal Income Tax Considerations," such
dividends generally will also be subject to a Canadian withholding tax. The
deduction for dividends received which is usually available to corporate
shareholders is generally not available for dividends paid from a foreign
corporation such as the Company. Pursuant to Sections 164 and 901 of the Code, a
United States Investor may generally elect, for U.S. federal income tax
purposes, to claim either a deduction from gross income for such Canadian
withholding taxes or a credit against its United States federal income taxes
with respect to such Canadian taxes. The choice of taking a deduction or
claiming a credit is up to the taxpayer.
In general, a United States Investor, other than a shareholder owning 10% or
more of the voting power of the Company, will be entitled to claim a foreign tax
credit only for taxes, if any, imposed on dividends paid to such United States
Investor (such as withholding taxes) and not for taxes, if any, imposed on the
Company or on any entity in which the Company has made an investment. The amount
of the foreign tax credit that may be claimed is limited to that proportion of
the tax against which the credit is taken that the holder's taxable income from
non-United States sources bears to the holder's entire taxable income for that
taxable year. The foreign tax credit limitation is applied separately to
different categories of income. Generally, for purposes of applying such foreign
tax credit limitations, dividends are included in the passive income category.
Dispositions of Common Shares. Subject to the discussion below of the
consequences of the Company being treated as a Passive Foreign Investment
Company or a Foreign Investment Company, gain or loss realized by a United
States Investor (other than a 10-percent shareholder of the Company) on the sale
or other disposition of Common Share will be subject to United States federal
income tax as capital gain or loss in an amount equal to the difference between
such United States Investor's basis in the Common Share and the amount realized
on the disposition. In general, such capital gain or loss will be long-term
capital gain or loss if the United States Investor has held the Common Shares
for more than one (1) year at the time of the sale or exchange. In general, gain
from a sale, exchange or other disposition of the Common Share by a United
States Investor will be treated as U.S. source income.
Special United States Federal Income Tax Considerations
Passive Foreign Investment Company. The Company believes that it is a passive
foreign investment company ("PFIC") for United States federal income tax
purposes with respect to a United States Investor. The Company will be a PFIC
with respect to a United States Investor if, for any taxable year in which such
United States Investor held the Company's shares, either (i) at least 75% of the
gross income of the Company for the taxable year is passive income, or (ii) at
least 50% of the Company's assets are attributable to assets that produce or are
held for the production of passive income. In each case, the Company must take
into account a pro rata share of the income and the assets of any company in
which the Company owns, directly or indirectly, 25% on more of the stock by
value (the "look-through" rules). Passive income generally includes dividends,
interest, royalties, rents (other than rents and royalties derived from the
active conduct of a trade or business and not derived from a related person),
annuities, and gains from assets that produce passive income. As a non-publicly
held (for United States Federal income tax purposes), non-CFC, the Company would
apply the 50% asset test based on the value of the Company's assets.
Because the Company is a PFIC, unless a United States Investor who owns shares
in the Company elects (a section 1295 election) to have the Company treated as a
"qualified electing fund" (a "QEF") as described below, the following rules will
apply:
<PAGE>21
1. Distributions made by the Company during a taxable year to a United
States Investor who owns shares in the Company that are an "excess distribution"
(defined generally as the excess of the amount received with respect to the
shares in any taxable year over 125% of the average received in the shorter of
either the three previous years or such United States Investor's holding period
before the taxable year) must be allocated ratably to each day of such
shareholder's holding period. The amount allocated to the current taxable year
and to years when the corporation was not a PFIC must be included as ordinary
income in the shareholder's gross income for the year of distribution. The
remainder is not included in gross income but the shareholder must pay a
deferred tax on that portion. The deferred tax amount, in general, is the amount
of tax that would have been owed if the allocated amount had been included in
income in the earlier year, plus interest. The interest charge is at the rate
applicable to deficiencies in income taxes.
2. The entire amount of any gain realized upon the sale or other
disposition of the share will be treated as an excess distribution made in the
year of sale or other disposition and as a consequence will be treated as
ordinary income and, to the extent allocated to years prior to the year of sale
or disposition, will be subject to the interest charge described above.
A shareholder that makes a section 1295 election will be currently taxable on
his or her pro rata share of the Company's ordinary earnings and net capital
gain (at ordinary income and capital gains rates, respectively) for each taxable
year of the Company, regardless of whether or not distributions were received.
The shareholder's basis in his or her shares will be increased to reflect taxed
but undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the shares and will not be
taxed against as a distribution to the shareholder.
A shareholder may make a section 1295 election with respect to a PFIC for any
taxable year of the shareholder (shareholder's election year). A section 1295
election is effective for the shareholder's election year and all subsequent
taxable years of the shareholder. (In temporary regulations, Treasury provides
procedures for both retroactive and protective elections). Once a section 1295
election is made it remains in effect, although not applicable, during those
years that the Company is not a PFIC. Therefore, if the Company requalifies as a
PFIC, the section 1295 election previously made is still valid and the
shareholder is required to satisfy the requirements of that election. Once a
shareholder makes a section 1295 election, the shareholder may revoke the
election only with the consent of the Commissioner.
If the shareholder makes the section 1295 election for the first tax year of the
Company as a PFIC that is included in the shareholder's holding period, the PFIC
qualifies as a pedigreed QEF with respect to the shareholder. If a QEF is an
unpedigreed QEF with respect to the shareholder, the shareholder is subject to
both the non-QEF and QEF regimes. Certain elections are available which enable
shareholders to convert an unpedigreed QEF into a pedigreed QEF thereby avoiding
such dual application.
A shareholder making the section 1295 election must make the election on or
before the due date, as extended, for filing the shareholder's income tax return
for the first taxable year to which the election will apply. A shareholder must
make a section 1295 election by completing Form 8621; attaching said Form to its
federal income tax return; receiving in the Form the information provided in the
PFIC Annual Information Statement or if the shareholder calculated the financial
information, a statement to that effect; and filing a copy of the Form with the
Philadelphia Service Center. As provided in IRS Notice 88-125, the PFIC Annual
Information Statement must include the shareholder's pro rata shares of the
ordinary earnings and net capital gain of the PFIC for the PFIC's taxable year
or information that will enable the shareholder to calculate its pro rata
<PAGE>22
shares. In addition, the PFIC Annual Information Statement must contain
information about distributions to shareholders and a statement that the PFIC
will permit the shareholder to inspect and copy its permanent books of account,
records, and other documents of the PFIC necessary to determine that the
ordinary earnings and net capital gain of the PFIC have been calculated
according to federal income tax accounting principles. Temporary regulations
have recently clarified that a shareholder may obtain the books, records and
other documents of the foreign corporation necessary for the shareholder to
determine the correct earnings and profits and net capital gain of the PFIC
according to federal income tax principles and calculate the shareholder's pro
rata shares of the PFIC's ordinary earnings and net capital gain. In that case,
the PFIC must include a statement in its PFIC Annual Information Statement that
it has permitted the shareholder to examine the PFIC's books of account,
records, and other documents necessary for the shareholder to calculate the
amounts of ordinary earnings and net capital gain.
Special rules apply with respect to the calculation of the amount of the foreign
tax credit with respect to excess distributions by a PFIC or inclusions under a
QEF.
Controlled Foreign Corporations. Sections 951 through 964 and Section 1248 of
the Code relate to controlled foreign corporations ("CFCs"). A foreign
corporation that qualifies as a CFC will not be treated as a PFIC with respect
to a shareholder during the portion of the shareholder's holding period after
December 31, 1997, during which the shareholder is a 10% United States
shareholder and the corporation is a CFC. (The PFIC provisions continue to apply
in the case of PFIC that is also a CFC with respect to shareholders that are
less than 10% United States shareholders).
The 10% United States shareholders of a CFC are subject to current U.S. tax on
their pro rata shares of certain income of the CFC and their pro rata shares of
the CFC's earnings invested in certain U.S. property. The effect is that the CFC
provisions may impute some portion of such a corporation's undistributed income
to certain shareholders on a current basis and convert into dividend income some
portion of gains on dispositions of stock which would otherwise qualify for
capital gains treatment.
The Company does not believe that it will be a CFC. Even if the Company were
classified as a CFC in a future year, however, the CFC rules referred to above
would apply only with respect to 10% shareholders.
Personal Holding Company/Foreign Personal Holding Company/Foreign Investment
Company. A corporation will be classified as a personal holding company (a
"PHC") if at any time during the last half of a tax year (i) five or fewer
individuals (without regard to their citizenship or residence) directly or
indirectly or by attribution own more than 50% in value of the corporation's
stock and (ii) at least 60% of its ordinary gross income, as specially adjusted,
consists of personal holding company income (defined generally to include
dividends, interest, royalties, rents and certain other types of passive
income). A PHC is subject to a United States federal income tax of 39.6% on its
undistributed personal holding company income (generally limited, in the case of
a foreign corporation, to United States source income).
A corporation will be classified as a foreign personal holding company (an
"FPHC") and not a PHC if at any time during a tax year (i) five or fewer
individual United States citizens or residents directly or indirectly or by
attribution own more than 50% of the total combined voting power or value of the
corporation's stock and (ii) at least 60% of its gross income consists of
foreign personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). Each
United States shareholder in a FPHC is required to include in gross income, as a
dividend, an allocable share of the FPHC's undistributed foreign personal
<PAGE>23
holding company income (generally the taxable income of the FPHC, as specially
adjusted).
A corporation will be classified as a foreign investment company (an "FIC") if
for any taxable year it (i) is registered under the Investment Company Act of
1940, as amended, as a management company or share investment trust or is
engaged primarily in the business of investing or trading in securities or
commodities (or any interest therein) and (ii) 50% or more of the value or the
total combined voting power of all the corporation's stock is owned directly or
indirectly (including stock owned through the application of attribution rules)
by United States persons. In general, unless an FIC elects to distribute 90% or
more of its taxable income (determined under United States tax principles as
specially adjusted) to its shareholders, gain on the sale or exchange of FIC
stock is treated as ordinary income (rather than capital gain) to the extent of
such shareholder's ratable share of the corporation's earnings and profits for
the period during which such stock was held.
The Company believes that it is not and will not be a PHC, FPHC or FIC. However,
no assurance can be given as to the Company's future status.
U.S. Information Reporting and Backup Withholding. Dividends are generally
subject to the information reporting requirements of the Code. Dividends may be
subject to backup withholding at the rate of 31% unless the holder provides a
taxpayer identification number on a properly completed Form W-9 or otherwise
establishes an exemption.
The amount of any backup withholding will not constitute additional tax and will
be allowed as a credit against the United States Investor's federal income tax
liability.
Filing of Information Returns. Under a number of circumstances, a United States
Investor acquiring shares of the Company may be required to file an information
return at the Internal Revenue Center where they are required to file their tax
returns with a copy to the Internal Revenue Service Center, Philadelphia, PA
19255. In particular, any United States Investor who becomes the owner, directly
or indirectly, of 10% or more of the shares of the Company will be required to
file such a return. Other filing requirements may apply, and United States
Investors should consult their own tax advisors concerning these requirements.
Item 8. Selected Financial Data
The selected consolidated unaudited financial data has been derived from the
financial statements of the Company and has been prepared in accordance with
Canadian generally accepted accounting principles. This data should be read in
conjunction with the Company's consolidated financial statements and the related
notes thereto presented elsewhere in this Registration Statement and with
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations." Differences in generally accepted accounting principles in Canada
and those in the U.S. for the Company are disclosed in Note 10 to the
consolidated financial statements.
<PAGE>24
APAC Minerals Inc.
(in Canadian dollars)
<TABLE>
<S> <C> <C> <C> <C> <C>
Fiscal Period Ended
-------------------------------------------------------------------------------------------
Six Months Six Months September
Ended Ended Year Ended Year Ended 9, 1996 to
August 31 August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
------------ ------------- -------------- ------------- ----------------
Summary of Operations:
Revenue
Share of income (loss) of
affiliated company net of
withholding taxes Nil Nil Nil Nil Nil
Interest and miscellaneous
income $ 11,499 $ 5,258 $ 7,474 $ 4,207 Nil
------------ ------------- -------------- -------------
$ 11,499 $ 5,258 $ 7,474 $ 4,207 Nil
Expenses
General and administrative $ 214,859 $ 30,920 $ 76,529 $ 43,770 $ 23,387
----------- ------------ ------------- ------------ --------------
Operating Income (loss) $ (203,360) $ (25,662) $ (69,055) $ (39,563) $ (23,387)
Write off of mineral interests - - $ (302,757) - -
------------ ------------- -------------- ------------- -------------
Net Income (loss) for year $ (203,369) $ (25,662) $ (371,812) $ (39,563) $ (23,387)
------------ ------------- -------------- ------------- --------------
Income (loss) per share $ (0.027) $ (0.01) $ (0.09) $ (0.02) $ (0.01)
============ ============== =============== ============== ==============
Balance Sheet Data:
Total assets $ 1,713,026 $ 630,288 $ 942,013 $ 719,668 $ 301,387
Cash and term deposits $ 46,959 $ 223,545 $ 61,244 $ 399,159 $ 162,758
Note payable - - $ 150,000 - -
Shareholders' equity $ 1,681,322 $ 630,288 $ 784,138 $ 655,950 $ 284,113
</TABLE>
Exchange Rate Information
The following table sets forth information as to the period end, average, high
and low exchange rates for Canadian Dollars and U.S. dollars for the periods
indicated, based on the noon buying rate in New York City for cable transfers in
Canadian Dollars as certified for customs purposes by the Federal Reserve Bank
of New York (Canadian $ = U.S. $1).
<PAGE>25
<TABLE>
<S> <C> <C> <C> <C>
Year Ended: Period
February 28 End Average High Low
- ----------- ------ ------- ----- ------
1997 1.3670 1.3617 1.3310 1.3775
1998 1.4236 1.4032 1.3649 1.4637
1999 1.5090 1.5010 1.4075 1.5770
Period Ended: Period
August 31 End Average High Low
- -------------- ------ ------- ---- ------
1998 1.5745 1.4490 1.3713 1.5770
1999 1.4965 1.5055 1.4512 1.5570
</TABLE>
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discusses the Company's financial condition and results of
operations based upon the Company's consolidated financial statements which have
been prepared in accordance with Canadian generally accepted accounting
principles. Reference is made to Note 10 to the Company's consolidated financial
statements which discusses differences from U.S. generally accepted accounting
principles.
Results of Operations
Six Month Period Ended August 31, 1999, Compared to the Six Month Period Ended
August 31, 1998
Revenues. Interest and service income was $11,499 for the period ended August
31, 1999, compared to $5,258 in interest income for the period ended August 31,
1998.
Expenses. General and administrative expenses for the period ended August 31,
1999, were $214,859, compared to $30,920 for the same period ended August 31,
1998. The increase in expenses during this period is primarily due to the
increased exploration activities of the Company in Argentina, the largest
increase being legal fees and expenses which increased from $6,025 to $92,148,
followed by administration costs which increased from $9,196 to $36,022, and
regulatory filing and due diligence fees which increased from $2,679 to $19,403,
during the period. Travel expenses increased from $7,114 to $17,727 during the
period.
Net Loss. The Company incurred a net loss of $203,360 during the period ended
August 31, 1999, compared to a net loss of $25,662 for the period ended August
31, 1998. The increase in net loss is primarily due to the increase in
exploration activities of the Company during the last 12 months.
Year Ended February 28, 1999, Compared to the Year Ended February 28, 1998
Revenues. Interest income was $4,207 in fiscal 1998, and increased to $7,474 in
fiscal 1999.
<PAGE>26
Expenses. General and administrative expenses for the fiscal year ended February
28, 1999, increased by $32,759 from $43,770 in fiscal 1998 to $76,529 in fiscal
1999. The increase in expenses is primarily due to the increased property
acquisition and exploration activities of the Company in Portugal, the largest
increase being administration costs which increased from $3,000 to $12,000,
followed by regulatory filing and due diligence fees which increased from $9,933
to $13,952, and legal fees and expenses which increased from $17,877 to $19,381,
during the last fiscal year. Travel expenses increased from $4,546 to $10,516
during the last fiscal year.
Net Loss. The Company incurred a loss of $371,812 for the year ended February
28, 1999, compared to a net loss of $39,563 for the year ended February 28,
1998. The increase in net loss was primarily due to the write-off of $302,757 in
acquisition and exploration expenses, incurred by the Company on the Company's
Millennium Property which was located in British Columbia, Canada. The
Millennium Property was written-off due to poor exploration results.
Year Ended February 28, 1998 Compared to the Year Ended February 28, 1997
Revenues. Interest income was $4,207 in fiscal 1998, and Nil in fiscal 1997.
Expenses. General and administrative expenses for the fiscal year ended February
28, 1998, increased by $20,383 from $23,387 in fiscal 1997 to $43,770 in fiscal
1998.
Net Loss. The Company incurred a loss of $39,563 in fiscal 1998, compared to a
net loss of $23,387 in fiscal 1997 (September 9, 1996 to February 28, 1997).
Liquidity and Capital Resources
The Company owns exploration concessions in Portugal and an option to acquire an
equity position in a company which owns exploration concessions in Argentina
(see: "Description of Business" herein). At this time, the Company has no
substantial revenues, and does not anticipate any substantial revenues until the
Company is able to place in to production and operate a mining property. The
Company will need additional funds to develop any potential mine. Historically,
the Company has raised funds through equity financings consisting of the
exercise of outstanding options and the issuance of common shares and warrants
to fund its operations and provide working capital for its subsidiaries. It is
anticipated that the Company will finance its operations and those operations of
its subsidiaries through future equity financings or joint venture participants.
During fiscal year 2000, the Company believes that it will need approximately
$1,500,000 for its operations and exploration activities. The Company intends to
meet this requirement through its existing working capital, equity financing and
funding from joint venture participants. The exploration and development work
will primarily be on the Company's Argentine properties. No assurance can be
given that the Company will be able to raise the necessary capital to complete
its proposed exploration projects. In the event that the Company is unable to
complete the proposed exploration work, this will have an adverse effect on the
Company's business objectives. In the event the Company decides to mine its
properties after establishing economic ore, if any, it may be necessary to raise
additional funds beyond those previously indicated.
<PAGE>27
As of February 28, 1999 and February 28, 1998, the Company's working capital
(deficit) was ($73,655) and $362,903, respectively. The decrease in working
capital during fiscal 1999 being related to the exploration work which was
carried out by the Company during the last fiscal year. As at August 31, 1999
and August 31, 1998, the Company's working capital was $36,707 and $242,319
respectively. The decrease in working capital during this interim period also
being related to the exploration work carried out by the Company.
Cash used for operating activities of the Company totaled $120,202 during the
year ended February 28, 1999, as compared to cash used for operating activities
of $12,255 during the year ended February 28, 1998. Cash provided by financing
activities for the year ended February 28, 1998, was $411,400. During the fiscal
year ended February 28, 1999, the Company received a loan of $150,000, bearing
interest at 12% per annum. Cash used in investing activities for the year ended
February 28, 1999, amounted to $367,712 primarily related to mineral property
acquisitions in Portugal and the exploration of the Company's mineral property
interests, and for the year ended February 28, 1998, cash used in investing
activities amounted to $162,744 primarily related to the exploration of the
Company's mineral property interests.
Cash used for operating activities of the Company totaled $177,426 for the six
months ended August 31, 1999, as compared to $80,537 for the same period in
1998. During the six months ended August 31, 1999, the Company raised
$1,100,544, net of $56,956 of share issuance costs, by issuing 2,450,000 shares.
Part of the proceeds was used to repay the $150,000 loan received during the
year ended February 28, 1999. There was no cash generated from financing
activities for the six months ended August 31, 1998.
During the six months ended August 31, 1999, the Company expended $777,522 in
exploration expenditures ($46,000 on the property in Portugal and $731,522 on
the property in Argentina), as compared to $95,077 expended during the same
period in 1998. As at August 31, 1999, the Company had a working capital balance
of $36,707.
Subsequent to August 31, 1999, the Company raised approximately $800,000
pursuant to a brokered private placement. Since the Company is still in the
exploration/development stage, it has to rely mainly on equity financing to fund
its future operating and exploration activities or third party financing through
joint ventures with other companies.
The Company does not believe that inflation will affect the Company's
operations.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's, or
its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. In the Company's assessment, because the Company and its
subsidiaries are in the mining industry whose operations do not substantially
rely on computers, the Year 2000 Issue will not materially effect the specific
operations of the Company and its subsidiaries.
Impact of Recently Issued Accounting Standards
<PAGE>28
Note 10 to the consolidated financial statements sets out differences between
Canadian GAAP and U.S. GAAP. In addition to the U.S. GAAP issues taken into
account in the preparation of Note 10, the following accounting standards have
been issued by the Financial Accounting Standards Board in the United States and
may impact the Company's reported results, but have not yet been adopted by The
Company because such standards are not effective for the periods presented.
FAS 128, "Earnings per Share," changes the method of computing and presenting
earnings per share. The statement simplifies previous requirements to exclude
the dilutive effect of Common Shares equivalents from the basic earnings per
share calculation and to include them only in the diluted earnings per share
measure. FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997. Upon adoption, all earnings per share data presented
for prior periods is required to be restated.
FAS 129, "Disclosure of Information about Capital Structure," establishes
standards for disclosing information about an entity's capital structure and is
effective for periods ending after December 15, 1997.
Management of the Company does not believe that the adoption of these new
accounting standards will materially affect its historical results of operations
as set out in the consolidated financial statements included elsewhere in this
Registration Statement.
Item 10. Directors and Officers of The Company
<TABLE>
<S> <C> <C> <C>
Name and Position
with Company Principal Occupation Term of Office Office Held Since
- ----------------------- ---------------------------- --------------- -----------------
Tore Birkeland Director of Naneco Minerals Annual 1997
Ltd.; Director of Poplar Shareholders
President and Director Resources Ltd.; Previously, Meeting in 2000
President and a Director of
Zappa Resources Ltd.;
Managing Director of
Prominex S.A., a mineral
exploration company;
Previously a self-employed
Consulting Geologist
<PAGE>29
Name and Position
with Company Principal Occupation Term of Office Office Held Since
- ----------------------- ---------------------------- --------------- -----------------
Don H.C. Ho(1) President and Chief Annual 1996
Executive Officer of CPAC Shareholders
Director (Care) Holdings Ltd.; Meeting in 2000
President of Trans City
Properties Ltd.; Previously
an Associate of Vancity
Estates Ltd., both real estate
related companies.
Previously President and
Director of Transtech
Industries Inc. and Director
of Native Strategic
Investments Ltd.
Joanne Yan(1) Vice-President and Director Annual 1996
of CPAC (Care) Holdings Shareholders
Director, Vice-President and Ltd., a developer and Meeting in 2000
Secretary operator of senior housing;
President and Director of
Joyco Consulting Services
Inc., a corporate finance and
investment consulting firm;
Previously a Director of
Transtech Industries Inc.,
Pacific Star Resources Inc.
and Desert Holdings Inc.
Stephen D. Alfers Attorney-at-Law, Partner Annual 1999
Alfers & Carver, LLC. Shareholders
Director Meeting in 2000
Sven-Erik Setterberg Mining financier; Director of Annual 1999
EuroZinc Mining Corp. from Shareholders
Director 1996 to April, 1999, Meeting in 2000
President, Arminex S.A.
from 1996 to present
=============================================================================================================================
</TABLE>
(1) Member of the Audit Committee.
The last annual meeting of shareholders was held on June 16, 1999, at which time
all directors were re-elected and officers were re-appointed.
<PAGE>30
Item 11. Compensation of Directors and Officers
The following table sets forth particulars concerning the compensation of the
executive officers as defined in Form 41 prescribed by the "Regulations" under
the Securities Act of the Province of British Columbia for the Company's
financial year ended February 28, 1999, and for the interim period ended August
31, 1999.
<PAGE>31
The Company has one executive officer, Tore Birkeland, President of the Company.
Outstanding stock options are held by directors and officers and employees of
the Company, as separate groups:
<TABLE>
<S> <C> <C> <C>
Number of Exercise Price
Common Shares per Common
Group under Option Share Expiry Date
- --------------- --------------- -------------- -----------------
Directors and 220,000 $0.48 October 3, 2002
Officers 80,000 $0.75 March 15, 2004
- --------------- --------------- -------------- -----------------
Employees 120,000 $0.75 March 15, 2001
</TABLE>
The Company has also issued non-transferable share purchase warrants to purchase
up to 3,146,000 common shares pursuant to private placements, exercisable at the
following exercise prices within the following dates:
<TABLE>
<S> <C> <C>
Warrants Exercise Price Expiry Date
- ----------------- ---------------- ---------------
1,210,000 shares $0.55/sh March 29, 2000
$0.75/sh March 29, 2001
- ----------------- ---------------- ---------------
1,340,000 shares $0.55/sh April 12, 2000
$0.75/sh April 12, 2001
- ----------------- ---------------- ---------------
510,000 shares(1) $1.00/sh Sept. 7, 2000
$1.15/sh Sept. 7, 2001
- ----------------- ---------------- ---------------
86,000 shares(2) $1.00/sh Sept. 10, 2000
$1.15/sh Sept. 10, 2001
</TABLE>
(1) Any shares purchased upon exercise of these warrants will be subject to
hold restrictions and may not be sold or otherwise disposed of until after
January 7, 2000.
(2) Any shares purchased upon exercise of these warrants will be subject to
hold restrictions and may not be sold or otherwise disposed of until after
January 10, 2000.
<PAGE>32
Item 13. Interest of Management in Certain Transactions
Pursuant to an Option to Purchase and Shareholders' Agreement dated October 24,
1998, as amended November 27, 1998, February 6, 1999, March 25, 1999, and June
4, 1999 between the Company and Arminex, S.A., Lafayette Limited and Ilmars
Gemuts, more particularly described under the heading "Acquisition of Equity
Interest in Arminex, S.A.", the Company obtained the exclusive options to
purchase up to a 100% equity interest Arminex. Mr. Sven-Erik Setterberg, a
recently appointed director of the Company, is also President of Arminex, S.A.
By a Sub-Lease Agreement dated December 18, 1997, the Company agreed to pay to
CPAC (Care) Holdings Ltd. ("CPAC") $350 per month plus taxes, for rent,
maintenance fees, property taxes, and hydro expenses. CPAC has two directors in
common with the Company, Mr. Don H.C. Ho and Ms. Joanne Yan. Effective March 31,
1999, the sub-lease was terminated by mutual agreement, as the Company
re-located to new office premises.
Item 14. Description of Securities To Be Registered
The Company proposes to register its common shares without par value. Holders of
common shares of the Company are entitled to one vote per share at meetings of
shareholders, to receive such dividends as are declared by the Company, and to
receive the remaining assets of the Company upon its liquidation, dissolution of
winding-up. The common shares rank equally as to dividends, voting rights, and
participation in assets. The common shares are not subject to call or
assessment, nor pre-emptive or conversion rights. There are no provisions
attached to such shares for redemption, purchase for cancellation, surrender or
sinking or purchase funds.
Item 15. Defaults upon Senior Securities
Not applicable.
Item 16. Changes in Securities and Changes in Security of Registered Securities
Not applicable.
Item 17. Financial Statements
<TABLE>
<S> <C>
Auditor's Report................................................................................................F-1
Consolidated Balance Sheets as of August 31, 1999 (unaudited) and
February 28, 1999, 1998 and 1997 (audited)......................................................................F-2
Consolidated Statements of Operations and Deficit
For the Period Ended August 31, 1999 (unaudited) and the Years Ended
February 28, 1999, 1998 and 1997 (audited)......................................................................F-3
Consolidated Statements of Cash Flows
For the Period Ended August 31, 1999 (unaudited) and the Years Ended
February 28, 1999, 1998 and 1997 (audited)......................................................................F-4
Notes to Consolidated Financial Statements......................................................................F-5
</TABLE>
<PAGE>33
Item 18. Financial Statements
Not applicable.
Item 19. Financial Statements and Exhibits
(a) Financial Statements: See Item 17
(b) Exhibits:
3.1 Memorandum of the Company
3.2 Articles of the Company
10.1 Letter of Intent dated April 15, 1998 between the Company and
EXMINCO Exploration and Mining Investment Company
Establishment ("EXMINCO")
10.2 Option to Purchase and Shareholders' Agreement dated October
24, 1998, as amended November 27, 1998, February 6, 1999,
March 25, 1999, and June 4, 1999, between the Company and
Arminex S.A., Lafayette Limited and Ilmars Gemuts
<PAGE>34
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Company certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: November ____, 1999 APAC MINERALS INC.
By: /s/ TORE BIRKELAND
----------------------------------------
Tore Birkeland, Chief Executive Officer
<PAGE>i
APAC MINERALS INC.
Financial Statements
(in Canadian Dollars)
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998
Index
- -----------------------------------
Auditors' Report
Balance Sheet
Statement of Operations and Deficit
Statement of Cash Flows
Notes to Financial Statements
<PAGE>F-1
ELLIS FOSTER
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
E-Mail: [email protected]
- --------------------------------------------------------------------------------
AUDITORS' REPORT
To the Shareholders of
APAC MINERALS INC.
We have audited the balance sheets of APAC Minerals Inc. as at February 28,
1999, 1998 and 1997 and the statements of operations and deficit and cash flows
for the years then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at February 28, 1999, 1998
and 1997 and the results of its operations and cash flows for the years then
ended in accordance with generally accepted accounting principles. As required
by the Company Act of British Columbia, we report that, in our opinion, these
principles have been applied on a basis consistent with that of the preceding
year.
Vancouver, Canada "ELLIS FOSTER"
March 18, 1999, except as to Chartered
Accountants
Note 8 which is as of April 14, 1999
COMMENTS BY AUDITS FOR U.S. READERS ON CANADA-U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
These financial statements are prepared in accordance with generally accepted
accounting principles ("GAAP") in Canada, which conforms with the GAAP in United
States in most respects. The additional disclosures and reconciliation of
financial statement items to conform with U.S. GAAP are summarized in Note 10 of
the financial statements.
Vancouver, Canada "ELLIS FOSTER"
March 18, 1999 Chartered Accountants
<PAGE>F-2
APAC MINERALS INC.
Balance Sheet
(In Canadian Dollars)
<TABLE>
<S> <C> <C> <C> <C> <C>
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
-------------- ------------- ------------- ------------ ------------
(unaudited - (unaudited -
prepared by prepared by
management) management)
ASSETS
Current
Cash and cash equivalents $ 46,959 $ 223,545 $ 61,244 $ 399,159 $ 162,758
Accounts receivable 14,945 15,538 17,976 23,558 8,142
Prepaid expenses 6,507 3,236 5,000 3,904 -
-------------- ------------- ------------- ------------ ------------
68,411 242,319 84,220 426,621 170,900
Capital assets 10,135 888 835 1,044 -
Mineral interests (Note 3) 1,634,480 387,081 856,958 292,003 130,487
-------------- ------------- ------------- ------------ ------------
$ 1,713,026 $ 630,288 $ 942,013 $ 719,668 $ 301,387
============== ============= ============= ============= ============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 31,704 $ - $ 7,875 $ 63,718 $ 17,274
Notes payable, due March 31, 1999,
interest at 12% per annum - - 150,000 - -
-------------- ------------- ------------- ------------ ------------
31,704 - 157,875 63,718 17,274
-------------- ------------- ------------- ------------ ------------
SHAREHOLDERS' EQUITY
Share capital (Note 4) 2,319,444 718,900 1,218,900 718,900 307,500
Deficit (638,122) (88,612) (434,762) (62,950) (23,387)
-------------- ------------- ------------- ------------ ------------
1,681,322 630,288 784,138 655,950 284,113
-------------- ------------- ------------- ------------ ------------
Subsequent event (Note 8) $ 1,713,026 $ 630,288 $ 942,013 $ 719,668 $ 301,387
============== ============== ============= ============ ============
Approved by the Directors: "Joanne Yan" "Tore Birkeland"
----------- ---------------
Joanne Yan Tore Birkeland
</TABLE>
<PAGE>F-3
APAC MINERALS INC.
Statement of Operations and Deficit
(In Canadian Dollars)
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Six Months Year Year September 9,
Ended Ended Ended Ended 1996 to
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
------------- ------------- ------------ ------------ ----------
(Unaudited - (Unaudited -
prepared by prepared by
management) management)
Revenue
Service income $ 4,000 $ - $ - $ - $ -
Interest income 7,499 5,258 7,474 4,207 -
------------- ------------- ------------ ------------ -----------
11,499 5,258 7,474 4,207 -
------------- ------------- ------------ ------------ -----------
Expenses
Accounting and audit 11,198 580 6,900 5,390 1,500
Administration 36,022 9,196 12,000 3,000 -
Amortization 581 156 209 184 -
Consulting fees - - - - 4,673
Filing and due diligence 19,403 2,670 13,952 9,933 7,102
Legal 92,148 6,025 19,381 17,877 9,576
Office and miscellaneous 17,351 3,079 9,371 2,140 536
Rent 9,773 2,100 4,200 700 -
Salaries and benefits 10,656 - - - -
Travel and entertainment 17,727 7,114 10,516 4,546 -
------------- ------------- ------------ ------------ -----------
214,859 30,920 76,529 43,770 23,387
------------- ------------- ------------ ------------ -----------
Operating loss (203,360) (25,662) (69,055) (39,563) (23,387)
Write off of mineral
interests (Note 3a) - - (302,757) - -
------------- ------------- ------------ ------------ -----------
Loss for the period (203,360) (25,662) (371,812) (39,563) (23,387)
Deficit, beginning of period (434,762) (62,950) (62,950) (23,387) -
------------- ------------- ------------ ------------ -----------
Deficit, end of period $ (638,122) $ (88,612) $ (434,762) $ (62,950) $ (23,387)
============= ============= ============ ============ ===========
Loss per share $ (0.03) $ (0.01) $ (0.09) $ (0.02) $ (0.01)
============= ============= ============ ============ ==========
Weighted average number
of common shares outstanding 6,010,761 2,950,000 4,254,110 2,204,795 1,900,307
============= ============= ============ ============ ==========
</TABLE>
<PAGE>F-4
APAC MINERALS INC.
Statement of Cash Flows
(In Canadian Dollars)
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Six Months Year Year September 9,
Ended Ended Ended Ended 1996 to
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
-------------- ------------ ------------ ------------ -------------
(Unaudited - (Unaudited -
prepared by prepared by
management) management)
Cash flows from (used in)
operating activities
Net loss for the year $ (203,360) $ (25,662) $ (371,812) $ (39,563) $ (23,387)
Adjustments for items not
involving cash:
- amortization 581 156 209 184 -
- write-off of mineral interest - - 302,757 - -
-------------- ------------ ------------ ------------ -------------
(202,779) (25,506) (68,846) (39,379) (23,387)
Change in non-cash working capital
Accounts receivable 3,031 8,020 5,582 (15,416) (8,142)
Prepaid expenses (1,507) 667 (1,095) (3,904) -
Accounts payable and accrued liabilities 23,829 (63,718) (55,843) 46,444 17,274
-------------- ------------ ------------ ------------ -------------
(177,426) (80,537) (120,202) (12,255) (14,255)
-------------- ------------ ------------ ------------ -------------
Cash flows from (used in)
financing activities
Loan proceeds (repayment) (150,000) - 150,000 - -
Shares issued for cash, net of
share issuance costs 1,100,544 - - 411,400 295,000
-------------- ------------ ------------ ------------ -------------
950,544 - 150,000 411,400 295,000
-------------- ------------ ------------ ------------ -------------
Cash used for investing activities
Acquisition of mineral interests - - (10,000) - (15,000)
Deferred exploration costs (777,522) (95,077) (357,712) (161,516) (102,987)
Purchase of capital assets (9,881) - - (1,228) -
-------------- ------------ ------------ ------------ -------------
(787,403) (95,077) (367,712) (162,744) (117,987)
-------------- ------------ ------------ ------------ -------------
Increase (decrease) in cash and
cash equivalents (14,285) (175,614) (337,914) 236,401 162,758
Cash and cash equivalents,
beginning of period 61,244 399,159 399,158 162,758 -
-------------- ------------ ------------ ------------ -------------
Cash and cash equivalents,
end of period $ 46,959 $ 223,545 $ 61,244 $ 399,159 162,758
============== ============ ============ ============ =============
</TABLE>
<PAGE>F-5
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
Nature of Operations
The Company was incorporated under the laws of British Columbia, Canada
on September 9, 1996. The Company is in the business of mining
exploration.
These financial statements have been prepared on a going-concern basis
which assumes that the Company will be able to realize assets and
discharge liabilities in the normal course of business for the
foreseeable future. The continued operations of the Company and the
recoverability of amounts shown for mineral interests is dependent upon
the discovery of economically recoverable reserves, confirmation of the
Company's interest in the underlying mineral claims, the ability of the
Company to obtain financing to complete development of the projects, and
on future profitable production or proceeds from the disposition thereof.
Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the period. Actual
results may differ from those estimates.
Mineral Interests
(b) The Company follows the method of accounting for its mineral
interests whereby all costs related to acquisition, exploration
and development are capitalized by project. These costs will be
amortized against revenue from future production or written off if
the interest is abandoned or sold.
On the commencement of commercial production, net costs will be
charged to operations on the unit-of-production method by project
based upon estimated recoverable reserves.
The amounts shown for mineral interests represent costs incurred
to date, less recoveries, and do not necessarily reflect present
or future values.
<PAGE>F-6
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(b) Mineral Interests (continued)
Ownership in mineral interests involves certain inherent risks due
to the difficulties of determining the validity of certain claims
as well as the potential for problems arising from the frequently
ambiguous conveyancing history characteristic of many mineral
interests. The Company has investigated ownership of its mineral
interests and, to the best of its knowledge, ownership of its
interests are in good standing.
The Company does not accrue the estimated costs of maintaining its
mineral interests in good standing.
(c) Property Option Agreements
From time to time, the Company may acquire or dispose of
properties pursuant to the terms of option agreements. Due to the
fact that options are exercisable entirely at the discretion of
the optionee, the amounts payable or receivable are not recorded.
Option payments are recorded as resource property costs or
recoveries when the payments are made or received.
(d) Cash Equivalents
Cash equivalents usually consists of highly liquid investments
which are readily convertible into cash with maturities of three
months or less when purchased. The Company has no cash equivalents
as at August 31, 1999.
(e) Earnings (loss) per Share
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the period.
Fully-diluted earnings (loss) per share has not been disclosed as
the effect of common shares issuable upon the exercise of warrants
and options would be anti-dilutive.
<PAGE>F-7
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
Mineral Interests
<TABLE>
<S> <C> <C> <C> <C>
Canada Portugal Argentina Total
------------- ------------- ------------- --------------
Acquisition costs $ 27,500 $ - $ - $ 27,500
Exploration costs 102,987 - - 102,987
------------- ------------- ------------- --------------
Balance, February 28, 1997 130,487 - - 130,487
Exploration costs 161,516 - - 161,516
------------- ------------- ------------- --------------
Balance, February 28, 1998 292,003 - - 292,003
Exploration costs 10,754 84,324 - 95,078
------------- ------------- ------------- --------------
Balance, August 31, 1998 302,757 84,324 - 387,081
Acquisition costs - 510,000 - 510,000
Exploration costs - 113,549 149,085 262,634
Amounts written-off (302,757) - - (302,757)
------------- ------------- ------------- --------------
Balance February 28, 1999 - 707,873 149,085 856,958
Exploration costs - 46,000 731,522 777,522
------------- ------------- ------------- --------------
Balance, August 31, 1999 $ - $ 753,873 $ 880,607 $ 1,634,480
------------- ------------- ------------- --------------
</TABLE>
(a) Mineral Interests in Canada
Pursuant to an agreement dated October 7, 1996, the Company was
granted an option to acquire a 100% interest in eight (8) units of
mineral claims located in the Kamloops Mining Division, British
Columbia, Canada.
In consideration, the Company must issue 200,000 shares of which
50,000 shares have been issued and the balance in three equal
yearly instalments, pay $115,000 of which $15,000 have been paid
with an additional of $100,000 to be paid on or before October 7,
2000 to the optionor and spend an aggregate of $2,000,000 on
exploration and development on the property over three years.
On commencement of commercial production, the property will be
subject to a 1.75% net smelter returns royalty payable to the
optionor.
These mineral interests were abandoned during the 1999 fiscal year
due to unfavourable exploration results.
(b) Mineral Interests in Portugal
Pursuant to a letter agreement dated April 15, 1998, the Company
agreed to acquire a 100% undivided interest in an exploration
concession ("the concession") located in Alentejo, Portugal.
<PAGE>F-8
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
3. Mineral Interests (continued)
In consideration, the Company agreed to pay to the Vendor, and to issue and
deliver to the Vendor, the following:
(i) the sum of $10,000 in Canadian dollars as a non-refundable deposit
upon the completion of a due diligence review of the concession
(paid);
(ii) a total of 2,000,000 common shares of the Company (issued and
delivered); and
(iii)the assumption of responsibility for the payment of all required
annual exploration work under the terms and conditions of the
exploration concession, which for greater certainty are estimated to
be US$550,000 over the next two years in order to maintain the
concession.
(c) Mineral Interests in Argentina
Pursuant to an agreement dated October 24, 1998, as amended on
November 27, 1998, February 6, 1999, March 25, 1999 and June 4,
1999, the Company agreed to acquire an aggregated of 100% interest
in a portfolio of more than twenty (20) exploration concessions
("the concessions") in the provinces of Caramarca, La Pampa,
Mendoza, Rio Negro, and San Juan, Argentina.
To earn an initial 40% interest in the concessions, the Company
has to expend $700,000 on exploration work of the concessions
within one year and the issuance of 800,000 shares of the Company
after a report detailing the exploration work is accepted by the
Vancouver Stock Exchange. To earn an additional 11%, for a total
of 51%, interest in the concessions, the Company has to fund
further exploration expenditures of $750,000 in each of the second
and third years of the agreement. A performance bonus of US$5.00
per ounce of gold or gold equivalent is payable on the pro-rata
basis based on the then optionor's interest in the concessions, in
either cash or shares of the Company, if a proven and probable
reserve of 1,000,000 or more ounces of gold is determined within
five (5) years of the date of acceptance of the agreement by the
Vancouver Stock Exchange. To earn the remaining 49% for a total of
100% interest in the concessions, the Company has to pay $500,000
and the issuance of 5,000,000 shares of the Company to the
optionors within six (6) months after the Company earned the 51%
interest in the concessions and provided that the average closing
price of the Company's share is at least $1.00 for twenty (20)
trading days preceding the date of exercise and the Company has
filed a current Annual Information Form with the British Columbia
Securities Commission.
These mineral concessions are held in an Argentine company. The
Company's exploration expenditures are funded through that
company.
<PAGE>F-9
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
4. Share Capital
(a) Authorized: 25,000,000 common shares without par value.
(b) Issued:
<TABLE>
<S> <C> <C>
Shares Amount
---------------- ------------------
For cash at $0.01 per share 750,000 $ 7,500
For cash at $0.25 per share 1,150,000 287,500
For mineral interest at $0.25 per share 50,000 12,500
---------------- ------------------
Balance, February 28, 1997 307,500
For cash at $0.48 per share, net of share issuance
cost of $68,600 1,000,000 411,400
---------------- ------------------
Balance, February 28, 1998 and August 31, 1998 2,950,000 718,900
For mineral interests in Portugal at $0.25 per share 2,000,000 500,000
---------------- ------------------
Balance, February 28, 1999 4,950,000 1,218,900
For cash at $0.48 per share, plus 40,000 shares for
corporate finance fee, less $56,956 share issuance costs 2,440,000 1,095,044
For exercise of warrants at $0.55 per share 10,000 5,500
---------------- ------------------
Balance, August 31, 1999 7,400,000 $ 2,319,444
================ =================
</TABLE>
(c) As at August 31, 1999, 750,000 shares issued are held in escrow,
the release of which is subject to the direction of the
regulatory authorities having jurisdiction.
(d) Stock options outstanding as at August 31, 1999:
<TABLE>
<S> <C> <C> <C>
Number of Shares Exercise Price Expiry Date
----------------- ---------------- ----------------
220,000 $0.48 October 3, 2002
120,000 $0.75 March 15, 2001
80,000 $0.75 March 15, 2004
(e) Share purchase warrants as at August 31, 1999:
Number of Shares Exercise Price Expiry Date
----------------- ---------------- ----------------
1,340,000 $0.55 (1st year) April 12, 2000
$0.75 (2nd year) April 12, 2001
1,210,000 $0.55 (1st year) March 29, 2000
$0.75 (2nd year) March 29, 2001
</TABLE>
<PAGE>10
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
5. Non-Cash Financing and Investing Activities
(a) In 1997 fiscal period, the Company issued 50,000 shares to acquire a
100% interest in eight (8) units of mineral claims in Canada.
(b) In 1999 fiscal year, the Company issued 2,000,000 shares to acquire a
100% undivided interest in an exploration concession located in
Alantejo, Portugal.
(c) During the six months ended August 31, 1999, the Company issued 40,000
shares as corporate financing fees pursuant to the terms of a private
placement.
6. Related Party Transactions
The Company paid the following administration fee and rent to a company
with common directors:
<TABLE>
<S> <C> <C> <C> <C>
Six Months Six Months September 9,
Ended Ended Year Ended Year Ended 1996 to
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
------------- ----------- --------------- --------------- ---------------
$ 21,000 $8,100 $ 16,200 $ 3,700 $ -
============= =========== =============== ============== ===============
</TABLE>
7. Financial Instruments
The financial instruments of the Company consist of cash, accounts
receivable, accounts payable and accrued liabilities and notes payable.
The fair value of these financial instruments approximate their carrying
value due to their short-term nature. The Company operates in Portugal
and Argentina, giving rise to significant exposure to market risks from
changes in foreign rates and the degree of volatility of these rates. The
Company is not exposed to significant interest rate and credit risks.
<PAGE>F-11
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
8. Subsequent Event
Subsequent to August 31, 1999, the Company completed a brokered private
placement of 1,000,000 units at a price of $0.85 per unit. Each unit
comprises one common share of the Company and one half of a
non-transferable share purchase warrant. One full warrant will entitle
the holder to acquire one additional common share of the Company. Each
share purchase warrant will be exercisable for a period of two years from
the date of closing with an exercise price of $1 per share in the first
year and $1.15 per share in the second year. The common shares and any
shares issued upon exercise of the warrant will bear a legend and are
subject to hold restrictions until January 2000. The Company paid
commission of $61,200 and issued 25,000 shares as a corporate finance fee
to the agents. The Company also issued 96,000 warrants to the agents.
9. Comparative Figures
Certain comparative figures for prior periods have been reclassified to
conform with the financial statement presentation adopted for 1999.
10. Reconciliation of Canadian and United States Generally Accepted
Accounting Principles
These financial statements are prepared in accordance with Canadian
generally accepted accounting principles ("GAAP") which conforms with the
GAAP in United States in most aspects. The following present additional
disclosures and reconciliation of financial statement items to conform
with U.S. GAAP:
Reconciliation of Balance Sheet Items:
<TABLE>
<S> <C> <C> <C> <C> <C>
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
--------------- -------------- --------------- ----------------- ---------------
Mineral interests
(Canadian GAAP) $ 1,634,480 $ 387,081 $ 856,958 $ 292,003 $ 130,487
Mineral interests
written-off (1,634,480) (387,081) (856,958) (292,003) (130,487)
--------------- -------------- --------------- ----------------- ---------------
Mineral interests
(US GAAP) - - - - -
--------------- -------------- --------------- ----------------- ---------------
</TABLE>
<PAGE>F-11
APAC MINERALS INC.
Notes to Financial Statements
February 28, 1999, 1998 and 1997
August 31, 1999 and 1998 (unaudited - prepared by management)
- -------------------------------------------------------------------------------
10. Reconciliation of Canadian and United States Generally Accepted
Accounting Principles (continued)
Reconciliation of Statement of Operations Items:
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Six Months September 9,
Ended Ended Year Ended Year Ended 1996 to
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
--------------- -------------- ----------------- ----------------- -------------------
Loss for the period
(Canadian GAAP) $ (203,360) $ (25,662) $ (371,812) $ (39,563) $ (23,387)
Mineral interests
written-off (777,522) (95,078) (564,955) (161,516) (130,487)
--------------- -------------- ----------------- ----------------- -------------------
Loss for the period
(US GAAP) (980,882) (120,740) (936,767) (201,079) (153,874)
--------------- -------------- ----------------- ----------------- -------------------
Deficit, beginning
of period
(Canadian GAAP) (434,762) (62,950) (62,950) (23,387) -
Mineral interest
written off (856,958) (292,003) (292,003) (130,487) -
--------------- -------------- ----------------- ----------------- -------------------
Deficit, beginning
of period
(US GAAP) (1,291,720) (354,953) (354,953) (153,874) -
--------------- -------------- ----------------- ----------------- -------------------
Deficit, end of period
(US GAAP)
--------------- -------------- ----------------- ----------------- -------------------
Loss per share
(US GAAP) (0.19) (0.05) (0.27) (0.14) (0.13)
--------------- -------------- ----------------- ----------------- -------------------
Weighted average
number of common
shares outstanding-
basic and diluted
(US GAAP) 5,260,761 2,200,000 3,504,110 1,454,795 1,150,307
--------------- -------------- ----------------- ----------------- -------------------
</TABLE>
(c) Mineral Interests
U.S. GAAP requires that cost of mineral interests not be deferred
and capitalized until there is evidence of economically
recoverable resources. Accordingly, the Company's costs incurred
for mineral interests will not be capitalized for U.S. GAAP
purposes as the Company is at present exploring its properties for
economically recoverable ore reserves. The effect of the write-off
is presented in Notes 10(a) and 10(b).
<PAGE>F-12
10. Reconciliation of Canadian and United States Generally Accepted
Accounting Principles (continued)
(d) Escrow Shares
Escrow shares (see Note 4(c)) may be released, upon application,
on the basis of 15% of the original number of escrow shares for
every $100,000 expended on exploration and development of a
resource property provided that no more than 50% of the original
number of escrow shares may be released in any twelve-month
period. In addition, where administrative expenses exceed 33% of
total expenditures during the period of application, then the
release factor of 15% will be reduced to 7.5% and the percentage
of the original number of escrow shares available for release in
any twelve-month period will be reduced to 25%.
U.S. GAAP requires that the fair value of the shares at the time
they are released from escrow should be recognized as a charge to
income as a compensation expense. There were no shares released
from escrow during the periods as presented.
As escrow shares are contingently cancellable, they are excluded
from the calculation of weighted average number of shares for
purposes of loss per share under U.S. GAAP. Its effect on the
Company's financial statements is presented in Note 10(b).
(e) Stock Options Compensation
The Company adopted a Stock Option Plan ("the Plan") for the grant
of options to directors, officers and employees from 1997 onwards.
Options granted under the Plan will be exercised from the date of
grant for a period from two years to five years. All options
granted vest immediately at the date of grant.
A summary of the activity in the option plan is as follows:
<TABLE>
<S> <C> <C>
Number of Weight Average
Shares Exercise Price
----------- ----------------
Granted 220,000 $ 0.48
----------- ----------------
Balance outstanding and exercisable,
February 28, 1997, 1998 and 1999 220,000 0.48
Granted 200,000 0.75
----------- ----------------
Balance outstanding and exercisable,
August 31, 1999 420,000 $ 0.61
=========== =================
</TABLE>
<PAGE>F-13
10. Reconciliation of Canadian and United States Generally Accepted
Accounting Principles (continued)
(e) Stock Options Compensation (continued)
The Company applies Accounting Principles Board ("APB") No. 25
"Accounting for Stock Issued to Employees" and related
interpretations in accounting for stock options. Under APB25, when
the exercise price of the Company's stock options equals the
market price of the underlying stock on the date of grant, no
compensation expense is recognized. There were no compensation
costs charged to income for the periods as presented.
Pro-forma information regarding Net Loss and Loss per Share is
required under SFAS 123, and has been determined if the Company
has accounted for its stock options under the fair value method of
SFAS 123. If compensation cost for the stock option plan had been
determined based on the fair value at the grant dates for awards
under the plan, consistent with the alternative method set forth
under SFAS 123, the Company's net loss, basic and diluted loss per
share would have been increased on a pro-forma basis as indicated
below:
<TABLE>
<S> <C> <C> <C> <C> <C>
Six Months Six Months September 9,
Ended Ended Year Ended Year Ended 1996 to
August 31, August 31, February 28, February 28, February 28,
1999 1998 1999 1998 1997
--------------- --------------- ---------------- ----------------- -------------------
Net loss
-as reported $ (980,882) $ (120,470) $ (936,767) $ (201,079) $ (153,874)
--------------- --------------- ---------------- ----------------- -------------------
- pro-forma $ (1,140,882) $ (120,470) $ (936,767) $ (348,479) $ (153,874)
--------------- --------------- ---------------- ----------------- -------------------
Basic and diluted loss
per share
- as reported (0.19) (0.05) (0.27) (0.14) (0.13)
--------------- --------------- ---------------- ----------------- -------------------
- pro-forma (0.22) (0.05) (0.27) (0.24) (0.13)
--------------- --------------- ---------------- ----------------- -------------------
</TABLE>
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for the grants
rewarded in 1997 and 1999, respectively:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Expected Fair
Year Number of Dividend Expected Risk Free Lives in Value of
Granted Options Granted Yields Volatility Interest Rate Years Options
------- ---------------- ----------- ----------- ------------- -------- -----------
1997 220,000 0% 15% 5.75% 5 $ 0.67
1999 80,000 0% 51% 5% 2 $ 0.80
1999 120,000 0% 51% 5% 5 $ 0.80
</TABLE>
INCORPORATION NO. 526715
PROVINCE OF BRITISH COLUMBIA
FORM 1 (Section 5)
COMPANY ACT
MEMORANDUM
APAC MINERALS INC.
I wish to be formed into a company with limited liability under the Company Act
in pursuance of this memorandum.
1. The name of the company is APAC MINERALS INC.
2. The authorized capital of the company consists of Twenty-five Million
(25,000,000) Common shares without par value.
3. I agree to take the number, class and kind of shares in the company set
opposite my name.
- ------------------------------------------------------------------------------
FULL NAME, RESIDENT ADDRESS NUMBER, CLASS AND KIND OF
AND OCCUPATION OF SUBSCRIBER SHARES TAKEN BY SUBSCRIBER
- ------------------------------------------------------------------------------
/s/ LOUIS P. SALLEY One (1) Common share
------------------- without par value
Louis P. Salley
520 Stevens
West Vancouver, BC
V7S 1C9
Solicitor
TOTAL SHARES TAKEN: One (1) Common share
without par value
- ------------------------------------------------------------------------------
DATED this 28th day of August, 1996.
SALLEY BOWES HARWARDT
ARTICLES
OF
APAC MINERALS INC.
TABLE OF CONTENTS
PART 1 INTERPRETATION
1.1 Definitions, Construction of Words
1.2 Definitions Same as Company Act
1.3 Interpretation Act Rules of Construction
Apply
PART 2 SHARES AND SHARE CERTIFICATES
2.1 Member Entitled to Certificate
2.2 Replacement of Lost or Defaced Certificate
2.3 Execution of Certificates
2.4 Recognition of Trusts
PART 3 ISSUE OF SHARES
3.1 Directors Authorized
3.2 Conditions of Allotment
3.3 Commissions and Brokerage
3.4 Conditions of Issue
PART 4 SHARE REGISTERS
4.1 Register of Members, Transfers and
Allotments
4.2 Branch Registers of Members
PART 5 TRANSFER AND TRANSMISSION OF SHARES
5.1 Transfer of Shares
5.2 Execution of Instrument of Transfer
5.3 Enquiry as to Title not Required
5.4 Submission of Instruments of Transfer
<PAGE>
5.5 Transfer Fee
5.6 Personal Representative Recognized on Death
5.7 Death or Bankruptcy
5.8 Persons in Representative Capacity
PART 6 ALTERATION OF CAPITAL
6.1 Increase of Authorized Capital
6.2 Other Capital Alterations
6.3 Creation, Variation and Abrogation of
Special Rights and Restrictions
6.4 Consent of Class Required
6.5 Special Rights of Conversion
6.6 Class Meetings of Members
PART 7 PURCHASE AND REDEMPTION OF SHARES
7.1 Company Authorized to Purchase or Redeem its
Shares
7.2 Selection of Shares to be Redeemed
7.3 Purchased or Redeemed Shares Not Voted
PART 8 BORROWING POWERS
8.1 Powers of Directors
8.2 Special Rights Attached to and Negotiability
of Debt Obligations
8.3 Register of Debentureholders
8.4 Execution of Debt Obligations
8.5 Register of Indebtedness
PART 9 GENERAL MEETINGS
9.1 Annual General Meetings
9.2 Waiver of Annual General Meeting
9.3 Classification of General Meetings
9.4 Calling of Meetings
9.5 Advance Notice for Election of Directors
9.6 Notice of General Meeting
9.7 Waiver or Reduction of Notice
9.8 Notice of Special Business at General
Meeting
<PAGE>
PART 10 PROCEEDINGS AT GENERAL MEETINGS
10.1 Special Business
10.2 Requirement of Quorum
10.3 Quorum
10.4 Lack of Quorum
10.5 Chairman
10.6 Alternate Chairman
10.7 Adjournments
10.8 Resolutions Need Not be Seconded
10.9 Decisions by Show of Hands or Poll
10.10 Casting Vote
10.11 Manner of Taking Poll
10.12 Retention of Ballots Cast on a Poll
10.13 Casting of Votes
10.14 Ordinary Resolution Sufficient
PART 11 VOTES OF MEMBERS
11.1 Number of Votes per Share or Member
11.2 Votes of Persons in Representative Capacity
11.3 Representative of a Corporate Member
11.4 Votes by Joint Holders
11.5 Votes by Committee for a Member
11.6 Appointment of Proxyholders
11.7 Execution of Form of Proxy
11.8 Deposit of Proxy
11.9 Validity of Proxy Note
11.10 Acceptance of Proxy in Substituted Form
11.11 Directors May Make Regulations for Deposit
of Proxy
11.12 Death or Incapacity of Member Giving Proxy
11.13 Revocation of Proxy
PART 12 DIRECTORS
12.1 Number of Directors
12.2 Remuneration and Expenses of Directors
12.3 Qualification of Directors
<PAGE>
PART 13 ELECTION AND REMOVAL OF DIRECTORS
13.1 Election at Annual General Meetings
13.2 Eligibility of Retiring Director
13.3 Continuance of Directors
13.4 Election of Less Than Required Number of
Directors
13.5 Filling a Casual Vacancy
13.6 Additional Directors
13.7 Alternate Directors
13.8 Termination of Directorship
13.9 Removal of Directors
PART 14 POWERS AND DUTIES OF DIRECTORS
14.1 Management of Affairs and Business
14.2 Appointment of Attorney
PART 15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1 Disclosure of Conflicting Interest
15.2 Voting and Quorum re Proposed Contract
15.3 Alternate Director Conflict
15.4 Director May Hold Office or Place of Profit
with Company
15.5 Director Acting in Professional Capacity
15.6 Director Receiving Remuneration from Other
Interests
PART 16 PROCEEDINGS OF DIRECTORS
16.1 Chairman and Alternate
16.2 Meetings - Procedure
16.3 Meetings by Conference Telephone
16.4 Notice of Meeting
16.5 Waiver of Notice of Meetings
16.6 Quorum
16.7 Continuing Directors May Act During Vacancy
16.8 Validity of Acts of Directors
16.9 Resolution in Writing Effective
<PAGE>
PART 17 EXECUTIVE AND OTHER COMMITTEES
17.1 Appointment of Executive Committee
17.2 Appointment of Committees
17.3 Procedure at Meetings
PART 18 OFFICERS
18.1 President and Secretary Required
18.2 Persons Holding More Than One Office and
Remuneration
18.3 Disclosure of Conflicting Interest
PART 19 INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Indemnification of Directors
19.2 Indemnification of Officers, Employees,
Agents
19.3 Indemnification Not Invalidated by
Non-compliance
19.4 Company May Purchase Insurance
PART 20 DIVIDENDS AND RESERVES
20.1 Declaration of Dividends
20.2 Declaration of Dividend Rate
20.3 Proportionate to Number of Shares Held
20.4 Reserves
20.5 Receipts from Joint Holders
20.6 No Interest on Dividends
20.7 Payment of Dividends
20.8 Capitalization of Undistributed Surplus
PART 21 DOCUMENTS, RECORDS AND REPORTS
21.1 Documents to be Kept
21.2 Accounts to be Kept
21.3 Inspection of Accounts
21.4 Financial Statements and Reports for General
Meeting
21.5 Financial Statements and Reports for Members
<PAGE>
PART 22 NOTICES
22.1 Method of Giving Notice
22.2 Notice to Joint Holder
22.3 Notice to Personal Representative
22.4 Persons to Receive Notice
PART 23 RECORD DATES
23.1 Record Date
23.2 No Closure of Register of Members
PART 24 SEAL
24.1 Affixation of Seal to Documents
24.2 Reproduction of Seal
24.3 Official Seal for Other Jurisdictions
PART 25 MECHANICAL REPRODUCTION OF SIGNATURES
25.1 Instruments may be Mechanically Signed
25.2 Definition of Instruments
PART 26 PROHIBITIONS
26.1 Number of Members and No Securities to be
Offered to the Public
26.2 Restriction on Transfer of Shares
<PAGE>
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
OF
APAC MINERALS INC.
PART 1
INTERPRETATION
1.1 In these Articles, unless there is something in the subject or
context inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the directors or
sole director and includes alternate directors, if any, of the Company
for the time being.
"Company Act" means the Company Act of the Province of British Columbia
as from time to time enacted and all amendments thereto and statutory
modifications thereof and includes the regulations made pursuant
thereto.
"Seal" means the common seal of the Company.
"Month" means a calendar month.
"Registered owner" or registered holder", when used with respect to a
share in the authorized capital of the Company means the person
registered in the register of members in respect of such share.
"Personal representative" shall include executors, administrators,
trustees-in-bankruptcy and duly constituted representatives in lunacy.
Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography,
photocopy, telecopying, telexing, telegraphing and other modes of
representing, reproducing or transmitting words in a visible form.
<PAGE>
Words importing the singular include the plural and vice versa; and
words importing male persons include female persons and words importing
persons shall include corporations.
1.2 The meaning of any words or phrases defined in the Company Act shall,
if not inconsistent with the subject or context, bear the same meaning
in these Articles.
1.3 The Rules of Construction contained in the Interpretation Act shall
apply, mutatis mutandis, to the interpretation of these Articles.
PART 2
SHARES AND SHARE CERTIFICATES
2.1 Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him; provided
that, in respect of a share or shares held jointly by several persons,
the Company shall not be bound to issue more than one certificate, and
delivery of a certificate for a share to the first named of several
joint registered holders or to his duly authorized agent shall be
sufficient delivery to all; and provided further that the Company shall
not be bound to issue certificates representing redeemable shares, if
such shares are to be redeemed within one month of the date on which
they were allotted. Any share certificate may be sent through the mail
by registered prepaid mail to the member entitled thereto, and neither
the Company nor any transfer agent shall be liable for any loss
occasioned to the member owing to any such share certificate so sent
being lost in the mail or stolen.
2.2 If a share certificate
(a) is worn out or defaced, the directors shall, upon production
to them of the said certificate and upon such other terms, if
any, as they may think fit, order the said certificate to be
cancelled and shall issue a new certificate in lieu thereof;
(b) is lost, stolen or destroyed, then upon proof thereof to the
satisfaction of the directors and upon such indemnity, if any,
as the directors deem adequate being given, a new share
certificate in lieu thereof shall be issued to the person
entitled to such lost, stolen or destroyed certificate; or
(c) represents more than one share and the registered owner
thereof surrenders it to the Company with a written request
that the Company issue in his name two or more certificates,
each representing a specified number of shares and, in the
aggregate, representing the same number of shares as the
certificate so surrendered and, upon payment of an amount
determined from time to time by the directors, the Company
shall cancel the certificate so surrendered and issue in lieu
<PAGE>
thereof certificates in accordance with such request.
2.3 Every share certificate shall be signed manually by at least one
officer or director of the Company, or by or on behalf of a registrar,
branch registrar, transfer agent or branch transfer agent of the
Company and any additional signatures may be printed, lithographed,
engraved or otherwise mechanically reproduced in accordance with these
Articles.
2.4 Except as required by law, statute or these Articles, no person shall
be recognized by the Company as holding any share upon any trust, and
the Company shall not be bound by or compelled in any way to recognize
(even when having notice thereof) any equitable, contingent, future or
partial interest in any share or in any fractional part of a share or
(except only as by law, statute or these Articles provided or as
ordered by a court of competent jurisdiction) any other rights in
respect of any share except an absolute right to the entirety thereof
in its registered holder.
PART 3
ISSUE OF SHARES
3.1 Subject to Article 3.2 and to any direction to the contrary contained
in a resolution passed at a general meeting authorizing any increase or
alteration of capital, the shares shall be under the control of the
directors who may, subject to the rights of the registered holders of
the shares of the Company for the time being issued, issue, allot, sell
or otherwise dispose of, and/or grant options on or otherwise deal in,
shares authorized but not outstanding at such times, to such persons
(including directors), in such manner, upon such terms and conditions,
and at such price or for such consideration, as they, in their absolute
discretion, may determine.
3.2 If the Company is, or becomes, a company which is not a reporting
company and the directors are required by the Company Act before
allotting any shares to offer them pro rata to the members, the
directors shall, before allotting any shares, comply with the
applicable provisions of the Company Act.
3.3 Subject to the provisions of the Company Act, the Company or the
directors on behalf of the Company, may pay a commission or allow a
discount to any person in consideration of his subscribing or agreeing
to subscribe, whether absolutely or conditionally, for any shares,
debentures, share rights, warrants or debenture stock in the Company,
or procuring or agreeing to procure subscriptions, whether absolutely
or conditionally, for any such shares, debentures, share rights,
warrants or debenture stock, provided that, if the Company is not a
specially limited company, the rate of the commission and discount
shall not in the aggregate exceed 25 percent of the amount of the
subscription price of such shares, and if the Company is a specially
limited company, the rate of the commission and discount shall not in
<PAGE>
the aggregate exceed 98 percent of the amount of the subscription price
of such shares, debentures, share rights, warrants or debenture stock.
The Company may also pay such brokerage as may be lawful.
3.4 No share may be issued until it is fully paid and the Company shall
have received the full consideration therefor in cash, property or past
services actually performed for the Company. The value of the property
or services for the purposes of this Article shall be the value
determined by the directors by resolution to be, in all circumstances
of the transaction, the fair market value thereof.
PART 4
SHARE REGISTERS
4.1 The Company shall keep or cause to be kept a register of members, a
register of transfers and a register of allotments within British
Columbia, all as required by the Company Act, and may combine one or
more of such registers. If the Company's capital shall consist of more
than one class of shares, a separate register of members, register of
transfers and register of allotments may be kept in respect of each
class of shares. The directors, on behalf of the Company, may appoint a
trust company to keep the register of members, register of transfers
and register of allotments or, if there is more than one class of
shares, the directors may appoint a trust company, which need not be
the same trust company, to keep the register of members, the register
of transfers and the register of allotments for each class of shares.
The directors, on behalf of the Company, may also appoint one or more
trust companies, including the trust company which keeps the said
registers of its shares or of a class thereof, as transfer agent for
its shares or such class thereof, as the case may be, and the same or
another trust company or companies as registrar for its shares or such
class thereof, as the case may be. The directors may terminate the
appointment of any such trust company at any time and may appoint
another trust company in its place.
4.2 Unless prohibited by the Company Act, the Company may keep or cause to
be kept one or more branch registers of members at such place or places
as the directors may from time to time determine.
<PAGE>
PART 5
TRANSFER AND TRANSMISSION OF SHARES
5.1 Subject to the provisions of the Memorandum and of these Articles that
may be applicable, any member may transfer any of his shares by
instrument in writing executed by or on behalf of such member and
delivered to the Company or its transfer agent, the instrument of
transfer of any share of the Company shall be in the form, if any, on
the back of the Company's share certificates or in such other form as
the directors may from time to time approve. Except to the extent that
the Company Act may otherwise provide, the transferor shall be deemed
to remain the holder of the shares until the name of the transferee is
entered in the register of members or a branch register of members
thereof.
5.2 The signature of the registered holder of any shares, or of his duly
authorized attorney, upon an authorized instrument of transfer shall
constitute a complete and sufficient authority to the Company, its
directors, officers and agents to register, in the name of the
transferee as named in the instrument of transfer, the number of shares
specified therein or, if no number is specified. all the shares of the
registered holder represented by share certificates deposited with the
instrument of transfer. If no transferee is named in the instrument of
transfer, the instrument of transfer shall constitute a complete and
sufficient authority to the Company, its directors, officers and agents
to register, in the name of the person in whose behalf any certificate
for the shares to be transferred is deposited with the Company for the
purpose of having the transfer registered, the number of shares
specified in the instrument of transfer, or if no number is specified,
all the shares represented by all share certificates deposited with the
instrument of transfer.
5.3 Neither the Company nor any director, officer or agent thereof shall be
bound to inquire into the title of the person named in the form of
transfer as transferee, or if no person is named therein as transferee,
of the person on whose behalf the certificate is deposited with the
Company for the purpose of having the transfer registered or be liable
to any claim by such registered holder or by any intermediate holder of
the certificate or of any of the shares represented thereby or any
interest therein for registering the transfer, and the transfer, when
registered, shall confer upon the person in whose name the shares have
been registered, a valid title to such shares.
5.4 Every instrument of transfer shall be executed by the transferor and
left at the registered office of the Company or at the office of its
transfer agent or registrar for registration together with the share
certificate for the shares to be transferred and such other evidence,
if any, as the directors or the transfer agent or registrar may require
to prove the title of the transferor or his right to transfer the
shares and the right of the transferee to have the transfer registered.
All instruments of transfer where the transfer is registered shall be
retained by the Company or its transfer agent or registrar and any
instrument of transfer where the transfer is not registered, shall be
returned to the person depositing the same together with the share
certificate which accompanied the same when tendered for registration.
<PAGE>
5.5 There shall be paid to the Company in respect of the registration of
any transfer, such sum, if any, as the directors may from time to time
determine.
5.6 In the case of the death of a member, the survivor, or survivors where
the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be
the only persons recognized by the Company as having any title to his
interest in the shares. Before recognizing any legal personal
representative, the directors may require him to obtain a grant of
probate or letters of administration in British Columbia.
5.7 Upon the death or bankruptcy of a member, his personal representative
or trustee in bankruptcy, although not a member, shall have the same
rights, privileges and obligations that attach to the shares formerly
held by the deceased or bankrupt member if the documents required by
the Company Act shall have been deposited at the Company's registered
office.
5.8 Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon such documents and evidence being
produced to the Company as the Company Act requires or who becomes
entitled to a share as a result of an order of a court of competent
jurisdiction or a statute, has the right either to be registered as a
member in his representative capacity in respect of such share or, if
he is a personal representative, instead of being registered himself,
to make such transfer of the share as the deceased or bankrupt person
could have made; but the directors shall, as regards a transfer by a
personal representative or trustee in bankruptcy, have the same right,
if any, to decline or suspend registration of a transferee as they
would have in the case of a transfer of a share by the deceased or
bankrupt person before the death or bankruptcy.
PART 6
ALTERATION OF CAPITAL
6.1 The Company may, by ordinary resolution filed with the Registrar, amend
its Memorandum to increase the authorized capital of the Company by
(a) creating shares with par value or without par value, or both;
(b) increasing the number of shares with par value or shares without
par value, or both; or
(c) increasing the par value of a class of shares with par value,
if no shares of that class are issued.
<PAGE>
All new shares shall be subject to the same provisions with reference
to transfers, transmissions and otherwise as the existing shares of the
Company.
6.2 The Company may, by special resolution, alter its Memorandum to
subdivide, consolidate, change from shares with par value to shares
without par value, or from shares without par value to shares with par
value, or change the designation of all or any of its shares but only
to such extent, in such manner and with such consents of members
holding a class of shares which is the subject of or affected by such
alteration as the Company Act provides.
6.3 The Company may alter its Memorandum or these Articles
(a) by special resolution, to create, define and attach special
rights or restrictions to any shares, and
(b) by special resolution, and by otherwise complying with any
applicable provision of its Memorandum or these Articles, to
vary or abrogate any special rights and restrictions attached
to any shares
and in each case by filing a copy of such resolution with the Registrar
but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of each
class whose right or special right is so prejudiced or interfered with
consent thereto in writing, or unless a resolution consenting thereto
is passed at a separate meeting of the holders of the shares of each
such class by a majority of three-fourths, or such greater majority as
may be specified by the special rights attached to the class of shares,
of the issued shares of such class.
6.4 Notwithstanding such consent in writing or such resolution, no such
alteration shall be valid as to any part of the issued shares of any
class unless the holders of the remainder of the issued shares of such
class, either all consent thereto in writing or consent thereto by a
resolution passed by the votes of members holding three-fourths of the
rest of such remaining shares.
6.5 If the Company is or becomes a reporting company, no resolution to
create, vary or abrogate any special right of conversion attaching to
any class of shares shall be submitted to any meeting of members
unless, if so required by the Company Act, the British Columbia
Securities Commission shall have consented to the resolution.
6.6 Unless these Articles otherwise provide, the provisions of these
Articles relating to general meetings shall apply with the necessary
changes, and so far as they are applicable, to a class meeting of
members holding a particular class of shares but the quorum at a class
meeting shall be one person holding or representing by proxy one-third
of the shares affected.
<PAGE>
PART 7
PURCHASE AND REDEMPTION OF SHARES
7.1 Subject to the special rights and restrictions attached to any class of
shares, the Company may, by a resolution of the directors and in
compliance with the Company Act, purchase any of its shares at the
price and upon the terms specified in such resolution or redeem any
class of its shares in accordance with the special rights and
restrictions attaching thereto. No such purchase or redemption shall be
made if the Company is insolvent at the time of the proposed purchase
or redemption, or if the proposed purchase or redemption would render
the Company insolvent.
7.2 If the Company proposes, at its option to redeem some but not all of
the shares of any class, the directors may, subject to the special
rights and restrictions attached to such class of shares, decide the
manner in which the shares to be redeemed shall be selected.
7.3 Subject to the provisions of the Company Act, any shares purchased or
redeemed by the Company may be sold or issued by it, but while such
shares are held by the Company, it shall not exercise any vote in
respect of such shares.
PART 8
BORROWING POWERS
8.1 The directors may from time to time on behalf of the Company
(a) borrow money in such manner and amount, on such security, from
such sources and upon such terms and conditions as they think
fit;
(b) issue bonds, debentures and other debt obligations, either
outright or as security for any liability or obligation of the
Company, or any other person; and
(c) mortgage, charge, whether by way of specific or floating
charge, or give other security on the undertaking, or on the
whole or any part of the property and assets of the Company
(both present and future).
8.2 Any bonds, debentures or other debt obligations of the Company may be
issued at a discount, premium or otherwise, and with any special
privileges as to redemption, surrender, drawings, allotment of or
conversion into or exchange for shares or other securities, attending
and voting at general meetings of the Company, appointment of directors
and otherwise, and may, by their terms, be assignable free from any
equities between the Company and the person to whom they were issued or
any subsequent holder thereof, all as the directors may determine.
<PAGE>
8.3 The Company shall keep or cause to be kept within the Province of
British Columbia, in accordance with the Company Act, a register of its
debentures and a register of debentureholders, which registers may be
combined, and subject to the provisions of the Company Act, may keep or
cause to be kept, one or more branch registers of its debentureholders
at such place or places as the directors may from time to time
determine and the directors may, by resolution, regulation or
otherwise, make such provisions as they think fit respecting the
keeping of such branch registers.
8.4 Every bond, debenture or other debt obligation of the Company shall be
signed manually by at least one director or officer of the Company or
by or on behalf of a trustee, registrar, branch registrar, transfer
agent or branch transfer agent for the bond, debenture or other debt
obligation appointed by the Company or under any instrument under which
the bond, debenture or other debt obligation is issued and any
additional signatures may be printed or otherwise mechanically
reproduced thereon and, in such event, a bond, debenture or other debt
obligation so signed is as valid as if signed manually notwithstanding
that any person whose signature is so printed or mechanically
reproduced shall have ceased to hold the office that is stated on such
bond, debenture or other debt obligation to be held at the date of the
issue thereof.
8.5 The Company shall keep or cause to be kept a register of its
indebtedness of every director or officer of the Company or any
associate of any of them in accordance with the provisions of the
Company Act.
PART 9
GENERAL MEETINGS
9.1 Subject to any extensions of time permitted pursuant to the Company
Act, the first annual general meeting of the Company shall be held
within fifteen months from the date of incorporation and thereafter, an
annual general meeting shall be held once in every calendar year at
such time (being not more than thirteen months after the holding of the
last annual general meeting) and place as may be determined by the
directors.
9.2 If the Company is, or becomes a company which is not a reporting
company, and all the members entitled to attend and vote at an annual
general meeting consent in writing to all the business which is
required or desired to be transacted at the meeting, the meeting need
not be held.
9.3 All general meetings, other than annual general meetings, are herein
referred to as and may be called extraordinary general meetings.
<PAGE>
9.4 The directors may, whenever they think fit, convene an extraordinary
general meeting. An extraordinary general meeting, if requisitioned in
accordance with the Company Act, shall be convened by the directors or,
if not convened by the directors, may be convened by the
requisitionists as provided in the Company Act.
9.5 If the Company is or becomes a reporting company, advance notice of any
general meeting at which directors are to be elected shall be published
in the manner required by the Company Act.
9.6 A notice convening a general meeting specifying the place, the day and
the hour of the meeting, and in the case of special business, the
general nature of that business, shall be given as provided in the
Company Act and in the manner hereinafter in these Articles mentioned,
or in such other manner (if any) as may be prescribed by ordinary
resolution, whether previous notice thereof has been given or not, to
such persons as are entitled by law or under these Articles to receive
such notice from the Company. Accidental omission to give notice of a
meeting to, or the non-receipt of notice of a meeting by any member
shall not invalidate the proceedings at that meeting.
9.7 All the members of the Company entitled to attend and vote at a general
meeting may, by unanimous consent in writing given before, during or
after the meeting, or if they are present at the meeting, by a
unanimous vote, waive or reduce the period of notice of such meeting
and an entry in the minute book of such waiver or reduction shall be
sufficient evidence of the due convening of the meeting.
9.8 Except as otherwise provided by the Company Act, where any special
business at a general meeting includes considering, approving,
ratifying, adopting or authorizing any document or the execution
thereof or the giving of effect thereto, the notice convening the
meeting shall, with respect to such document, be sufficient if it
states that a copy of the document or proposed document is or will be
available for inspection by members at the registered office or records
office of the Company or at some other place in British Columbia
designated in the notice during usual business hours up to the date of
such general meeting.
<PAGE>
PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1 All business shall be deemed special business which is transacted at
(a) an extraordinary general meeting, other than the conduct of and voting
at such meeting; and
(b) an annual general meeting, with the exception of the conduct of and
voting at such meeting, the consideration of the financial statements
and the respective reports of the directors and auditors, fixing or
changing the number of directors, approving a motion to elect two or
more directors by a single resolution, the election of directors, the
appointment of the auditor, the fixing of the remuneration of the
auditor, and such other business as by these Articles or the Company
Act may be transacted at a general meeting without prior notice
thereof being given to the members or any business which is brought
under consideration by the report of the directors.
10.2 No business, other than election of the chairman or the adjournment of
the meeting shall be transacted at any general meeting unless a quorum
of members entitled to attend and vote is present at the commencement
of the meeting, but the quorum need not be present throughout the
meeting.
10.3 Save as herein otherwise provided, a quorum shall be two members or one
or more proxyholder representing two members, or one member and a
proxyholder representing another member. The directors, the Secretary,
or in his absence, an Assistant-Secretary, and the solicitor for the
Company, shall be entitled to attend at any general meeting but no such
person shall be counted in the quorum or be entitled to vote at any
general meeting unless he shall be a member or proxyholder entitled to
vote thereat.
10.4 If within half an hour from the time appointed for a general meeting, a
quorum is not present, the meeting, if convened upon requisition by the
members shall be dissolved. In any other case, it shall stand adjourned
to the same day in the next week, at the same time and place, and if at
the adjourned meeting a quorum is not present within half an hour from
the time appointed for the meeting, the member or members present or
being represented by proxy shall be a quorum.
10.5 The Chairman of the Board, if any, or in his absence, the President of
the Company, or in his absence, a Vice-President of the Company, if
any, shall be entitled to preside as chairman at every general meeting
of the Company.
10.6 If at any general meeting neither the Chairman of the Board nor the
President or a Vice-President is present within fifteen minutes after
<PAGE>
the time appointed for holding the meeting or is unwilling to act as
chairman, the directors present shall choose one of their number to be
chairman, or if all the directors present decline to take the chair or
shall fail to do so, or if no director be present, the members present
shall choose some other person in attendance, who need not be a member,
to be chairman.
10.7 The chairman may and shall, if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting other than the business
left unfinished at the meeting from which the adjournment took place.
When a meeting is adjourned for thirty days or more, notice, but not
advance notice of the adjourned meeting shall be given as in the case
of an original meeting. Save as aforesaid, it shall not be necessary to
give any notice of an adjourned meeting or of the business to be
transacted at an adjourned meeting.
10.8 No motion proposed at a general meeting need be seconded and the
chairman may propose or second a motion.
10.9 Subject to the provisions of the Company Act, at any general meeting a
resolution put to the vote of the meeting shall be decided by a show of
hands, unless (before or on the declaration of the result of the show
of hands) a poll is directed by the chairman or demanded by at least
one member entitled to vote who is present in person or by proxy. The
chairman shall declare to the meeting, the decision on every question
in accordance with the result of the show of hands or the poll, and
such decision shall be entered in the book of proceedings of the
Company. A declaration by the chairman that a resolution has been
carried, or carried unanimously, or by a particular majority, or lost
or not carried by a particular majority and an entry to that effect in
the book of the proceedings of the Company shall be conclusive evidence
of the fact, without proof of the number or proportion of the votes
recorded in favour of or against that resolution.
10.10 In the case of an equality of votes, whether on a show of hands or on a
poll, the chairman of the meeting at which the show of hands takes
place or at which the poll is demanded shall be entitled to a casting
vote in addition to the vote or votes to which he may be entitled as a
member or proxyholder and this provision shall apply notwithstanding
the chairman is interested in the subject matter of the resolution.
10.11 No poll may be demanded on the election of the chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll
demanded on any other question shall be taken as soon as, in the
opinion of the chairman, is reasonably convenient, but in no event
later than seven days after the meeting and at such time and place and
in such manner as the chairman of the meeting directs. The result of
the poll shall be deemed to be the resolution of and passed at the
meeting upon which the poll was demanded. Any business other than that
upon which the poll has been demanded may be proceeded with pending the
taking of the poll. A demand for a poll may be withdrawn. In any
dispute as to the admission or rejection of a vote, the decision of the
chairman made in good faith shall be final and conclusive.
<PAGE>
10.12 Every ballot cast upon a poll and every proxy appointing a proxyholder
who casts a ballot upon a poll shall be retained by the Secretary for
such period and subject to such inspection as the Company Act may
provide.
10.13 On a poll a person entitled to cast more than one vote need not, if
he votes, use all his votes or cast all the votes he uses in the same
way.
10.14 Unless the Company Act, the Memorandum or these Articles otherwise
provide, any action to be taken by a resolution of the members may be
taken by an ordinary resolution.
PART 11
VOTES OF MEMBERS
11.1 Subject to any special voting rights or restrictions attaching to any
class of shares and the restrictions on joint registered holders of
shares
(a) on a show of hands
(1) every member who is present in person and entitled to vote
shall have one vote, and
(2) a proxyholder duly appointed by a holder of a share
who would have been entitled to vote shall have one vote,
(b) on a poll, every member shall have one vote for each share of which he
is the registered holder and may exercise such vote either in person
or by proxyholder.
11.2 Any person who is not registered as a member but is entitled to vote at
any general meeting in respect of a share, may vote the share in the
same manner as if he were a member; but unless the Directors have
previously admitted his right to vote at that meeting in respect of the
share, he shall satisfy the Directors of his right to vote the share
before the time for holding the meeting or adjourned meeting, as the
case may be, at which he proposes to vote.
11.3 Any corporation not being a subsidiary which is a member of the Company
may, by a document signed by two directors, or two officers, or any one
director and one officer, or any one member of an Executive or other
committee, or by resolution of its directors or other governing body,
authorize such person as it thinks fit to act as its representative at
any general meeting or class meeting. The person so authorized shall be
entitled to exercise in respect of and at such meeting, the same powers
on behalf of the corporation which he represents as that corporation
could exercise if it were an individual member of the Company
<PAGE>
personally present, including without limitation, the right, unless
restricted by such resolution, to appoint a proxyholder to represent
such corporation, and shall be counted for the purpose of forming a
quorum if present at the meeting. Evidence of the appointment of any
such representative may be sent to the Company by written instrument.
Notwithstanding the foregoing, a corporation being a member may appoint
a proxyholder.
11.4 In the case of joint registered holders of a share, the vote of the
senior who exercises a vote, whether in person or by proxyholder, shall
be accepted to the exclusion of the votes of the other joint registered
holders; and for this purpose, seniority shall be determined by the
order in which the names stand in the register of members. Several
legal personal representatives of a deceased member whose shares are
registered in his sole name shall, for the purpose of this Article, be
deemed joint registered holders.
11.5 A member of unsound mind entitled to attend and vote in respect of whom
an order has been made by any court having jurisdiction, may vote,
whether on a show of hands or on a poll, by his committee, curator
bonis or other person in the nature of a committee or curator bonis
appointed by that court, and any such committee, curator bonis or other
person may appoint a proxyholder.
11.6 A member holding more than one share in respect of which he is entitled
to vote shall be entitled to appoint one or more (but not more than
five) proxyholders to attend, act and vote for him on the same
occasion. If such member should appoint more than one proxyholder for
the same occasion, he shall specify the number of shares each
proxyholder shall be entitled to vote. A member may also appoint one or
more alternate proxyholders to act in the place and stead of an absent
proxyholder.
11.7 A form of proxy shall be in writing executed by the appointor or his
attorney authorized in writing, or if the appointor is a corporation,
by a duly authorized officer or attorney of such corporation.
11.8 A proxy shall be deposited in the manner hereinafter specified. A
proxyholder need not be a member of the Company.
11.9 Subject as herein provided, a proxy shall be deposited at the
registered office of the Company or at such other place as is specified
for that purpose in the notice convening the meeting not less than 48
hours (excluding Saturdays, Sundays and holidays) before the time for
holding the meeting or such other time and place as is specified in the
notice calling the meeting.
11.10 The chairman, in his absolute and unfettered discretion may, but is not
bound to accept a proxy in substituted form and in his absolute and
unfettered discretion may, but is not bound to accept in substituted
form, evidence of authority by a corporation to vote or a power of
attorney or evidence of other authority under which a proxy is
executed. The chairman may, in his unfettered discretion waive the
<PAGE>
requirement to deposit evidence of the authority under which a proxy or
authority by a corporation to vote is executed. In this Article 11.10,
"substituted form" shall mean a document produced by means of
photocopy, telegraph, telex, telecopy or any other means of
transmission or production which creates a legibly recorded message or
copy of a document.
11.11 In addition to any other method of depositing proxies provided for in
these Articles, the directors may, from time to time, by resolution
make regulations relating to the depositing of proxies at any place or
places and fixing the time or times for depositing the proxies not
exceeding 48 hours (excluding Saturdays, Sundays and holidays)
preceding the meeting or adjourned meeting specified in the notice
calling a meeting of members and providing for particulars of such
proxies to be sent to the Company or any agent of the Company in
writing so as to arrive before the commencement of the meeting or
adjourned meeting at the office of the Company or any agent of the
Company appointed for the purpose of receiving such particulars and
providing that proxies so deposited as required by this Part 11 and
votes given in accordance with such regulations shall be valid and
counted.
11.12 A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving
the proxy or the authority under which the form of proxy was executed
or the transfer of the share in respect of which the proxy is given,
provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered
office of the Company or by the chairman of the meeting or adjourned
meeting for which the proxy was given before the vote is taken.
11.13 Every proxy may be revoked by instrument in writing
(a) executed by the member giving the same or by his attorney
authorized in writing or, where the member is a corporation,
by a duly authorized officer or attorney of the corporation;
and
(b) delivered either to the registered office of the Company at
any time up to and including the last business day preceding
the day of the meeting or any adjournment thereof at which the
proxy is to be used, or to the chairman of the meeting on the
day of the meeting or any adjournment thereof before any vote
in respect of which the proxy is to be used shall have been
taken
or in any other manner provided by law.
<PAGE>
PART 12
DIRECTORS
12.1 The subscribers to the Memorandum of the Company are the first
directors. The directors to succeed the first directors may be
appointed in writing by a majority of the subscribers to the Memorandum
or at a meeting of the subscribers, or if not so appointed, they shall
be elected by the members entitled to vote on the election of directors
and the number of directors shall be the same as the number of
directors so appointed or elected. The number of directors, excluding
additional directors, may be fixed or changed from time to time by
ordinary resolution, whether previous notice thereof has been given or
not, but notwithstanding anything contained in these Articles, the
number of directors shall never be less than one or, if the Company is
or becomes a reporting company, less than three.
12.2 The remuneration of the directors, as such, may from time to time be
determined by the directors or, if the directors shall so decide, by
the members. Such remuneration may be in addition to any salary or
other remuneration paid to any officer or employee of the Company as
such who is also a director. The directors shall be paid such
reasonable travelling, hotel and other expenses as they incur in and
about the business of the Company and if any director shall perform any
professional or other services for the Company that in the opinion of
the directors are outside the ordinary duties of a director or shall
otherwise be specially occupied in or about the Company's business, he
may be paid a remuneration to be fixed by the Board or, at the option
of such director, by the Company in general meeting, and such
remuneration may be either in addition to or in substitution for any
other remuneration that he may be entitled to receive. The directors,
on behalf of the Company, unless otherwise determined by ordinary
resolution, may pay a gratuity, a pension or an allowance on retirement
to any director who has held any salaried office or place of profit
with the Company or to his spouse or dependents and may make
contributions to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or allowance.
12.3 A director shall not be required to hold a share in the capital of the
Company as qualification for his office, but shall be qualified as
required by the Company Act to become or act as a director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1 At each annual general meeting of the Company, all of the directors
shall retire and the members shall elect a Board of Directors
consisting of the number of directors for the time being fixed pursuant
to these Articles. If the Company is or becomes a company that is not a
reporting company and the business to be transacted at any annual
general meeting is consented to in writing by all of the members who
are entitled to attend and vote thereat, such annual general meeting
shall be deemed, for the purpose of this Part 13, to have been held on
such written consent becoming effective.
<PAGE>
13.2 A retiring director shall be eligible for re-election.
13.3 When the Company fails to hold an annual general meeting in accordance
with the Company Act, the directors then in office shall be deemed to
have been elected or appointed as directors on the last day on which
the annual general meeting could have been held pursuant to these
Articles and they may hold office until other directors are appointed
or elected or until the day on which the next annual general meeting is
held.
13.4 If at any general meeting at which there should be an election of
directors, the places of the retiring directors are not filled by such
election, such retiring directors who are not re-elected as may be
requested by the newly-elected directors shall, if willing to do so,
continue in office to complete the number of directors for the time
being fixed pursuant to these Articles until further new directors are
elected at a general meeting convened for the purpose. If any such
election or continuance of directors does not result in the election or
continuance of the number of directors for the time being fixed
pursuant to the Articles, such number shall be fixed at the number of
directors actually elected or continued in office.
13.5 Any casual vacancy occurring in the Board of Directors may be
filled by the remaining directors or director.
13.6 Between successive annual general meetings, the directors shall have
power to appoint one or more additional directors but not more than
one-third of the number of directors fixed pursuant to these Articles
and in effect at the last general meeting at which directors were
elected. Any director so appointed shall hold office only until the
next following annual general meeting of the Company, but shall be
eligible for election at such meeting and so long as he is an
additional director, the number of directors shall be increased
accordingly.
13.7 Any director may, by instrument in writing delivered to the Company,
appoint any person to be his alternate to act in his place at meetings
of the directors at which he is not present unless the directors shall
have reasonably disapproved the appointment of such person as an
alternate director and shall have given notice to that effect to the
director appointing the alternate director within a reasonable time
after delivery of such instrument to the Company. Every such alternate
shall be entitled to notice of the meetings of the directors and to
attend and vote as a director at a meeting at which the person
appointing him is not personally present, and if he is a director. to
have a separate vote on behalf of the director he is representing in
addition to his own vote. A person may be appointed as an alternate for
more than one director and shall have a separate vote for each director
so represented. A director may, at any time, by instrument in writing
delivered to the Company, revoke the appointment of an alternate
appointed by him. The remuneration payable to such alternate shall be
payable out of the remuneration of the director appointing him.
13.8 The office of director shall be vacated if the director:
<PAGE>
(a) resigns his office by notice in writing delivered to the registered
office of the Company; or
(b) is convicted of an indictable offence and the other directors shall
have resolved to remove him; or
(c) ceases to be qualified as a director pursuant to the Company Act.
13.9 The Company may, by special resolution, remove any director before the
expiration of his period of office, and may, by an ordinary resolution,
appoint another person in his stead.
PART 14
POWERS AND DUTIES OF DIRECTORS
14.1 The directors shall manage or supervise the management of the affairs
and business of the Company and shall have authority to exercise all
such powers of the Company as are not, by the Company Act or by the
Memorandum or these Articles required to be exercised by the Company in
general meeting.
14.2 The directors may, from time to time, by power of attorney or other
instrument under seal, appoint any person to be the attorney of the
Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the
directors under these Articles and excepting the powers of the
directors relating to the constitution of the Board and of any of its
committees and the appointment or removal of officers and the power to
declare dividends) and for such period, with such remuneration, and
subject to such conditions as the directors may think fit, and any such
appointment may be made in favour of any of the directors or any of the
members of the Company, or in favour of any corporation, or of any of
the members, directors, nominees or managers of any corporation, firm
or joint venture and any such power of attorney may contain such
provisions for the protection or convenience of persons dealing with
such attorney as the directors think fit. Any such attorney may be
authorized by the directors to sub-delegate all or any of the powers,
authorities and discretions for the time being vested in him.
<PAGE>
PART 15
DISCLOSURE OF INTEREST OF DIRECTORS
15.1 A director who is, in any way, directly or indirectly interested in an
existing or proposed contract or transaction with the Company, or who
holds any office or possesses any property whereby, directly or
indirectly, a duty or interest might be created to conflict with his
duty or interest as a director, shall declare the nature and extent of
his interest in such contract or transaction or the conflict or
potential conflict with his duty and interest as a director, as the
case may be, in accordance with the provisions of the Company Act.
15.2 A director shall not vote in respect of any such contract or
transaction with the Company in which he is interested and if he shall
do so, his vote shall not be counted, but he shall be counted in the
quorum present at the meeting at which such vote is taken. Subject to
the provisions of the Company Act, the foregoing prohibitions shall not
apply to:
(i) any such contract or transaction relating to a loan to the
Company, which a director or a specified corporation or a
specific firm in which he has an interest has guaranteed or
joined in guaranteeing the repayment of the loan or any part
of the loan;
(ii) any contract or transaction made or to be made with, or for
the benefit of a holding corporation or a subsidiary
corporation of which a director is a director;
(iii) any contract by a director to subscribe for or underwrite
shares or debentures to be issued by the Company or a
subsidiary of the Company, or any contract, arrangement or
transaction in which a director is, directly or indirectly
interested if all the other directors are also, directly or
indirectly interested in the contract, arrangement or
transaction;
(iv) determining the remuneration of the directors;
(v) purchasing and maintaining insurance to cover directors
against liability incurred by them as directors; or
(vi) the indemnification of any director by the Company.
These exceptions may from time to time be suspended or amended to any
extent approved by the Company at a general meeting and as permitted by
the Company Act, either generally or in respect of any particular
contract or transaction for any particular period.
15.3 The interest of a director in any matter in Articles 15.1, 15.2 or
otherwise shall not affect such director's alternate director and such
alternate director may be counted in a quorum and may vote upon such
matter notwithstanding disqualification of the director, nor shall a
disqualification of an alternate director affect the ability of a
director to be counted in a quorum or to vote on a matter in which such
director's alternate director shall be disqualified.
15.4 A director may hold any office or place of profit with the Company
<PAGE>
(other than the office of auditor of the Company) in conjunction with
his office of director for such period and on such terms (as to
remuneration or otherwise) as the directors may determine and no
director or intended director shall be disqualified by his office from
contracting with the Company, either with regard to his tenure of any
such other office or place of profit, or as vendor, purchaser or
otherwise, and, subject to compliance with the provisions of the
Company Act, no contract or transaction entered into by or on behalf of
the Company in which a director is in any way interested shall be
liable to be voided by reason thereof.
15.5 Subject to compliance with the provisions of the Company Act, a
Director or his firm may act in a professional capacity for the Company
(except as auditor for the Company) and he or his firm shall be
entitled to remuneration for professional services as if he were not a
director.
15.6 A director may be or become a director or other officer or employee of,
or otherwise interested in any corporation or firm in which the Company
may be interested as a shareholder or otherwise, and, subject to
compliance with the provisions of the Company Act, such director shall
not be accountable to the Company for any remuneration or other
benefits received by him as a director, officer or employee of, or from
his interest in such other corporation or firm prior to the Company in
general meeting directing otherwise.
PART 16
PROCEEDINGS OF DIRECTORS
16.1 The Chairman of the Board, if any, or in his absence, the President,
shall preside as chairman at every meeting of the directors, or if
there is no Chairman of the Board or neither the Chairman of the Board
nor the President is present within fifteen minutes of the time
appointed for holding the meeting or is unwilling to act as chairman,
or if the Chairman of the Board, if any, and the President have advised
the Secretary that they will not be present at the meeting, the
directors present shall choose one of their number to be chairman of
the meeting.
16.2 The directors may meet together for the dispatch of business, adjourn
and otherwise regulate their meetings as they think fit. Questions
arising at any meeting shall be decided by a majority of votes. In the
case of an equality of votes, the chairman shall not have a second or
casting vote. Meetings of the Board held at regular intervals may be
held at such place, at such time and upon such notice ( if any) as the
Board may by resolution from time to time determine.
16.3 One or more directors, or all directors, may participate in a meeting
of the Board or of any committee of the directors by means of
conference telephones or other communication facilities by means of
which the directors participating in the meeting can hear each other
provided that a majority of such directors agree to such participation.
A director participating in a meeting in accordance with this Article
shall be deemed to be present at the meeting and to have so agreed and
<PAGE>
shall be counted in the quorum therefor and be entitled to speak and
vote thereat.
16.4 A director may, and the Secretary or an Assistant Secretary, upon
request of a director, shall call a meeting of the Board at any time.
Reasonable notice of such meeting specifying the place, day and hour of
such meeting shall be given by mail, postage prepaid, addressed to each
of the directors and alternate directors at his address as it appears
on the books of the Company or by leaving it at his usual business or
residential address, or by telephone, telegram, telex or any method of
transmitting legibly recorded message. It shall not be necessary to
give notice of a meeting of directors to any director or alternate
director if such meeting is to be held immediately following a general
meeting at which such director shall have been elected or is the
meeting of directors at which such director is appointed.
16.5 Any director of the Company may file with the Secretary, a document
executed by him, waiving notice of any past, present or future meetings
of the directors being or required to have been sent to him and may, at
any time, withdraw such waiver with respect to meetings held
thereafter. After filing such waiver with respect to future meetings,
until such notice is withdrawn, no notice need be given to such
director, and unless the director otherwise requires in writing to the
Secretary, to his alternate director, of any meeting of directors and
all meetings of the directors so held shall be deemed not to be
improperly called or constituted by reason of notice not having been
given to such director or alternate director.
16.6 The quorum necessary for the transaction of the business of the
directors may be fixed by the directors and if not so fixed shall be a
majority of the directors or, if the number of directors is fixed at
one, shall be one director.
16.7 The continuing directors may, notwithstanding any vacancy in their
body, but if and so long as their number is reduced below the number
fixed pursuant to these Articles as the necessary quorum of directors,
act only for the purpose of increasing the number of directors to that
number, or of summoning a general meeting of the Company, but for no
other purpose.
16.8 Subject to the provisions of the Company Act, all acts done by any
meeting of the directors or of a committee of directors, or by any
person acting as a director, shall, notwithstanding that it be
afterwards discovered that there was some defect in the qualification,
election or appointment of any of such directors or the members of such
committee or persons acting aforesaid, or that they or any of them were
disqualified, be as valid as if every such person had been duly elected
or appointed and was qualified to be a director.
16.9 A resolution consented to in writing by all of the directors or
alternate directors shall be as valid and effectual as if it had been
passed at a meeting of the directors duly called and held. Such
resolution may be in two or more counterparts which together shall be
<PAGE>
deemed to constitute one resolution in writing. Such resolution shall
be filed with the minutes of the proceedings of the directors and shall
be effective on the date stated thereon or on the latest day stated on
any counterpart. A resolution may be consented to by a director or
alternate director who has an interest in the subject matter of the
resolution provided that he has otherwise complied with the provisions
of these Articles and the Company Act.
PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1 The directors may, by resolution, create and appoint an Executive
Committee to consist of such member or members of their body as they
think fit, which Committee shall have, and may exercise during the
intervals between the meetings of the Board, all the powers vested in
the Board except the power to fill vacancies on the Board, the power to
change the membership of or fill vacancies in said Committee or any
other committee of the Board, and such other powers, if any, as may be
specified in the resolution. The said Committee shall keep regular
minutes of its transactions and shall cause them to be recorded in the
books for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time
require. The Board shall have the power at any time to revoke or
override the authority given to or acts done by the Executive Committee
except as to the acts done before such revocation or overriding and to
terminate the appointment or change the membership of such Committee
and to fill vacancies on it. The Executive Committee may make rules for
the conduct of its business and may appoint such assistants as it may
deem necessary. A majority of the members of the said Committee shall
constitute a quorum thereof.
17.2 The directors may, by resolution, create and appoint one or more
committees consisting of such member or members of their body as they
think fit and may delegate to any such committee, such powers of the
Board as the Board may designate or prescribe (except the power to fill
vacancies in any committee of the Board and the power to appoint or
remove officers appointed by the Board) subject to such conditions as
may be prescribed in such resolution, and all committees so appointed
shall keep regular minutes of their transactions and shall cause them
to be recorded in books kept for that purpose, and shall report same to
the Board of Directors at such times as the Board of Directors may from
time to time require. The directors shall also have power at any time
to revoke or override any authority given to or acts to be done by any
such committees except as to acts done before such revocation or
overriding and to terminate the appointment or change the membership of
a committee and to fill vacancies in it. Committees may make rules for
the conduct of their business and may appoint such assistants as they
may deem necessary. A majority of the members of a committee shall
constitute a quorum thereof.
17.3 The Executive Committee and any other committee may meet and adjourn as
it thinks proper. Questions arising at any meeting shall be determined
<PAGE>
by a majority of votes of the members of the committee present, and in
case of an equality of votes, the chairman shall not have a second or
casting vote. A resolution approved in writing by all the members of
the Executive Committee or any other committee shall be as valid and
effective as it if had been passed at a meeting of such committee duly
called and constituted. Such resolution may be in two or more
counterparts which together shall be deemed to constitute one
resolution in writing. Such resolution shall be filed with the minutes
of the proceedings of the committee and shall be effective on the date
stated thereon or on the latest date stated in any counterpart.
PART 18
OFFICERS
18.1 The directors shall, from time to time, appoint a President and a
Secretary and such other officers, if any, as the directors shall
determine and the directors may, at any time, terminate any such
appointment. No officer shall be appointed unless he is qualified in
accordance with the provisions of the Company Act.
18.2 One person may hold more than one of such offices except that the
offices of President and Secretary must be held by different persons
unless the Company has only one member. Any person appointed as the
Chairman of the Board, the President or the Managing Director shall be
a director. The other officers need not be directors. The remuneration
of the officers of the Company as such and the terms and conditions of
their tenure of office or employment shall, from time to time, be
determined by the directors; such remuneration may be by way of salary,
fees, wages, commission or participation in profits or any other means
or all of these modes and an officer may, in addition to such
remuneration, be entitled to receive, after he ceases to hold such
office or leaves the employment of the Company, a pension or gratuity.
The directors may decide what functions and duties each officer shall
perform and may entrust to and confer upon him any of the powers
exercisable by them upon such terms and conditions and with such
restrictions as they think fit and may, from time to time, revoke,
withdraw, alter or vary all or any of such functions, duties and
powers. The Secretary shall, inter alia, perform the functions of the
Secretary specified in the Company Act.
18.3 Every officer of the Company who holds any office or possesses any
property whereby, whether directly or indirectly, duties or interests
might be created in conflict with his duties or interests as an officer
of the Company shall, in writing, disclose to the President the fact
and the nature, character and extent of the conflict.
<PAGE>
PART 19
INDEMNITY AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
19.1 Subject to the provisions of the Company Act, the directors shall cause
the Company to indemnify a director or former director of the Company
and the directors may cause the Company to indemnify a director or
former director of a corporation of which the Company is or was a
shareholder and the heirs and personal representatives of any such
person against all costs, charges and expenses, including any amount
paid to settle an action or satisfy a judgment, actually and reasonably
incurred by him or them including an amount paid to settle an action or
satisfy a judgment in a civil, criminal or administrative action or
proceeding to which he is or they are made a party by reason of his
being or having been a director of the Company or a director of such
corporation, including any action brought by the Company or any such
corporation. Each director of the Company, on being elected or
appointed, shall be deemed to have contracted with the Company on the
terms of the foregoing indemnity.
19.2 Subject to the provisions of the Company Act, the directors may cause
the Company to indemnify any officer, employee or agent of the Company
or of a corporation of which the Company is or was a shareholder
(notwithstanding that he is also a director) and his heirs and personal
representatives against all costs, charges and expenses whatsoever
incurred by him or them and resulting from his acting as an officer,
employee or agent of the Company or such corporation. In addition, the
Company shall indemnify the Secretary or an Assistant Secretary of the
Company (if he shall not be a full time employee of the Company and
notwithstanding that he is also a director) and his respective heirs
and legal representatives against all costs, charges and expenses
whatsoever incurred by him or them and arising out of the functions
assigned to the Secretary by the Company Act or these Articles and each
such Secretary and Assistant Secretary shall, on being appointed, be
deemed to have contracted with the Company on the terms of the
foregoing indemnity.
19.3 The failure of a director or officer of the Company to comply with the
provisions of the Company Act or of the Memorandum or these Articles
shall not invalidate any indemnity to which he is entitled under this
Part.
19.4 The directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was serving as a director,
officer, employee or agent of the Company, or as a director, officer,
employee or agent of any corporation of which the Company is or was a
shareholder and his heirs or personal representatives against any
liability incurred by him as such director, officer, employee or agent.
<PAGE>
PART 20
DIVIDENDS AND RESERVE
20.1 The directors may from time to time declare and authorize payment of
such dividends, if any, as they may deem advisable and need not give
notice of such declaration to any member. No dividend shall be paid
otherwise than out of funds and/or assets properly available for the
payment of dividends and a declaration by the directors as to the
amount of such funds or assets available for dividends shall be
conclusive. The Company may pay any such dividend wholly or in part by
the distribution of specific assets and in particular, by paid-up
shares, bonds, debentures or other securities of the Company or any
other corporation or in any one or more such ways as may be authorized
by the Company or the Directors and where any difficulty arises with
regard to such a distribution, the directors may settle the same as
they think expedient, and in particular, may fix the value for
distribution of such specific assets or any part thereof, and may
determine that cash payments in substitution for all or any part of the
specific assets to which any members are entitled shall be made to any
members on the basis of the value so fixed in order to adjust the
rights of all parties and may vest any such specific assets in trustees
for the persons entitled to the dividend as may seem expedient to the
directors.
20.2 Any dividend declared on shares of any class by the directors may
be made payable on such date as is fixed by the directors.
20.3 Subject to the rights of members (if any) holding shares with special
rights as to dividends, all dividends on shares of any class shall be
declared and paid according to the number of shares held.
20.4 The directors may, before declaring any dividend, set aside out of the
funds properly available for the payment of dividends, such sums as
they think proper as a reserve or reserves, which shall, at the
discretion of the directors, be applicable for meeting contingencies,
or for equalizing dividends, or for any other purpose to which such
funds of the Company may be properly applied, and sending such
application may, at the like discretion, either be employed in the
business of the Company or be invested in such investments as the
directors may from time to time think fit. The directors may also,
without placing the same in reserve, carry forward such funds which
they think prudent not to divide.
20.5 If several persons are registered as joint holders of any share, any
one of them may give an effective receipt for any dividend, bonuses or
other monies payable in respect of the share.
20.6 No dividend shall bear interest against the Company. Where the dividend
to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such
payment shall be deemed to be payment in full.
20.7 Any dividend, bonuses or other monies payable in cash in respect of
shares may be paid by cheque or warrant sent through the post, directed
to the registered address of the holder, or in the case of joint
holders, to the registered address of that one of the joint holders who
<PAGE>
is first named on the register, or to such person and to such address
as the holder or joint holders may direct in writing. Every such cheque
or warrant shall be made payable to the order of the person to whom it
is sent. The mailing of such cheque or warrant shall, to the extent the
sum represented thereby (plus the amount of any tax required by law to
be deducted) discharge all liability for the dividend, unless such
cheque or warrant shall not be paid on presentation or the amount of
tax so deducted shall not be paid to the appropriate taxing authority.
20.8 Notwithstanding anything contained in these Articles, the directors
may, from time to time, capitalize any undistributed surplus of the
Company on hand and may, from time to time, issue as fully paid and non
assessable, any unissued shares, or any bonds, debentures or debt
obligations of the Company as a dividend representing such
undistributed surplus on hand or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1 The Company shall keep at its records office or at such other place as
the Company Act may permit, the documents, copies, registers, minutes
and records which the Company is required by the Company Act to keep at
its records office or such other place, as the case may be.
21.2 The Company shall cause to be kept proper books of account and
accounting records in respect of all financial and other transactions
of the Company in order to properly record the affairs and condition of
the Company and to comply with the Company Act.
21.3 Unless the directors determine otherwise, or unless otherwise
determined by an ordinary resolution, no member of the Company shall be
entitled to inspect the accounting records of the Company.
21.4 The directors shall, from time to time, at the expense of the Company,
cause to be prepared and laid before the Company in general meeting
such financial statements and reports as are required by the Company
Act.
21.5 Every member shall be entitled to be provided once gratis, on demand,
with a copy of the latest annual financial statement of the Company
and, if so required by the Company Act, a copy of each such annual
financial statement and interim financial statement shall be mailed to
each member.
<PAGE>
PART 22
NOTICES
22.1 A notice, statement or report may be given or delivered by the Company
to any member either by delivery to him personally or by sending it by
mail to him at his address as recorded in the register of members.
Where a notice, statement or report is sent by mail, service or
delivery of the notice, statement or report shall be deemed to be
effected by properly addressing, prepaying and mailing the notice,
statement or report and shall be deemed to have been given on the day,
(Saturdays, Sundays and holidays excepted), following the date of
mailing. A certificate signed by the Secretary or other officer of the
Company or of any other corporation acting in that behalf for the
Company that the letter, envelope or wrapper containing the notice,
statement or report was so addressed, prepaid and mailed shall be
conclusive evidence thereof.
22.2 A notice, statement or report may be given or delivered by the Company
to the joint holders of a share by giving notice to the joint holder
first named in the register of members in respect of the share.
22.3 A notice, statement or report may be given or delivered by the Company
to the persons entitled to a share in consequence of the death,
bankruptcy or incapacity of a member by sending it through the mail,
prepaid, addressed to them by name or by the title of representative of
the deceased or incapacitated person or trustee of the bankrupt, or by
any like description, at the address (if any) supplied to the Company
for the purpose by the persons claiming to be so entitled, or (until
such address has been so supplied) by giving notice in the manner in
which same might have been given if the death, bankruptcy or incapacity
had not occurred.
22.4 Notice of every general meeting or meeting of members holding a class
of shares shall be given in the manner hereinbefore authorized to every
member holding at the time of the issue of the notice or the date fixed
for determining the members entitled to such notice, whichever is the
earlier, shares which confer the right to notice of and to attend and
vote at any such meeting. No other person except the auditor of the
Company and the directors of the Company shall be entitled to receive
notices of any such meeting.
PART 23
RECORD DATES
23.1 The directors may fix in advance a date, which shall not be more than
the maximum number of days permitted by the Company Act, preceding the
date of any meeting of members of any class of shares, or of the
payment of any dividend, or of the proposed taking of any other proper
action requiring the determination of members as the record date for
the determination of the members entitled to notice of, or to attend
and vote at, any such meeting and any adjournment thereof, or entitled
<PAGE>
to receive payment of any such dividend or for any other proper purpose
and, in such case, notwithstanding anything elsewhere contained in
these Articles, only members of record on the date so fixed shall be
deemed to be members for the purposes aforesaid.
23.2 Where no record date is so fixed for the determination of members as
provided in the preceding Article, the date on which the notice is
mailed or on which the resolution declaring the dividend is adopted, as
the case may be, shall be the record date for such determination.
PART 24
SEAL
24.1 The directors may provide a seal for the Company and, if they do so,
shall provide for the safe custody of the seal which shall not be
affixed to any instrument except in the presence of the following
persons, namely:
(i) any two directors, or
(ii) one of the Chairman of the Board, the President, the Managing
Director, a Director and a Vice-President together with one of
the Secretary, the Treasurer, the Secretary-Treasurer, an
Assistant Secretary, an Assistant Treasurer and an Assistant
Secretary-Treasurer, or
(iii) if the Company shall have only one member, the President or the
Secretary, or
(iv) such person or persons as the directors may from time to time by
resolution appoint
and the said directors, officers, person or persons in whose presence
the seal is so affixed to an instrument shall sign such instrument. For
the purpose of certifying under seal true copies of any document or
resolution, the seal may be affixed in the presence of any one of the
foregoing persons.
24.2 To enable the seal of the Company to be affixed to any bonds,
debentures, share certificates or other securities of the Company,
whether in definitive or interim form, on which facsimiles of any of
the signatures of the directors or officers of the Company are, in
accordance with the Company Act and/or these Articles printed or
otherwise mechanically reproduced, there may be delivered to the firm
or company employed to engrave, lithograph or print such definitive or
interim bonds, debentures, share certificates or other securities one
or more unmounted dies reproducing the Company's seal and the Chairman
of the Board, the President, the Managing Director or a Vice-President
and the Secretary, Treasurer, Secretary-Treasurer, Assistant Secretary,
<PAGE>
Assistant Treasurer or Assistant Secretary-Treasurer may by a document
authorize such firm or company to cause the Company's seal to be
affixed to such definitive or interim bonds, debentures, share
certificates or other securities by the use of such dies. Bonds,
debentures, share certificates and other securities to which the
Company's seal has been so affixed shall, for all purposes, be deemed
to be under and to bear the Company's seal lawfully affixed thereto.
24.3 The Company may have for use in any other province, state, territory or
country an official seal which shall have on its face, the name of the
province, state, territory or country where it is to be used and all of
the powers conferred by the Company Act with respect thereto may be
exercised by the directors or by a duly authorized agent of the
Company.
PART 25
MECHANICAL REPRODUCTION OF SIGNATURES
25.1 The signature of any officer, director, registrar, branch registrar,
transfer agent or branch transfer agent of the Company, unless
otherwise required by the Company Act or by these Articles may, if
authorized by the directors, be printed, lithographed, engraved or
otherwise mechanically reproduced upon all instruments executed or
issued by the Company or any officer thereof; and any instrument on
which the signature of any such person is so reproduced shall be deemed
to have been manually signed by such person whose signature is so
reproduced and shall be as valid to all intents and purposes as if such
instrument had been signed manually, and notwithstanding that the
person whose signature is so reproduced may have ceased to hold the
office that he is stated on such instrument to hold at the date of the
delivery or issue of such instrument.
25.2 The term "instrument" as used in Article 25.1 shall include deeds,
mortgages, hypothecs, charges, conveyances, transfers and assignments
of property, real or personal, agreements, releases, receipts and
discharges for the payment of money or other obligations, shares and
share warrants of the Company, bonds, debentures and other debt
obligations of the Company, and all paper writings.
<PAGE>
PART 26
PROHIBITIONS
26.1 If the Company is, or becomes a company which is not a reporting
company
(i) the number of members for the time being of the Company,
(counting any two or more joint registered members as one member)
exclusive of persons who are in the employment of the Company, or
an affiliate of the Company, or continue to be members after the
termination of such employment, shall not exceed fifty (50); and
(ii) no shares or debt obligations issued by the Company shall be
offered for sale to the public.
26.2 If the Company is, or becomes a company which is not a reporting
company, or a reporting company but does not have any of its securities
listed for trading on any stock exchange wheresoever situate, or a
reporting company and has not with respect to any of its securities,
filed a prospectus with the British Columbia Securities Commission or
any similar securities' regulatory body and obtained a receipt
therefor, then no shares shall be transferred without the previous
consent of the directors expressed by a resolution of the Board and the
directors shall not be required to give any reason for refusing any
such proposed transfer.
- -------------------------------------------------------------------------------
Full Name(s), Resident Address(es) and Occupation(s) of Subscriber(s)
- -------------------------------------------------------------------------------
Signature: /s/ LOUIS P. SALLEY
-------------------
Name: Louis P. Salley
Resident Address: 520 Stevens
West Vancouver, BC
V7S 1C9
Occupation: Solicitor
- -------------------------------------------------------------------------------
DATED this 28th day of August, 1996.
===================================
SALLEY BOWES HARWARDT
===================================
APAC MINERALS INC.
1147 Homer Street
Vancouver, B.C.
V6B 5T5
Telephone: (604) 688-2220 Fax: (604) 681-4056
April 15, 1998
EXMINCO
Exploration and Mining Investment
Company Establishment
P.O. Box 95/
FL-9490 Vaduz
Liechtenstein
Dear Sirs:
Re: APAC Minerals Inc. (the "Purchaser") and Letter of Intent (the "Letter of
Intent") for Purchase of an Undivided 100% Interest in an Exploration
Concession covering the lands located in Alentejo, Portugal, more
particularly described in Schedule "A" attached hereto (the "Property")
from EXMINCO Exploration and Mining Investment Company Establishment (the
"Vendor")
- ------------------------------------------------------------------------------
This binding Letter of Intent will confirm our understanding of your sale to us
and our purchase from you of an undivided 100% interest in the Property, on the
following material terms and conditions:
1. REPRESENTATIONS AND WARRANTIES
1.1 The Vendor has legal and beneficial ownership of the Property;
and the Property is free and clear of all liens, charges and
encumbrances, and is properly recorded and staked in
accordance with the laws of Portugal and is in good standing.
1.2 The Vendor has the absolute right to enter into this Letter of
Intent without first obtaining the consent of any other person
or body corporate, except as described below, and no other
person or body corporate has any agreement, option, right or
privilege capable of becoming and agreement for the purchase
of the Property or any interest therein.
1.3 The Vendor has completed all necessary and proper corporate
acts and procedures for the Vendor to enter into this Letter
of Intent and carry out its terms to the full extent.
<PAGE>
2. PURCHASE AND SALE
2.1 The Vendor hereby sells and the Purchaser hereby purchases an
undivided 100% interest in and to the Property free and clear
of all liens, charges, encumbrances and claims, in accordance
with the terms and conditions of this Letter of Intent.
2.2 In consideration of the sale, the Purchaser agrees to pay to
the Vendor, and to issue and deliver to the Vendor, the
following:
(a) the sum of $10,000 in Canadian dollars as a non-refundable
deposit, upon the completion of our due diligence review of
the Property;
(b) a total of 2,000,000 common shares in the capital stock of
the Purchaser, within thirty (30) days of the Approval Date
(as defined below); and
(c) the Purchaser's assumption of responsibility for the payment
of all required annual exploration work under the terms and
conditions of the exploration concession for the Property,
which for greater certainty are estimated to be $550,000 in
lawful currency of the United States of America over the
next two years, in order to maintain the Property in good
standing.
3. TRANSFER OF PROPERTY
3.1 After the execution of this Letter of Intent, the Purchaser
shall incorporate a company in Portugal ("Newco") for the
purpose of holding the exploration concession of the Property,
and the Vendor agrees to co-operate with and assist the
Purchaser in applying to the government of Portugal for the
transfer of the exploration concession for the Property to
Newco. Upon request, the Vendor will forthwith deliver to the
Purchaser a registrable transfer or transfers of the Property,
or such other instrument as may be required, transferring to
the Purchaser an undivided 100% interest in and to the
Property, and the Purchaser will be entitled to immediately
register the transfer or transfers against the title to the
Property.
4. OPERATOR
4.1 Newco, the wholly-owned subsidiary of the Purchaser to be
formed, will be the operator of the Property (the "Operator"),
and as Operator will be responsible for preparing work
programs and budgets for the exploration and development work
on the Property, and for conducting all such exploration,
development, and mining activities on the Property.
<PAGE>
5. FURTHER ASSURANCES
5.1 The parties hereto agree to do or cause to be done all acts or
things necessary to implement and carry into effect the
provisions and intent of this agreement.
6. GENERAL
6.1 This Letter of Intent will be governed and construed in
accordance with the laws of the Province of British Columbia.
6.2 This Letter of Intent is intended to create binding legal
relations among the parties and will ensure to the benefit of
and be binding upon the parties hereto and their respective
successors and assigns as the case may be.
6.3 In the event that any provision of this Letter of Intent held
unenforceable or invalid by court of law, this Letter of
Intent will be read as if such unenforceable or invalid
provision were removed.
6.4 The rights and obligations of the parties created by this
Letter of Intent are not assignable by any party without the
prior written consent of the other party, not to be
unreasonably withheld, except for any transfer or assignment
to a wholly owned subsidiary of the party or pursuant to an
amalgamation, merger, or corporate reorganization or
arrangement of the party.
6.5 This Letter of Intent and the obligations of the Purchaser are
subject to the performance of the following conditions
precedent:
(a) the Purchaser's due diligence review of the Property
within the next thirty (30) days following the
execution date of this Letter of Intent to the
satisfaction and approval of the Purchaser in its
sole discretion, including for greater certainty the
preparation and delivery of an independent technical
report on the Property, the cost of which is to be
borne by the Purchaser;
(b) the prior written acceptance for filing of this
Letter of Intent by the Vancouver Stock Exchange on
behalf of the Purchaser; and
(c) the approval of, or written evidence of the approval
of, simple majority of the shareholders of the
Purchaser, if required by the Vancouver Stock
Exchange as a condition of its acceptance;
(the latest date of such approvals being referred to as the
"Approval Date" herein)
<PAGE>
6.6 Prior to the closing of the purchase and sale, the Vendor will
cause to be delivered to the Purchaser, a legal opinion from
the Portuguese counsel of the Vendor in a form satisfactory to
the counsel for the Purchaser confirming that the Vendor was
the legal and beneficial owner of the Property, that the
Property free and clear of all recorded liens, charges and
encumbrances, that the Property is in good standing, that all
required corporate steps and procedures have been performed
and all required governmental approvals and consents have been
obtained to transfer the Property to Newco, and that the
Property is validly registered in the name of Newco in
accordance with the laws of Portugal.
If the foregoing terms and conditions, and the attached schedules which form a
part of this Letter of Intent, accurately set out our mutual understandings,
please indicate your acceptance by signing this letter where indicated below and
returning to us the enclosed copy duly signed on or before 4:30 p.m. on April
30, 1998.
Your very truly,
APAC MINERALS INC.
/s/ TORE BIRKELAND
---------------
Tore Birkeland
President
TB/lh
Encls.
Terms and conditions approved as of the date first above written.
EXMINCO
Exploration and Mining Investment
Company Establishment
/s/ GUNTRAM WOLF
--------------
Guntram Wolf
Authorized Signatory
<PAGE>
Schedule "A"
Prospecting rights and researching of mineral deposits of zinc, lead, silver,
copper and gold are granted to EXMINCO - EXPLORATION AND MINING INVESTMENT CO.
hereinafter designated as EXMINCO, as per articles 9 and 13 of Decree-Law No.
90/90 and under the terms of articles 5 and 8 of Decree-Law No. 88/90, of March
16, over an area approximately 520 Km2, and area bounded by a polygon whose
vertices, in Hayford-Gauss coordinates, as referred to the Central Point
indicate:
<TABLE>
<S> <C> <C> <C>
- --------------------VERTEX--------------------MERIDIAN (m)------------------------------- - 147 900 --------
- --------------------2------------------------- + 46 180---------------------------------- - 163 000 --------
- --------------------3------------------------- + 61 980---------------------------------- - 163 820 --------
- --------------------4------------------------- + 76 250---------------------------------- - 175 700 --------
- --------------------5------------------------- + 76 400---------------------------------- - 187 100 -------
- --------------------6------------------------- + 77 200---------------------------------- - 189 350 --------
- --------------------7------------------------- + 68 400---------------------------------- - 192 450 --------
- --------------------8------------------------- + 64 000---------------------------------- - 186 050 --------
- --------------------9--------------------------+ 64 900---------------------------------- - 181 350 --------
- -------------------10--------------------------+ 60 300---------------------------------- - 174 500 --------
- -------------------11------------------------- + 52 750---------------------------------- - 169 570 --------
- -------------------12------------------------- + 41 850---------------------------------- - 166 040 --------
- -------------------13------------------------- + 31 150---------------------------------- - 155 700 --------
</TABLE>
OPTION TO PURCHASE AND SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made the 24th day of October, 1998, by and among APAC
MINERALS INC., a body corporate incorporated pursuant to the laws of the
Province of British Columbia and having an office located at 1147 Homer Street,
Vancouver, B.C., V6B 5T5 (hereinafter called "APAC"), ARMINEX S.A., a body
corporate incorporated pursuant to the laws of Argentina and having an office
located at Lemos 522, 3B, Mendoza, Ciudad (5500), Argentina (hereinafter called
"Arminex"), LAFAYETTE LIMITED, a body corporate incorporated pursuant to the
laws of St. Vincent, and having an office located at Trust House, 112 Bonadie
Street, Kingstown, St. Vincent (hereinafter called "Lafayette"), and ILMARS
GEMUTS, an individual, of 90 Hillside Trail, Mahopac, NY 10541, USA (hereinafter
called "Gemuts") (Lafayette and Gemuts being collectively referred to herein as
the "Optionors").
RECITALS
A. Arminex carries on the business of exploration and
development of mineral resources in Argentina, and Arminex currently holds more
than twenty (20) concessions in different provinces in Argentina;
B. APAC wishes to obtain from the Optionors and/or Arminex and the
Optionors and Arminex wish to grant to APAC and exclusive option to purchase an
undivided Forty percent (40%) equity interest in Arminex, and a second option to
purchase an additional Eleven percent (11%) interest in Arminex, for an
aggregate Fifty-one percent (51%) equity interest in Arminex, upon the terms and
conditions set below; and
C. APAC, Lafayette, Gemuts and Arminex desire to enter into this
Agreement in order to record their respective rights and obligations, and how
the affairs of Arminex will be conducted.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
sum of Fifty Thousand Dollars ($50,000) in lawful money of Canada paid to
Arminex, the receipt and sufficiency of which is hereby acknowledged by Arminex
and the Optionors, and the mutual promises herein contained, the parties hereto
agree each with the other as follows:
1. DEFINITIONS
1.1 In this Agreement, the following words and phrases, unless there is
something in the context inconsistent therewith, will have the following
meanings:
(a) "Affiliate" means, with respect to any Shareholder, any
corporation which is directly or indirectly controlled by such
Shareholder, and if any Shareholder shall be a corporation
means in addition to the foregoing any corporation which
controls such corporate Shareholder;
(b) "Arminex" means Arminex S.A.;
(c) "APAC" means APAC Minerals Inc.;
(d) "Approval Date" means the date upon which APAC receives
written confirmation from the Vancouver Stock Exchange that
this Agreement has been accepted for filing by the Vancouver
Stock Exchange;
<PAGE>
(e) "Board" means the board of directors of Arminex;
(f) "Escrow Agent" shall mean Montpellier McKeen Varabioff Talbot
& Guiffe, the Optionors' lawyers in Vancouver, B.C., who shall
hold the Shares and authorizations referred to in Section 3.6
in escrow until APAC has exercised its First Option and/or its
Second Option as hereinafter provided.
(g) "Operator" means that person or company acting as such
pursuant to Article 6 of this Agreement;
(h) "Optionors" means Lafayette and Gemuts, or their respective
successors or assigns;
(i) "Property" means the exploration and mining concessions
lawfully owned by Arminex in Argentina, including those owned
on the date hereof and those which may be acquired during the
term hereof, such concessions currently being those more
particularly described in Exhibit A attached hereto and by
this reference incorporated herein and any successor or
replacement mineral titles or interests therein;
(j) "Shareholders" means a shareholder of Arminex, including, as
appropriate, APAC, Lafayette and Gemuts or their respective
successors or permitted assigns and "Shareholder" means any
one of them;
(k) "Shares" means at the relevant time the shares in the capital
of Arminex issued and outstanding; and
(l) "Technical Report" means an independent geological or
engineering report on the Property or any portion thereof
discussing the geology of the area, the historical work
performed upon the Property or any portion thereof, and
recommending that further exploration or development work be
carried out thereon.
2. CONDITIONS PRECEDENT
2.1 APAC's obligations hereunder shall be subject to the completion of the
following conditions precedent:
(a) APAC's receipt of audited financial statements of Arminex
prepared in accordance with generally accepted accounting
principles in Canada;
(b) APAC's receipt of a satisfactory title report on the Property;
and
(c) The acceptance of this Agreement for filing by the Vancouver
Stock Exchange.
3. OPTIONS TO PURCHASE SHARES
3.1 The Optionors and Arminex hereby irrevocably grant to APAC the exclusive
<PAGE>
right to purchase (the "First Option") from Optionors and/or Arminex that number
of the Shares sufficient to comprise at the time of exercise and completion of
the First Option, Forty percent (40%) of the Shares (the "First Option Shares"),
such First Option being exercisable on or before the first anniversary of the
Approval Date as more particularly set out in paragraph 3.2 below. The First
Option shall be granted on the Approval Date. If the Approval Date has not
occurred within forty-five (45) days of the date hereof, the Optionors shall,
upon request by APAC or of their own discretion, refund the CDN$50,000 amount
paid to the Optionors upon execution hereof, without deduction or interest, and
this Agreement shall be terminated and of no further force and effect.
3.2 APAC may exercise the First Option
(a) by the payment to Arminex of funds as required by budgets as
provided in paragraph 3.3 below in the aggregate sum of Six
Hundred Fifty Thousand Dollars ($650,000) in lawful money of
Canada, on or before the first anniversary of the Approval
Date; and
(b) by the issuance and delivery to Optionors of an aggregate of
Eight Hundred Thousand (800,000) free trading common shares of
APAC within a period of fifteen (15) business days following
the date of APAC's receipt of written confirmation from the
Vancouver Stock Exchange ("VSE") that a Technical Report filed
with the VSE reviewing exploration work performed on any of
the Property during the First Option period and recommending
that further exploration or development work be carried out on
the concessions, is in a form acceptable for the issuance of
such shares, but in any event not less than 30 days after the
first anniversary of the Approval Date.
3.3 Exploration and development expenditures on the concessions will only be
conducted in accordance with budgets and programs approved by Arminex and APAC
and these exploration and development expenses and reasonable costs of Arminex
will be funded by APAC within Forty-five (45) days of a cash call to APAC from
Arminex to provided funding for such programs or expenses. If APAC fails to
provide the required funding within the 45-day period or a subsequent 45-day
default period, the applicable option shall terminate. Expenditures in excess of
$650,000 for the exploration and development of the Property in one period may
be carried forward to earn an additional ownership interest pursuant to the
Second Option.
3.4 Upon APAC's exercise of the First Option, the Optionors and Arminex hereby
irrevocably grant to APAC the exclusive right to purchase that number of Shares
(the "Second Option Shares") sufficient to comprise, at the time of exercise and
completion of the Second Option, an additional Eleven percent (11%) equity
interest in Arminex (for an aggregate equity interest of Fifty-one percent (51%)
in Arminex) (the "Second Option"), such Second Option being exercisable on or
before the third anniversary of the Approval Date as more particularly set out
in paragraph 3.5 below.
3.5 In order to exercise the Second Option and earn up to an additional Eleven
percent (11%) ownership interest in Arminex for an aggregate equity interest in
Arminex of Fifty-one percent (51%), APAC must:
<PAGE>
(a) have exercised the First Option;
(b) pay to Arminex the aggregate additional amount of One Million
Five Hundred Thousand Canadian Dollars (CDN$1,500,000) as
required by budgets as provided in paragraph 3.5(c) below for
the purpose of carrying out further exploration and
development on all or any of the concessions including the
funding of property maintenance costs for the concessions and
the other reasonable costs of Arminex within the two (2) year
period following the first anniversary of the Approval Date
(the "Second Option Period") as follows:
(i) not less than Seven Hundred Fifty Thousand Canadian
Dollars (CDN$750,000) during the first year of the
Second Option Period, in which case APAC shall have
earned an additional Five percent (55) interest for
an aggregate Forty-five percent (45%) equity interest
in Arminex; and
(ii) not less than a further Seven Hundred Fifty Thousand
Canadian Dollars (CDN$750,000) during the second year
of the Second Option Period;
(c) exploration and development expenditures on the Property will
only be conducted during the Second Option Period in accordance
with budgets and programs approved by Arminex and APAC and these
exploration and development expenses and reasonable costs of
Arminex will be funded by APAC within Forty-five (45) days of a
cash call to APAC from Arminex to provide funding for such
programs or expenses. If APAC fails to provide the required
funding within the 45-day period or a subsequent 45-day default
period, the applicable option shall terminate. Expenditures in
excess of $750,000 for the exploration and development of the
Property in the first year of the Second Option Period may be
carried forward to the second year of the Second Option Period.
All of the foregoing share payments and expenditures will be optional. APAC may
choose not to deliver any shares of APAC to the Optionors or pay moneys to
Arminex to fund exploration and development expenditures under the First Option
and will thereby surrender and terminate the First Option and retain no interest
in Arminex. Alternatively, APAC may decide to deliver that number of shares of
APAC to the Optionors and make the payments to Arminex to fund exploration and
development expenditures to exercise the First Option to earn a Forty percent
(40%) equity interest in Arminex or both the First Option and the Second Option
to earn up to the total Fifty-one percent (51%) equity interest in Arminex, in
accordance with the requirements described in this paragraph 3.5.
3.6 Upon completion of the payment and execution of this Agreement, Arminex
and/or Optionors shall deliver the First Option Shares and Second Option Shares,
duly endorsed for transfer to APAC together with the appropriate corporate
authorizations or resolutions for such transfer, to the Escrow Agent. In the
event Arminex shall issue additional shares or warrants at any time during the
term of this Agreement, Arminex shall deliver to the Escrow Agent additional
share certificates sufficient to assure to APAC Forty percent (40%) and/or
Fifty-one percent (51%) equity interest in Arminex as the case may be. The
Escrow Agent shall hold such shares and authorizations in escrow in accordance
<PAGE>
with irrevocable escrow instructions executed by all parties until they have
received written confirmation from APAC that:
(a) APAC has delivered the APAC shares and the balance of Six
Hundred and Fifty Thousand Dollars ($650,000) to Arminex in
full and final payment for the First Option Shares, and upon
receipt of such written confirmation, the Escrow Agent shall
release the First Option Shares to APAC provided that the
Escrow Agent has given at least fifteen (15) days notice to
Arminex; and
(b) APAC has delivered the balance of One Million Five Hundred
Thousand Dollars ($1,500,000) to Arminex in full and final
payment for the Second Option Shares, and upon receipt of such
written confirmation, the Escrow Agent shall release the
Second Option Shares to APAC provided that the Escrow Agent
has given at least fifteen (15) days notice to Arminex.
The parties hereto agree to indemnify and hold the Escrow Agent harmless from
any and all losses, claims, costs, expenses and damages or liabilities which
they may suffer or incur, caused or arising from their acceptance of the terms
of escrow described herein.
3.7 The exercise date (the "Excise Date") for the exercise of the First Option
and Second Option to earn the applicable interest described in this Section 3
shall be five (5) business days after the fulfilment by APAC of the conditions
set forth to earn the applicable interest and, as of such Exercise Date, APAC
will be deemed to have acquired such interest and will be entitled to receive a
transfer from Arminex and/or the Optionors of the appropriate number of Shares
of Arminex and/or Optionors in respect of the interest earned.
3.8 The First Option and Second Option granted to APAC herein are options only,
and no payment of action on the part of APAC obligates APAC to make any further
payment or perform any further act hereunder.
4. PERFORMANCE BONUS
4.1 In the event that, at any time within Five (5) years from the Approval Date,
exploration on any of the concessions comprising the Property has advanced to a
stage where the Arminex attributable interest in a measured or indicated
resource has been outlined to or greater than One (1) million ounces of gold or
gold equivalent, the Optionors shall be entitled to receive a performance bonus.
This bonus entitles Optionors to a one-time payment upon the first discovery and
delineation of such measured or indicated resource. This bonus will be
calculated at $5.00 per ounce (for example, for 1 million ounces of gold or gold
equivalent attributable to the interest of Arminex in such resource, Five (5)
million U.S. dollars), to Arminex of which the Optionors will be paid pro-rata
based on their then current equity interest in Arminex. APAC shall pay such
bonus to Optionors in proportion to their then current shareholdings in Arminex.
APAC will have the option to pay the performance bonus in U.S. dollars or in
free trading common shares of APAC valued at the thirty (3) trading day weighted
average closing price of APAC, prior to the date of public disclosure of the
measured or indicated resource. The bonus in U.S. dollars or issued shares shall
be delivered to the Optionors upon written acceptance from the VSE of a
Technical Report confirming such measured or indicated resources on any of the
concessions included in the Property.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES
5.1 The Optionors, jointly and severally, and APAC each represent and warrant to
others as follows:
(a) It validly exists, and is in good standing with respect to its
required filings with all applicable regulatory authorities in
its place of incorporation;
(b) It has the corporate power and authority to enter into this
Agreement and to carry out and implement the terms hereof,
without the prior consent or approval of any other third party
or governmental authority, and its execution and delivery of
this Agreement will not result in its breach of any of its
constating documents, material contracts, permits, licenses,
or concessions, and will not result in the violation of any of
the terms and provisions of any law applicable to it;
(c) This Agreement has been duly executed and delivered by it and
constitutes a valid obligation of it legally binding upon it
and enforceable against it in accordance with its terms;
5.2 The Optionors, jointly and severally represent and warrant to APAC that
Arminex's exploration and mining concessions comprising the Property validly
exist and are in good standing in respect of all required filings with the
applicable regulatory authorities, and Arminex is not in breach or default of
any of the terms and conditions of the concessions comprising the Property, and
the concessions comprising the Property are properly recorded and registered in
title name of Arminex, and are not subject to any lien, charge, or encumbrance
of any nature or kind whatsoever by any other third party, other than normal
governmental royalties under applicable mining law.
6. OPERATOR
6.1 Unless APAC shall notify Optionors that it shall elect to abandon either its
First Option or its Second Option, and otherwise until the exercise of the
Second Option, the Operator shall be APAC. If APAC shall abandon either its
First Option or its Second Option and otherwise after the exercise of the Second
Option, there shall be no Operator, and the activities of Arminex shall be in
the discretion of the Board in accordance with its Articles and bylaws.
6.2 The Operator may at any time on sixty (60) days notice to Arminex resign as
Operator, in which event Arminex shall select another party, person or company
to be operator upon the sixtieth day after receipt of the Operator's notice of
resignation or such sooner date as Arminex may establish and give notice of to
the resigning Operator. The resigning Operator shall thereupon be released and
discharged from all its duties and obligations as Operator on the earlier of
those dates save only as to those duties and obligations that it theretofore
should have performed.
6.3 The new Operator shall assume all the rights, duties, liabilities and status
of the previous operator as provided in the Agreement, without obligation to
retain or hire any of the employees of the former Operator or to indemnify the
former Operator for any costs or expenses which the previous Operator may incur
as a result of the termination of the employment of any of its employees
resulting from this change of Operator, and shall continue to act as Operator
<PAGE>
until its replacement of resignation.
6.4 The Operator shall have full right, power and authority to do everything
necessary or desirable to carry out and to determine the manner of the
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
representatives of the parties to have access to the
properties at all reasonable times for the purpose of
inspecting mining 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 arid in this
connection to delegate any of its powers and rights to perform
its duties and obligations hereunder, but the Operator shall
not enter into any contractual relationships with the party
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 the equipment and facilities thereon and each
party hereby irrevocably constitutes the Operator its true and
lawful attorney to give effect to the foregoing and hereby
agrees to indemnify and save the Operator harmless from any
and all costs, loss or damage sustained or incurred without
gross negligence or bad faith by the Operator directly or
indirectly as a result of its exercise of its powers pursuant
to this subparagraph; and
(d) Conduct such title examinations and cure such title defects as
may be advisable in the reasonable judgment of the Operator.
6.5 The Operator shall have the following duties and obligations during the term
hereof:
(a) To diligently manage, direct and control all exploration,
development and producing operations in and under the Property
in a prudent and workmanlike manner and in compliance with all
applicable laws, rules, orders and regulations;
(b) To prepare and deliver to each of the parties after the
completion of a program, a report containing the engineering
and geological results derived from the mining work just
completed as well as a breakdown of the costs made in carrying
out such work, and such report shall contain any conclusions
reached by the Operator as well as the Operator's
recommendations regarding the next program and budget on the
Property; each report shall be delivered to the parties within
forty-five (45) days of the completion of each program;
(c) Subject to the terms and conditions of this Agreement, to keep
the properties of Arminex in good standing, free and clear of
all liens, charges and encumbrances of every character arising
from operations (except for those which are in effect on the
date of this Agreement or are created pursuant to this
Agreement, liens for taxes not yet due, other inchoate liens
<PAGE>
and liens contested in good faith by the Operator) and to
proceed with all diligence to contest or discharge any lien
that is filed by reason of the Operator's failure to perform
its obligations hereunder;
(d) To maintain true and correct books, accounts, and records of
operations hereunder;
(e) To permit one representative of the parties appointed in
writing on not less than two weeks notice and at their expense
to inspect, audit and copy the Operator's accounts and records
relating to the accounting for production or to the
determination of the proceeds from the sale thereof for any
fiscal year of the Operator within nine (9) months following
the end of such fiscal year;
(f) To obtain and maintain or cause any contractor engaged
hereunder to obtain and maintain during any period in which
active mining work is carried out hereunder such insurance
coverage as the Operator deems advisable;
(g) To open and maintain on behalf of Arminex such bank account or
bank accounts as the Operator may direct;
(h) To permit the parties or their representatives appointed in
writing, on not less than two (2) weeks notice, at their own
expense and risk, reasonable access to the Property and all
data derived from carrying out mining work thereon;
(i) To prosecute, and defend but not to initiate without the
consent of Arminex all litigation or administrative
proceedings arising out of the Property, the equipment or
facilities or mining work conducted thereon; and
(j) To transact, undertake and perform all transactions, contract,
employments, purchases, operations, negotiations with third
parties and any other matter or thing undertaken by or on
behalf of Arminex hereunder in Arminex's name.
7. CONDUCT OF THE AFFAIRS OF THE COMPANY
7.1 Prior to the exercise by APAC of its Second Option, the Shareholders shall
vote their Shares so that the Board shall be comprised of three directors and so
that two nominees will be appointed by Optionors, and one nominee will be
appointed by APAC. In the event that a position on the Board shall be open for
any reason whatsoever, the Shareholder whose nominee shall have formerly
occupied such position shall be entitled to nominate a new director to fill such
vacancy. Following the exercise by APAC of its Second Option, the Shareholders
shall vote their Shares to the effect that APAC will be entitled to have its
representatives constitute a majority of the Board.
7.2 Unless otherwise provided herein the conduct of the business of Arminex
shall be governed in accordance with its Articles or by-laws, as the case may
be.
<PAGE>
8. INTEREST
8.1 If any Shareholder is required by this Agreement to pay monies to the other
Shareholders, such monies shall bear interest at the prime commercial lending
rate of the bank of Arminex at the time the monies became payable plus 4% per
annum calculated monthly until repayment.
9. TERMINATION
9.1 This agreement shall terminate:
(a) if Arminex ceases to carry on business, has a receiving order
made against it, goes into bankruptcy either voluntarily or
involuntarily or makes a proposal to its creditors;
(b) if the First Option terminates unexercised; and
(c) if the parties hereto consent in writing to the termination
hereof.
10. THIRD PARTY JOINT VENTURES
10.1 Arminex with prior notice to APAC and consultation with APAC, may commit
concessions comprising the Property to joint ventures or joint venture companies
operated by third parties other than APAC upon such reasonable terms as Arminex
shall negotiate in good faith, provided that Arminex shall hold its interests in
such joint ventures or joint venture companies subject to APAC's rights under
this Agreement.
11. GENERAL PROVISIONS
11.1 The parties shall executed such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.
11.2 The provisions herein constitute the entire agreement among the parties and
supersedes all previous expectations, understandings, communications,
representations and agreements whether verbal or written among the parties with
respect to the subject matter hereof.
11.3 If any provisions of this Agreement is unenforceable or invalid for any
reason whatsoever, such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining provisions of this Agreement and
such provisions shall be severable from the remainder of this Agreement.
11.4 Any notice required to be given hereunder by any party shall be deemed to
have been well and sufficiently given if mailed by prepaid registered mail,
telexed or telegraphed to, or delivered at, the address of the other party
hereinafter set forth:
<PAGE>
If to APAC Minerals Inc.: 1147 Homer Street
Vancouver, BC V6B 5T5
If to Arminex S.A.: Lemos 522, 3B,
Mendoza, Ciudad (5500),
Argentina
If to Lafayette Limited: Trust House, 112 Bonadie Street
Kingstown, St. Vincent
If to Ilmars Gemuts: 90 Hillside Trail
Mahopac, NY 10541, USA
or at such other address as the other party may from time to time direct in
writing, and any such notice shall be deemed to have been received, if mailed,
telexed or telegraphed, 48 hours after the time of mailing, telexing or
telegraphing, and if delivered, upon the date of delivery. If normal mail
service, telex service or telegraph service is interrupted by strike, slowdown,
force majeure or other cause, a notice sent by the impaired means of
communication will not be deemed to be received until actually received, and the
party sending the notice shall utilize any other such services which have been
so interrupted or shall deliver such notice in order to ensure prompt receipt
thereof.
11.5 Time shall be of the essence hereof.
11.6 This Agreement shall be governed and construed in accordance with the law
of the Province of British Columbia.
11.7 Should there be a disagreement or a dispute between the parties hereto with
respect to this Agreement or the interpretation thereof, the same shall be
referred to a single arbitrator pursuant to the International Commercial
Arbitration Act of British Columbia, and the determination of such arbitrator
shall be final and binding upon the parties hereto.
11.8 The headings in this Agreement form no part of this Agreement and shall be
deemed to have been inserted for convenience only.
11.9 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective personal representatives, successors and permitted
assigns, as the case may be.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed these presents
under his hand and seat in the case of Gemuts and in the presence of their
proper officers duly authorized in the case of APAC, Arminex and Lafayette, as
of the day and year first above written.
THE COMMON SEAL OF APAC Minerals Inc. was hereunto )
affixed in the presence of: )
)
)
/s/ TORE BIRKELAND )
------------------ )
Tore Birkeland )
Authorized Signatory ) C/S
)
)
/s/ JOANNE YAN )
------------- )
Joanne Yan )
Authorized Signatory )
)
THE CORPORATE SEAL OF ARMINEX S.A. was hereunto affixed )
in the presence of: )
)
/s/ SVEN-ERIK SETTERBERG )
- ------------------------- )
Sven-Erik Setterberg )
Authorized Signatory ) C/S
)
)
)
Authorized Signatory )
)
THE CORPORATE SEAL OF LAFAYETTE LIMITED was hereunto )
affixed in the presence of: )
)
)
/s/ W. DENNIE )
- --------------- )
W. Dennie )
Authorized Signatory ) C/S
)
)
)
Authorized Signatory )
)
SIGNED, SEALED AND DELIVERED by ILMARS GEMUTS in the )
presence of: )
)
)
"Signed" )
Signature ) /s/ILMARS GEMUTS
) ----------------
Martinez de Rosas 32 "C" ) Ilmars Gemuts
- -------------------------------------------- )
Address )
Medoza (5500) )
- -------------------------------------------- )
)
Geologist )
Occupation
<PAGE>
APAC MINERALS INC.
1147 Homer Street
Vancouver, B.C., Canada, V6B 5T5
Telephone: (604) 688-2220 Fax: (604) 681-4056
November 27, 1998
Arminex S.A.
Lemos 522, 3B
Mendoza Ciudad (5500)
Argentina
Attention: Mr. Sven-Erik Setterberg
Dear Mr. Setterberg,
RE: APAC Minerals Inc. and its Option Agreement dated October 24, 1998 with
Arminex and its shareholders, S.A., Lafayette Limited and Mr. Ilmars Gemuts
to acquire a 51% interest in Arminex S.A., which lawfully owns more than 20
exploration and mining concessions in Argentina.
- ------------------------------------------------------------------------------
Based on our discussion with VSE and its recommendation we would like to amend
Section 4.1 of the Agreement of October 24, 1998 as the following.
"4.1 In the event that, at any time within Five (5) years from the Approval
Date, exploration of any of the concessions comprising the Property has advance
to a stage where the Arminex attributable interest in proven and probable
reserves have been outline to or greater than One (1) million ounces of gold or
gold equivalent, the Optionors shall be entitled to receive a performance bonus.
This bonus entitles Optionors to a one-time payment upon the first discovery and
delineation of such proven and probable reserves. This bonus will be calculated
at $5.00 per ounce (for example, for one (1) million ounces of gold or gold
equivalent attributable to the interest of Arminex in such reserves, Five (5)
million U.S. dollars), to Arminex of which the Optionors will be paid pro-rata
based on their then current equity interest in Arminex, APAC shall pay such
bonus to Optionors in proportion to their then current shareholdings in Arminex.
APAC will have the option to pay the performance bonus in U.S. dollars or in
free trading common shares of APAC valued at the thirty (30) trading day
weighted average closing price of APAC, prior to the date public disclosure of
the proven and probable reserves. The bonus in U.S. dollars or issued shares
shall be delivered to the Optionors upon written acceptance from the VSE of a
Technical Report confirming such proven and probable reserves on any of the
concessions included in the Property."
<PAGE>
Please confirm your understanding and agreement with the foregoing by signing
this letter and faxing it to us with the original by mail.
Yours truly,
APAC Minerals Inc.
Per:
/s/ TORE BIRKELAND
----------------
Tore Birkeland
President
Agreed to and Accepted By
Arminex S.A.
Per:
/s/ SVEN-ERIK SETTERBERG
-----------------------
Sven-Erik Setterberg
Lafayette Limited
Per:
/s/ W. DENNIE
---------------
Mr. Ilmars Gemuts
<PAGE>
THIRD AMENDMENT
TO
OPTION TO PURCHASE AND SHAREHOLDERS AGREEMENT
THIS THIRD AMENDMENT TO OPTION TO PURCHASE AND SHAREHOLDERS AGREEMENT made as of
and effective from the 25th day of March, 1999.
BETWEEN:
APAC MINERALS INC., a body corporate incorporated pursuant to
the laws of the Province of British Columbia and having an
office located at 1147 Homer Street, Vancouver, B.C., V6B 5T5
("APAC")
OF THE FIRST PART
AND:
ARMINEX S.A., a body corporate incorporated pursuant to the laws of
Argentina and having an office located at Lemos 522, 3B, Mendoza,
Ciudad (5500), Argentina
("Arminex")
AND:
LAFAYETTE LIMITED, a body corporate incorporated pursuant to the laws
of St. Vincent, and having an office located at Trust House, 112
Bonadie Street, Kingstown, St. Vincent
("Lafayette")
OF THE THIRD PART
AND:
ILMARS GEMUTS, an individual, of 7486 Robb Court, Arvada, Colorado,
80005, USA
("Gemuts")
OF THE FOURTH PART
(Lafayette and Gemuts being collectively referred to as the "Optionors")
<PAGE>
WHEREAS:
A. By an Option to Purchase and Shareholders Agreement dated October 24, 1998
(the "Agreement"), the Optionors have granted to APAC an option to acquire
up to 51% of the Shares of Arminex upon certain terms and conditions.
B. APAC, Arminex and the Optionors have agreed to further amend the Agreement
as herein set forth.
NOW THEREFORE THIS THIRD AMENDMENT WITNESSETH that in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, APAC, Arminex, Lafayette and Gemuts agree as
follows:
1. The Agreement is hereby amended by deleting Paragraph 10.1 and replacing
the same with a new Paragraph 10.1 to read as follows:
10.1 Arminex with prior notice to APAC and with prior consultation and
the prior written consent of APAC, which consent may not be
unreasonably withheld by APAC, may commit concessions comprising
the Property to joint ventures or joint venture companies
operated by third parties other than APAC upon such reasonable
terms as Arminex and APAC shall negotiate in good faith, provided
that Arminex shall hold its interest in such joint ventures or
joint venture companies subject to APAC's rights under this
Agreement.
2. All capitalized terms herein shall have the same meaning as attributed to
them in the Agreement.
3. The Agreement and this Third Amendment shall be read together as far as it
is practical as though all of the terms of the Agreement, as amended, and
this Third Amendment to Option to Purchase and Shareholders Agreement were
contained in one document.
4. Except as amended hereby, the provisions of the Agreement, as amended,
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Third Amendment to
Option to Purchase and Shareholders Agreement as of and from the date first
above written. IN WITNESS WHEREOF the parties hereto have executed this Third
Amendment to Option to Purchase and Shareholders Agreement as of and from the
date first above written.
THE COMMON SEAL of APAC MINERALS INC. was hereto affixed in )
the presence of its authorized signatories: )
)
)
/s/ TORE BIRKELAND )
-------------------- )
Tore Birkeland )
Authorized Signatory )
)
)
/s/ JOANNE YAN )
------------- )
Joanne Yan )
Authorized Signatory )
)
THE CORPORATE SEAL of ARMINEX S.A. was hereto affixed in the )
presence of its authorized signatories: )
)
/s/ SVEN-ERIK SETTERBERG )
- ---------------------- )
Sven-Erik Setterberg" )
Authorized Signatory )
)
)
- ----------------------- ) c/s
Authorized Signatory )
)
)
THE CORPORATE SEAL of LAFAYETTE LIMITED was hereto affixed in )
the presence of its authorized signatory: )
)
)
/s/ W. DENNIE )
--------------- )
W. Dennie ) c/s
Authorized Signatory )
)
)
)
<PAGE>
SIGNED, SEALED and DELIVERED by ILMAR GEMUTS in the presence )
of: )
)
)
/s/ AINA LISMANIS )
------------- )
AINA LISMANIS )
Signature )
)
90 Hillside Trail /s/ ILMARS GEMUTS )
Address -------------- )
Ilmars Gemuts )
Mahopac NY 10541 )
- --------------------------------------------
)
)
Biologist )
Occupation )
)
<PAGE>
DATED: February ______, 1999
================================================================================
BETWEEN:
APAC MINERALS INC.
OF THE FIRST PART
AND:
ARMINEX S.A.
OF THE SECOND PART
AND:
LAFAYETTE LIMITED
OF THE THIRD PART
AND:
ILMARS GEMUTS
OF THE FOURTH PART
===============================================================================
AMENDING AGREEMENT
===============================================================================
SALLEY BOWES HARWARDT
Barristers and Solicitors
Suite 1750, 1185 West Georgia Street
Vancouver, B.C. V6E 4E6
(604) 688-0788
Attention: Louis P. Salley
==============================================================================
<PAGE>
AMENDING AGREEMENT
THIS AMENDING AGREEMENT made as of and effective from the day of February, 1999
BETWEEN:
APAC MINERALS INC., a body corporate incorporated pursuant to the laws
of British Columbia, and having an office located at 1147 Homer Street,
Vancouver, British Columbia, V6B 5T5
("APAC")
OF THE FIRST PART
AND:
ARMINEX S.A., a body corporate incorporated pursuant to the laws of
Argentina, and having an office located at Lemos 522, 3B, Mendoza,
Ciudad (5500), Argentina
("Arminex")
OF THE SECOND PART
AND
LAFAYETTE LIMITED, a body corporate incorporated pursuant to the
laws of St. Vincent, and having an office located at Trust House,
112 Bonadie Street, Kingstown, St. Vincent
("Lafayette")
OF THE THIRD PART
AND
ILMARS GEMUTS, an individual, of 90 Hillside Trail, Mahopac, NY 10541,
USA
("Gemuts")
(Lafayette and Gemuts being collectively referred to as the
"Optionors")
<PAGE>
OF THE FOURTH PART
WHEREAS:
A. By Option to Purchase and Shareholders Agreement dated October 24, 1998
(the "Agreement"), the Optionors granted to APAC an option to acquire up to
51% of the Shares of Arminex upon certain terms and conditions;
B. APAX, Arminex and the Optionors have agreed to amend the Agreement as
herein set forth.
NOWTHEREFORE THIS AMENDING AGREEMENT WITNESSETH and in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, APAC, Arminex, Lafayette, and Gemuts agree as
follows:
1. The Agreement is hereby amended by adding the following as paragraph 7A
thereto:
"7A. RESTRICTIONS ON TRANSFER/RIGHT OF FIRST REFUSAL
7A.1 Except as otherwise expressly permitted in this Agreement:
(a) no Shareholder shall sell, transfer or otherwise
dispose or offer to sell, transfer or otherwise
dispose, of any of its Shares unless that Shareholder
(the "Offeror") first offers by notice in writing (the
"Offer") to the other Shareholders (the "Others") pro
rata in accordance with their shareholdings in the
Company the prior right to purchase, receive or
otherwise acquire the same;
(b) the Offer shall set forth:
(i) the Shares offered for sale;
(ii) the consideration therefor expressed only in
lawful money of Canada;
(iii) the terms and conditions of the sale; and
(iv) that the Offer is open for acceptance for a
period of 60 days after receipt of such
Offer by the Others;
(c) any of the Others may accept such Offer and by such
acceptance specify any additional portion of the Shares
offered for sale that such Shareholder is prepared to
purchase in the event that any of the Others fails to
accept such Offer, and if any of the Others fails to
accept such Offer, such Shareholder (pro rata if more
than one) shall be entitled to purchase such additional
portion of the Shares as shall be so available.
(d) if, and to the extent the Offer is not accepted, the
Offeror may sell, transfer or otherwise dispose of its
remaining Shares to any other person, firm or
corporation ("Third Party") only for the consideration
and upon the terms and conditions as set out in the
Offer but only within the period of 90 days after the
expiry of the period for acceptance by the Others and,
if the Offeror does not do so, the provisions of this
paragraph 7A.1 will again become applicable to the
<PAGE>
sale, transfer or other disposition of its Shares and
so on from time to time;
(e) nodisposition of any Shares permitted by this paragraph
7A.1 shall be made unless the Third Party shall have
entered into an agreement with the Others by which the
Third Party shall be bound by and entitled to the
benefit of the provisions of this Agreement and the
Others shall enter into such an agreement; and
(f) any Shareholder who shall have disposed of all its
Shares in compliance with the provisions of this
Agreement shall be entitled to the benefit of and be
bound by only the rights and obligations which arose
pursuant to this Agreement prior to such disposition.
7A.2 Any Shareholder may sell, transfer or otherwise dispose of the
whole or any part of its Shares to any of its Affiliates
provided that the Shareholder and the Affiliate enter into an
agreement with the other Shareholders that:
(a) the Affiliate will remain such so long as the Affiliate
holds the Shares or any part thereof;
(b) prior to the Affiliate ceasing to be such, the
Affiliate will transfer its Shares back to the
Shareholder or to another Affiliate of the Shareholder
provided that such other Affiliate enters into a
similar agreement with the other Shareholders; and
(c) the Affiliate will otherwise be bound by and have the
benefit of the provisions of this Agreement.
7A.3 Any sale, transfer or other disposition referred to in
paragraph 7A.2 shall not release the Shareholder from his
obligations hereunder.
7A.4 Except as specifically provided herein, no Shareholder shall
mortgage, pledge, charge, hypothecate or otherwise encumber
his Shares or any part thereof without the prior written
consent thereto of the other Shareholders, which consent may
not be arbitrarily or unreasonably withheld.
For greater certainty, the Optionors and Arminex hereby confirm and
acknowledge that, for the purposes of the provisions of this paragraph
7A only, APAC shall be deemed to be a Shareholder as of and from the
date of the Agreement."
2. All capitalized terms herein shall have the same meaning as attributed to
them in the Agreement.
3. The Agreement and this Amending Agreement shall be read together as far as
it is practical as though all of the terms of the Agreement and this
Amending Agreement were contained in one document.
4. Except as amended hereby, the provisions of the Agreement remain in full
force and effect.
<PAGE>
IN WITNESS WHEREOF the Parties hereto have executed this Amending Agreement as
of and from the date first above written.
THE COMMON SEAL OF APAC MINERALS INC. was hereunto )
affixed in the presence of its authorized signatories: )
)
- -------------------------------------- )
Authorized Signatory )
) C/S
- -------------------------------------- )
Authorized Signatory )
)
THE CORPORATE SEAL OF ARMINEX S.A. was hereunto affixed )
in the presence of its authorized signatories: )
)
- -------------------------------------- )
Authorized Signatory )
) C/S
- -------------------------------------- )
Authorized Signatory )
)
THE CORPORATE SEAL OF LAFAYETTE LIMITED was hereunto )
affixed in the presence of its authorized signatory: )
)
- -------------------------------------- )
Authorized Signatory ) C/S
)
SIGNED, SEALED AND DELIVERED by ILMARS GEMUTS in the )
presence of: )
)
- -------------------------------------- )
Signature )
- -------------------------------------- ) -----------------
Address ) ILMARS GEMUTS
- -------------------------------------- )
Occupation )
<PAGE>
===============================================================================
DATED: June 4, 1999
===============================================================================
BETWEEN:
APAC MINERALS INC.
OF THE FIRST PART
AND:
ARMINEX S.A.
OF THE SECOND PART
AND:
LAFAYETTE LIMITED
OF THE THIRD PART
AND:
ILMARS GEMUTS
OF THE FOURTH PART
================================================================================
FOURTH AMENDMENT TO OPTION TO PURCHASE
AND SHAREHOLDERS AGREEMENT
===============================================================================
Salley Bowes Harwardt
Barristers and Solicitors
Suite 1750, 1185 West Georgia Street
Vancouver, B.C. V6E 4E6
(604) 688-0788
===============================================================================
<PAGE>
FOURTH AMENDMENT TO OPTION TO PURCHASE AND
SHAREHOLDERS AGREEMENT
THIS FOURTH AMENDING AGREEMENT made the 4th day of June, 1999.
BETWEEN:
APAC MINERALS INC., a body corporate incorporated pursuant
to the laws of the Province of British Columbia and having
an office located at Suite 1208 - 808 Nelson Street,
Vancouver, B.C., V6Z 2H2
(hereinafter called "APAC")
OF THE FIRST PART
AND:
ARMINEX S.A., a body corporate incorporated pursuant to the
laws of Argentina and having an office located at Lemos 522,
3B, Mendoza, Ciudad (5500), Argentina
(hereinafter called "Arminex")
OF THE SECOND PART
AND:
LAFAYETTE LIMITED, a body corporate incorporated pursuant to
the laws of St. Vincent, and having an office located at
Trust House, 112 Bonadie Street, Kingstown, St. Vincent
(hereinafter called "Lafayette")
OF THE THIRD PART
AND:
ILMARS GEMUTS, an individual, of 90 Hillside Trail, Mahopac,
New York, 10541, USA
(hereinafter called the "Gemuts")
OF THE FOURTH PART
(Lafayette and Gemuts being collectively referred to herein as the "Optionors")
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WHEREAS:
A. Pursuant to an Option to Purchase and Shareholders Agreement dated October
24, 1998, as amended November 27, 1998, February 6, 1999, and March 25,
1999 (collectively, the "Agreement"), the Optionors have granted to APAC
certain exclusive options to acquire up to Fifty-One percent (51%) of the
total issued and outstanding shares of Arminex, consisting of One Thousand
(1,000) common shares (the "Shares"), as follows:
No. of Shares Percentage Interest in Shares
---------------- --------------------------------------------
400 Forty percent (40%) (the "First Option");
110 Eleven percent (11%) (the "Second Option");
upon the terms and conditions contained in the Agreement;
B. The parties have agreed to further amend the Agreement to provide for the
grant by the Optionors to APAC of a further exclusive option to purchase
the remaining Forty-Nine percent (49%) interest in the Shares being, for
greater certainty, an additional 490 common shares of Arminex, for an
aggregate One Hundred percent (100%) equity interest in Arminex, upon the
terms and conditions set out below.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
One Dollar ($1.00) in lawful money of Canada now paid by APAC, the receipt and
sufficiency of which is hereby acknowledged by Arminex and the Optionors, and
the mutual promises herein contained, the parties hereto agree each with the
other as follows:
1. DEFINITIONS
1.1 In this Fourth Amending Agreement, all defined words and phrases will have
the same meanings as set forth in the Agreement, except as expressly
amended hereby.
2. OPTION TO PURCHASE SHARES
2.1 The Optionors and Arminex hereby irrevocably grant to APAC the exclusive
option to purchase, provided that APAC has first exercised both the First
Option and the Second Option, the remaining Forty-Nine percent (49%)
interest in the Shares being, for greater certainty, an additional 490
common shares of Arminex (the "Third Option Shares"), for an aggregate One
Hundred percent (100%) equity interest in Arminex (the "Third Option"),
such Third Option being exercisable within six (6) months of the date that
APAC exercises the Second Option.
2.2 APAC may exercise the Third Option by the payment to the Optionors of the
sum of Five Hundred Thousand Dollars (CDN$500,000) in lawful money of
Canada, and the issuance to the Optionors of Five Million (5,000,000)
common shares in the capital stock of APAC (the "APAC Shares"), provided
that APAC may exercise the Third Option only if:
(a) the average closing price of APAC's common shares as listed on the
Vancouver Stock Exchange, or any other public stock exchange which
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trades the highest volume of such shares (the "Exchange"), for the
twenty (20) trading days preceding the date of exercise, is at least
CDN$1.00 per share; and
(b) APAC will have filed a current Annual Information Form with the
British Columbia Securities Commission.
2.3 The conditions precedent to the exercise by APAC of the Third Option
described in sub-paragraphs 2.2(a) and (b) above, have been inserted for
the benefit of the Optionors and Arminex and may be waived by them in whole
or in part at any time.
2.4 The issuance of the APAC Shares to the Optionors is first subject to the
prior acceptance for filing by the Exchange of an independent technical
report, satisfactory to the Exchange, which establishes a minimum value of
no less than Five Million Five Hundred Thousand Dollars ($5,500,000) in
lawful money of Canada, for the Forty-Nine percent (49%) interest in the
Shares.
3. ESCROW OF SHARES
3.1 Upon execution of this Fourth Amending Agreement, the Optionors shall
deliver the Third Option Shares, duly endorsed for transfer to APAC
together with the appropriate corporate authorizations or resolutions for
such transfer, to SBH Fiduciary Services Ltd. (the "Escrow Agent"), who
shall hold such shares and authorizations in escrow until they have
received written confirmation from APAC that APAC has delivered the balance
of Five Hundred Thousand Dollars (CDN$500,000) in lawful money of Canada
and the APAC Shares to the Optionors in full and final payment for the
Third Option Shares, and upon receipt of such written confirmation, the
Escrow Agent shall be at liberty to release the Third Option Shares to APAC
provided that the Escrow Agent has given at least fifteen (15) days notice
thereof to the Optionors and provided that the Optionors have not objected
to the release of the Third Option Shares to APAC within that time. The
parties hereto agree to indemnify and hold the Escrow Agent harmless from
any and all losses, claims, costs, expenses and damages or liabilities
which they may suffer or incur, caused or arising from their acceptance of
the terms of the escrow described herein.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Optionors, jointly and severally, represent and warrant to APAC as
follows:
(a) Arminex validly exists, and is in good standing with respect to
its required filings with all applicable regulatory authorities
in Argentina;
(b) The Optionors are the legal and beneficial owners of the Shares,
which are free and clear of all liens charges or encumbrances of
any nature or kind whatsoever;
(c) Arminex has the corporate power and authority to enter into this
Fourth Amending Agreement and to carry out and implement the
terms hereof, without the prior consent or approval of any other
third party or governmental authority, and the execution and
delivery of this Fourth Amending Agreement by the Optionors and
Arminex will not result in the breach by either the Optionors or
Arminex of any material contracts, permits, licenses, or
concessions, or of Arminex' constating documents, and will not
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result in the violation of any of the terms and provisions of any
law applicable to Arminex;
(d) This Fourth Amending Agreement has been duly executed and
delivered by the Optionors and Arminex and constitutes a valid
obligation of the Optionors and Arminex legally binding upon them
and enforceable against them in accordance with its terms;
(e) the exploration and mining concessions comprising the Property
validly exist and are in good standing in respect of all required
filings with the applicable regulatory authorities, and Arminex
is not in breach or default of any of the terms and conditions of
the concessions comprising the Property, and the concessions
comprising the Property are properly recorded and registered in
the name of Arminex, and are not subject to any lien, charge, or
encumbrance of any nature or kind whatsoever by any other third
party, other than normal governmental royalties under applicable
mining law.
4.2 The representations and warranties of the Optionors contained in this
Fourth Amending Agreement are made with the intent that they may be relied
upon by APAC for the purpose of its investment in Arminex, and the
Optionors hereby agree to jointly and severally indemnify APAC against all
losses, claims, costs, expenses and damages or liabilities which it may
suffer or incur, caused or arising from its reliance thereon and the
Optionors further agree that such representations and warranties will be
true as at the closing date of APAC's acquisition of the Third Option
Shares and will have the same force and effect as if they had been made by
the Optionors at the closing date and that the representations and
warranties of the Optionors shall survive the purchase by APAC of the Third
Option Shares and shall continue in full force and effect notwithstanding
any subsequent disposition by APAC of such shares. 5. GENERAL
PROVISIONSGENERAL PROVISIONS
5.1 The parties hereto hereby agree and confirm that:
(i) the Eight Hundred Thousand (800,000) common shares of APAC
which may be issued pursuant to the provisions of paragraph
3.2(b) of the Option to Purchase and Shareholders Agreement
dated October 24, 1998;
(ii) those common shares of APAC which may be issued pursuant to
the provisions of paragraph 4.1 of the subject Option to
Purchase and Shareholders Agreement; and
(iii) the Five Million (5,000,000) common shares of APAC which may
be issued pursuant to the provisions of paragraph 2.2 of this
Fourth Amendment to Option to Purchase and Shareholders
Agreement;
shall, on the date of issuance of any such shares, be issued as fully paid and
non-assessable common shares, which common shares shall be listed and posted for
trading on the Vancouver Stock Exchange or on any other recognized stock
exchange, the NASDAQ, or the Canadian Dealer Network.
5.2 The parties shall execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Fourth Amending Agreement.
<PAGE>
5.3 Any notice required to be given hereunder by any party shall be deemed to
have been well and sufficiently given if mailed by prepaid registered mail,
telexed or telegraphed to, or delivered at, the address of the other party
as set out in the Agreement.
5.4 Time shall be of the essence hereof.
5.5 This Fourth Amending Agreement shall be governed and construed in
accordance with the law of the Province of British Columbia.
5.6 Except as expressly amended hereby, the Agreement is hereby ratified,
confirmed and approved.
5.7 This Fourth Amending Agreement and the obligations of APAC hereunder are
first subject to the prior acceptance of this Fourth Amending Agreement by
the Vancouver Stock Exchange. APAC will use its best efforts to obtain such
acceptance as soon as practicable after the execution hereof.
5.8 The Third Option granted to APAC herein is an option only, and no payment
or action on the part of APAC obligates APAC to make any further payment or
perform any further act hereunder. 5.9 This Fourth Amending Agreement shall
enure to the benefit of and be binding upon the parties hereto and their
respective personal representatives, successors and permitted assigns, as
the case may be.5.9 This Fourth Amending Agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective
personal representatives, successors and permitted assigns, as the case may
be.
IN WITNESS WHEREOF the parties hereto have executed these presents under
his hand and seal in the case of Gemuts and in the presence of their proper
officers duly authorized in the case of APAC, Arminex and Lafayette, as of the
day and year first above written.
THE COMMON SEAL of APAC MINERALS INC. was hereto affixed in )
the presence of its authorized signatories: )
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Authorized Signatory )
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____________________________ ) c/s
Authorized Signatory )
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THE CORPORATE SEAL of ARMINEX S.A. was hereto affixed in the )
presence of its authorized signatories: )
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Authorized Signatory )
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____________________________ ) c/s
Authorized Signatory )
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THE CORPORATE SEAL of LAFAYETTE LIMITED was hereto affixed in )
the presence of its authorized signatory: )
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____________________________ ) c/s
Authorized Signatory )
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SIGNED, SEALED and DELIVERED by ILMAR GEMUTS in the presence )
of: )
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Signature )
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____________________________ )ILMAR GEMUTS
Address )
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Occupation )
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