UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarterly Period ended June 30, 1996
Transition Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from __________ to ___________
Commission File Number _________________________________
IDAHO CONSOLIDATED METALS CORP.
-----------------------------------
(Exact Name of Small Business
Issuer as Specified in Its Charter)
British Columbia, Canada
----------------------------------------
(State or other jurisdiction of
incorporation or organization)
82-0465571
----------------------------------------
(I.R.S. Employer Identification No.)
504 Main Street, Suite 475
Post Office Box 1124
Lewiston, Idaho 83501
----------------------------------------
(Address of Principal Executive Offices)
(208) 743-0914
----------------------------------------
(Issuer's Telephone Number,
Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,660,508 as of
August 15, 1996.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
IDAHO CONSOLIDATED METAL CORP.
Form 10-QSB
For the Fiscal Quarter ended June 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of the Company
Item 2. Management's Discussion and Analysis or Plan of
Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF THE COMPANY
--------------------------------------------
The following unaudited interim financial statements for the period
ending 30 June, 1996, are included in response to item 1 and have been
compiled by Staley, Okada, Chandler & Scott, Chartered Accountants.
The financial statements should be read in conjunction with
Management's Discussion and Analysis or Plan of Operations and other
financial information included elsewhere in this Form 10-QSB.
<PAGE>
SCHEDULE A
----------
IDAHO CONSOLIDATED
METALS CORP.
(An Exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
30 JUNE 1996
Unaudited - See Notice to Reader
U.S. Funds
STALEY, OKADA, CHANDLER & SCOTT
Chartered Accountants
<PAGE>
NOTICE TO READER
----------------
We have compiled the interim balance sheet of Idaho
Consolidated Metals Corp. as at 30 June 1996 and the interim
statements of changes in shareholders' equity, operations and cash
flows for the six months then ended from information provided by
management. We have not audited, reviewed or otherwise attempted to
verify the accuracy or completeness of such information. Readers are
cautioned that these statements may not be appropriate for their
purposes.
/s/ STALEY, OKADA, CHANDLER & SCOTT
CHARTERED ACCOUNTANTS
Burnaby, B.C.
2 August 1996
<PAGE>
Idaho Consolidated Metals Corp. Statement 1
(An Exploration Stage Company)
Interim Balance Sheet
As at 30 June
U.S. Funds
Unaudited - See Notice to Reader
1996 1995
----------- -----------
ASSETS
Current:
Cash $ 1,021,393 $ 10,710
Prepaid expenses - 539
Accounts receivable 10,000 28
Inventory 129,416 99,416
----------- -----------
1,160,809 110,693
Share Capital in Trust 153,448 -
Capital Assets 3,022 3,632
Resource Property Costs
- Schedule 2 4,009,731 3,539,234
----------- -----------
$ 5,327,010 $ 3,653,559
=========== ===========
LIABILITIES
Current:
Bank loan $ 30,409 $ -
Accounts payable - related parties 118,089 215,392
- other 418,989 341,824
Accrued claims rental fees 213,850 152,750
Current portion of notes payable 699,429 80,000
----------- -----------
1,480,766 789,966
Notes Payable 20,078 -
----------- -----------
Share Subscriptions Payable 1,260,495 155,000
----------- -----------
SHAREHOLDERS' EQUITY
Share Capital - Statement 2 5,721,590 5,095,447
Deficit - Accumulated during the
exploration stage - Statement 2 (3,103,334) (2,334,269)
Foreign Currency Translation
Adjustments - Statement 2 (52,585) (52,585)
2,565,671 2,708,593
----------- -----------
$ 5,327,010 $ 3,653,559
=========== ===========
ON BEHALF OF THE BOARD:
/s/ E. R. Knickel, Director
---------------------------
/s/ Delbert W. Steiner, Director
--------------------------------
<PAGE>
Idaho Consolidated Metals Corp. Statement 2
Interim Statement of Changes in Shareholders' Equity
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
----------------------- Exploration Translation
Shares Amount Stage Adjustment Total
--------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance - 31 December 1994 5,310,044 $ 4,298,476 $(1,794,488) $ (52,585) $ 2,451,403
Issuance of shares for
exercise of warrants
($2.23 per share) 30,000 66,900 - - 66,900
Private placement ($1.50
per share) 290,464 435,696 - - 435,696
Release of escrowed shares
for executive compen-
sation ($1.57 per share) - 294,375 - - 294,375
Loss for the period - - (539,781) - (539,781)
--------- ----------- ----------- ----------- -----------
Balance - 30 June 1995 5,630,508 $ 5,095,447 $(2,334,269) $ (52,585) $ 2,708,593
========= =========== =========== =========== ===========
Balance - 31 December 1995 5,630,508 $ 5,510,097 $(2,645,366) $ (52,585) $ 2,812,146
Release of escrowed shares
for executive compen-
sation ($0.55 per share) - 171,973 - - 171,973
Options exercised ($1.32
per share) 30,000 39,520 - - 39,520
Loss for the period - - (457,968) - (457,968)
--------- ----------- ----------- ----------- -----------
Balance - 30 June 1996 5,660,508 $ 5,721,590 $(3,103,334) $ (52,585) $ 2,565,671
========= =========== =========== =========== ===========
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp. Statement 3
Interim Statement of Operations
For the Six Months Ended 30 June
U.S. Funds
Unaudited - See Notice to Reader
1996 1995
---------- ----------
Operating Expenses:
General and administrative $ 422,275 $ 539,988
Other (Income) Expense:
Interest income (2,034) (356)
Interest expense 37,727 149
---------- ----------
35,693 (207)
---------- ----------
Loss for the Period $ 457,968 $ 539,781
========== ==========
Loss Per Common Share $ 0.08 $ 0.10
========== ==========
Weighted Average Number of
Common Shares Outstanding 5,633,008 5,506,981
========== ==========
<PAGE>
Idaho Consolidated Metals Corp. Statement 4
Interim Statement of Cash Flows
For the Six Months Ended 30 June
U.S. Funds
Unaudited - See Notice to Reader
1996 1995
---------- ----------
Cash Resources Provided By (Used In)
Operating Activities:
Loss for the period $ (457,968) $ (539,781)
Items not affecting cash:
Amortization 534 1,448
Loss on disposal of capital assets - 4,576
Release of escrowed shares for
executive compensation 171,973 294,375
Changes in current assets and
liabilities:
Accounts receivable 34,238 2,283
Prepaid expenses - 1,906
Inventory (5,000) -
Accounts payable - related parties 1,216 (28,734)
- other 93,169 123,976
---------- ----------
Net cash used in operating
activities (161,838) (139,951)
---------- ----------
Investing Activities:
Share capital in trust (153,448) -
Property rights, plant and equipment (63,095) (208,376)
---------- ----------
Net cash used in investing
activities (216,543) (208,376)
---------- ----------
Financing Activities:
Bank loan (4,999) -
Proceeds (repayments) of notes payable 29,507 (400,000)
Net proceeds from sale of common
stock 39,520 502,596
Share subscriptions payable 1,168,445 155,000
---------- ----------
Net cash provided by financing
activities 1,232,473 257,596
---------- ----------
Net Increase (Decrease) in Cash 854,092 (90,731)
Cash position - Beginning of Period 167,301 101,441
---------- ----------
Cash Position - End of Period $1,021,393 $ 10,710
========== ==========
<PAGE>
Idaho Consolidated Metals Corp. Schedule 1
Interim Schedule of Administrative Expenses
For the Six Months Ended 30 June
U.S. Funds
Unaudited - See Notice to Reader
1996 1995
---------- ----------
Executive compensation $ 171,973 $ 294,375
Professional fees 82,616 115,012
Management fees and wages 54,966 19,940
Shareholder information 54,561 27,652
Office and general 20,004 18,476
Travel 18,797 17,945
Transfer agent and filing fees 7,163 4,743
Office rent 6,181 8,210
Finance fees 5,067 21,728
Amortization 534 1,448
Entertainment and promotion 413 5,883
Loss on disposal of capital assets - 4,576
---------- ----------
Expenses for the Period $ 422,275 $ 539,988
========== ==========
<PAGE>
Idaho Consolidated Metals Corp. Schedule 2
Interim Schedule of Resource Property Costs
For the Six Months Ended 30 June
U.S. Funds
Unaudited - See Notice to Reader
1996 1995
---------- ----------
Direct - Mineral:
Idaho County, Idaho, U.S.A.:
Staking, filing and claim rental $ 56,037 $ 70,550
Process plant and equipment 29,027 53,552
Camp and general 28,313 12,014
Lease payments 19,500 -
Geological 4,632 49,754
Assaying 4,497 8,112
Taxes and licenses 1,459 16,733
Environmental 180 -
Stripping - 26,295
Survey - 1,916
Option payments received (50,000) -
---------- ----------
Costs for the Period 93,645 238,926
Balance - Beginning of Period 3,916,086 3,300,308
---------- ----------
Balance - End of Period $4,009,731 $3,539,234
========== ==========
<PAGE>
SCHEDULE B
1. YEAR-TO-DATE REQUIREMENTS
a. Deferred costs, exploration and development:
See attached Schedule 2 for details.
b. General and administrative:
See attached Schedule 1 for details.
c. Expenditures to non-arms length parties:
U.S. Funds
----------
Paid management fees to president and director $11,512
Paid management fees to a director 154
-------
$11,676
=======
2. FOR THE QUARTER ENDED 30 JUNE 1996a.Securities issued:
<TABLE>
<CAPTION>
Type of Total Type of
Date Security Type of Issue Number Price Proceeds Consideration Commission
----------- -------- ------------- ------ ----- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
17 May 1996 Common Options 30,000 $1.80 $54,000 Cash None
</TABLE>
b. Options granted:
<TABLE>
<CAPTION>
Date Granted Number Type Name Price Expiration Date
------------ ------- -------- -------- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
17 May 1996 250,000 Employee K. Scott $3.30 17 May 2000
17 May 1996 75,000 Employee T. Weed $3.30 17 May 2000
</TABLE>
<PAGE>
3. AS AT 30 JUNE 1996
a. Authorized and issued share capital:
Issued
----------------------
Authorized CDN Funds
Class Par Value Number Number Amount
------ --------- ---------- --------- ----------
Common N.P.V. 20,000,000 5,660,508 $5,721,590
b. Summary of options, warrants and convertible securities
outstanding:
<TABLE>
<CAPTION>
Date Granted Number Type Name Price Expiration Date
--------------- ------- -------- ------------- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
30 October 1995 60,000 Director D. W. Steiner $1.80 30 October 1999
30 October 1995 50,000 Director E. R. Knickel $1.80 30 October 1999
30 October 1995 30,000 Director P. Lepik $1.80 30 October 1999
30 October 1995 50,000 Employee W. Struck $1.80 30 October 1999
30 October 1995 30,000 Employee G. Magnuson $1.80 30 October 1999
17 May 1996 250,000 Employee K. Scott $3.30 17 May 2000
17 May 1996 75,000 Employee T. Weed $3.30 17 May 2000
-------
545,000
=======
</TABLE>
c. Shares in escrow or subject to pooling:
562,500 common shares
d. List of directors:
D. W. Steiner
E. R. Knickel
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------
(Dollar references are in U.S. dollars, unless otherwise specified.)
This Report on Form 10-QSB contains forward-looking statements. A
forward-looking statement may contain words such as "will continue to
be," "will be," "continue to," "expect to," "anticipates that," "to
be," or "can impact." Management cautions that forward-looking
statements are subject to risks and uncertainties that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements.
RESULTS OF OPERATIONS
Quarter ended June 30, 1996 compared with the quarter ended
June 30, 1995. The Company is in the exploration stage and has yet to
generate revenue from production. The Company continues to explore
its mineral properties in an effort to establish proven economic ore
reserves. The construction of the process plant on the Eckert Hill
Property was completed during the year ended December 31, 1995 and
will be used initially as a bulk test facility to process samples from
the Company's various properties and from other properties.
Activities at the plant have been temporarily suspended while the
Company interviews for the position of metallurgist. The metallurgist
will be responsible for finalization of plant design and construction
and start-up of the plant. The facility will remain a pilot plant
until sufficient ore reserves and gold concentrates are realized to
take the facility into economic production.
The Company has recently completed closing agreements with Idaho Gold
Corporation, a subsidiary of Bema Gold Corporation, to acquire the
Buffalo Gulch, Deadwood and Friday properties.
In the second quarter of 1996, general and administrative expenses
decreased by $83,144 as compared to 1995. The decrease was mainly due
to a decrease in executive compensation expense as a result of a
decline in qualifying exploration and development expenditures in the
quarter.
Under U.S. generally accepted accounting principles, the Company must
record executive remuneration on the release of performance shares
from escrow. The Company issued 750,000 shares at the time of its
initial public offering to the original principal founders of the
Company at a price of $0.01 CDN. per share, subject to the terms of an
escrow agreement. The number of shares released from escrow is
calculated on an annual basis as the Company expends qualifying
amounts on its exploration and development programs, and the Company
must seek regulatory approval for each release. During the second
quarter of 1996, the Company expended sufficient amounts on
exploration and development to qualify for a release of 41,475 shares,
which results in $83,365 of executive remuneration and a corresponding
$83,365 increase in share capital. During the second quarter of 1995,
the Company expended sufficient amounts to qualify for a release of
113,400 shares, which resulted in $178,038 of executive remuneration
<PAGE>
and a corresponding $178,038 increase in share capital. The executive
remuneration is a deemed amount and is based upon the fair market
value of the Company's common shares during the relevant quarter.
Regulatory approval of this release has yet to be obtained.
During the quarter ended June 30, 1996, the Company expended $63,844
on its resource property exploration, development and acquisition
program as compared to $144,842 in the second quarter of 1995. The
decrease is related to reduced exploration and development activities
as the Company seeks to obtain sufficient financing to continue with
its programs. The expenditures during the second quarter of 1996 were
mainly related to the accrual of claim rental fees payable to the
Bureau of Land Management ("BLM") and minor exploration costs. During
the second quarter of 1996, the Company also received a $50,000 option
payment on the Petsite and Golden Eagle properties under the terms of
the Cyprus Gold Exploration Corporation ("Cyprus") joint venture
agreement.
All of the Company's resource properties continue to be explored on
the basis of independent engineering report recommendations, and a
determination as to whether the properties contain proved reserves has
yet to be made. Management has obtained independent valuations of the
various resource properties and presently believes no write down to
net realizable value is required on any of the properties.
The Company challenged the 1993 introduction of the claim rental fees
system by the BLM and has requested a waiver of these fees which would
amount to approximately $460,000 for 1993 and 1994. The request for
the waiver was denied by the BLM which resulted in an appeal to the
United States Department of the Interior which was also denied.
Management identified approximately 1,700 peripheral claims which were
dropped as a result of this decision because they do not unduly affect
the status of each claim block. The key claims in each claim block
have been maintained, and accordingly an accrual of $213,850 has been
made in the financial statements comprised of $61,100 for each of 1993
to 1995 and $15,275 for each of the quarters ended March 31, 1996 and
June 30, 1996 representing the approximate amount of claim rental fees
which are owing to the BLM.
The net loss for the year to June 30, 1996 decreased to $457,968
($0.08 per share) from $539,781 ($0.10 per share) for the year to
June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates, based on currently proposed plans and
assumptions relating to its operations and exploration activities,
that the proceeds of private placements and the exercise of stock
options during the ensuing year will be sufficient to satisfy the
Company's contemplated cash requirements for the ensuing 12 month
period. The Company has also signed a letter of engagement with
Whalen Beliveau of Toronto, Canada for a large private placement to
fund capital expenditures on the construction of the Buffalo Gulch
Mine. The Eckert Hill Property in Idaho and its related process plant
will require approximately $450,000 for commissioning of the process
<PAGE>
plant for bulk sample testing and for the related geological
expenditures and feasibility studies. The Bema Properties will
require approximately $250,000 for permitting and an initial
exploration program. The Company estimates a cash requirement of
approximately $300,000 on the Mineral Zone and other properties for
claim rental fees and general exploration programs. The Company
requires approximately $480,000 for general and administrative
expenditures for the ensuing 12 month period, $699,429 for payments on
its notes payable and approximately $85,000 related to the proposed
application to the Toronto Stock Exchange for listing and market
making expenses. The remaining proceeds of private placements and the
exercise of stock options will be reserved for general working capital
purposes to reduce current liabilities.
The Company has $699,429 in payments on notes payable due in the next
year. The Company anticipates repayment of these notes from the
proceeds of private placements and the exercise of stock options.
The Company expects to fund exploration of the Petsite and Golden
Eagle properties through its joint venture with Cyprus under which
Cyprus has been granted an option to earn a 70% working interest in
the properties. The Company is also in discussions to obtain joint
venture partners on certain of its other properties.
As at June 30, 1996, the Company has a working capital deficiency of
$319,957. The Company anticipates improvement of this deficiency from
the proceeds of private placements and the exercise of stock options
during the ensuing year. The Company may also seek a debt
restructuring plan with its current debt holders during 1996 in order
to correct this deficiency.
The Company is dependent on the proceeds of private placements and the
exercise of stock options to fund its general and administrative
expenditures and its mineral exploration and development costs.
Without such proceeds, the Company may not continue as a going
concern. The Company anticipates revenue to be generated during 1996
from the processing of ores through its Eckert Hill facility. The
amount of positive cash flows, if any, from such production of ores at
the Eckert Hill facility, cannot be reasonably estimated, and
accordingly the Company will be required to rely on the sale of
securities or on a possible joint venture partner for its required
funding. The Company will need further funds to continue its
operations, and there is no reasonable assurance that such funding
will be available.
As at June 30, 1996, the Company had a working capital deficiency of
$319,957 as compared to a deficiency of $679,273 at June 30, 1995.
Cash flows generated from the financing activities of the Company were
recorded at the periods ended June 30 1996 and 1995 of $1,232,473 and
$257,596 respectively. The long-term debt increased to $20,078 at
June 30, 1996 from $Nil at June 30, 1995, and current liabilities
increased to $1,480,766 at June 30, 1996 from $789,966 at June 30,
1995. The Company has also raised share subscriptions totaling
$1,260,495 as compared to $155,000 as at June 30, 1995 related to a
<PAGE>
private placement of 377,950 units comprised of 2 common shares and 1
warrant which will allow the holder to purchase an additional common
share for $1.75 U.S. during the first year following regulatory
approval and at $2.75 U.S. during the second year. The balance of the
share subscriptions were received by the Company subsequent to June
30, 1996, bringing the total private placement to $1,322,825.
Approval in principle has been received on this private placement, and
final regulatory approval is a anticipated in the near future. Of the
June 30, 1996 current liabilities, $213,850 represents accrued claim
rental fees, $699,429 represents the current portion of notes payable
to shareholders and $118,089 are amounts payable to various related
parties. The balance of current liabilities consists of a bank loan
in the amount of $30,409 and approximately 120 days of unpaid trade
accounts payable. Legal fees represent a significant portion of these
unpaid trade accounts payable.
The Company is in the process of reincorporating in the State of
Wyoming, U.S.A. which, if completed, could impair the Company's
ability to use Canadian net operating loss carryforwards and could
result in certain Canadian exit taxes.
Negative cash flows from operating activities were recorded for the
periods ended June 30, 1996 and 1995 of ($161,838) and ($139,951)
respectively. The Company will continue recording negative cash flows
from operating activities unless significant revenue is generated from
ore production. This continued negative cash flow will have a
material negative impact on liquidity.
Investing activities consist of funds being expended on resource
properties. The net cash expended on investing activities increased
to $216,543 to June 30, 1996 from $208,376 to June 30, 1995.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
There have been no material developments regarding the legal
proceedings described in the Company's Form 10-KSB for the period
ended December 31, 1995. The reader is therefore referred to those
filings.
ITEM 2. CHANGES IN SECURITIES
-----------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
(a) On June 24, 1996, the Company held its Annual Meeting of
Shareholders.
(b) At the meeting, the shareholders passed a resolution increasing
the Board of Directors from three (3) to five (5). The
shareholders re-elected two (2) directors previously serving on
the board: Delbert W. Steiner and Edwin R. Knickel. The third
prior director, Peter Lepik, did not stand for election. The
shareholders also elected Geddes Webster to sit upon the Board.
There were no other persons nominated to run for director of the
Company, and no opposing votes.
(c) The following is a tabulation of the vote for each of the matters
submitted to a vote of shareholders at the annual meeting.
For Against Abstaining
--------- ------- ----------
(i) Del Steiner
Edwin R. Knickel 2,897,895 -0- -0-
Geddes Webster
(ii) Increasing the number 2,897,895 -0- -0-
of directors on the
Board from 3 to 5.
(iii) Increasing the number
of authorized shares 2,897,895 -0- -0-
from 20,000,000 to
100,000,000.
<PAGE>
For Against Abstaining
--------- ------- ----------
(iv) Cancellation of the
existing Articles of 2,897,895 -0- -0-
Incorporation as filed
with the Registrar of
Companies and adoption
of a new form of
Articles of the Company.
(v) Continuation of Coopers 2,897,895 -0- -0-
and Lybrand, Chartered
Accountants, as the
Company's auditor and
the setting of remunera-
tion for the auditor.
(vi) Authorization to allow 2,897,895 -0- -0-
directors to grant
incentive stock options
to insiders of the
Company and to renegoti-
ate existing stock
options upon such terms
as may be acceptable
to the Vancouver Stock
Exchange.
(vii) Motion by shareholder 892,993 1,994,902 10,000
to adjourn the motion
to cancel the existing
articles of the Company
and tabling the revised
articles.
ITEM 5. OTHER INFORMATION
--------------------------
Not applicable
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
(a) The following exhibits are attached to the Company's Form 10-QSB
for the quarter ending June 30, 1996:
(3.a) Articles of Incorporation adopted by shareholder vote at
the Annual General Meeting.
(10.1) Joint Venture Agreement between the Company and Cyprus
Gold Exploration Corporation.
(10.2) Agreement to Assign Interest - Deadwood claims.
(10.3) Agreement to Assign Interest - Friday claims.
(10.4) Agreement to Assign Interest - Buffalo Gulch claims.
(20.1) Notice of Annual General Meeting, Information Circular and
Form of Proxy.
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed during the second quarter
ending June 30, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDAHO CONSOLIDATED METALS CORP.
DATED: August 26, 1996 By: /s/ Delbert W. Steiner
-----------------------------------
Delbert W. Steiner, President
and Chief Executive Officer
DATED: August 26, 1996 By: /s/ Kenneth A. Scott
-----------------------------------
Kenneth A. Scott
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1021
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 129
<CURRENT-ASSETS> 1161
<PP&E> 4009
<DEPRECIATION> 0
<TOTAL-ASSETS> 5327
<CURRENT-LIABILITIES> 1481
<BONDS> 20
0
0
<COMMON> 5721
<OTHER-SE> (394)
<TOTAL-LIABILITY-AND-EQUITY> 5327
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 422
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> (458)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (458)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
IDAHO CONSOLIDATED METALS CORP.
(the "Company")
Notice of Annual General Meeting of Members
NOTICE is hereby given that the Annual General Meeting (the "Meeting")
of the Shareholders of IDAHO CONSOLIDATED METALS CORP. (the "Company")
will be held in 2100, 1111 West Georgia Street, Vancouver, British
Columbia, Canada, on 24 June 1996, at 10:00 a.m. (Vancouver time) for
the following purposes:
1. To receive the Report of the Directors;
2. To receive and consider the financial statements of the Company
for the fiscal year ended 31 December 1995, together and the
Auditors' Report thereon;
3. To determine the number of Directors for the ensuing year at five;
4. To elect directors for the ensuing year;
5. To appoint Coopers & Lybrand, Chartered Accountants, as auditor
for the Company for the ensuing year and to authorize the
directors to fix the remuneration to be paid to the auditor;
6. To approve a special resolution that the existing Articles of the
Company as filed with the Registrar of Companies be canceled, and
a new form of Articles be adopted as the Articles of the Company;
7. To approve a special resolution that the authorized share capital
of the Company be increased from 20,000,000 common shares without
par value to 100,000,000 common shares without par value, and that
paragraph 2 of the Memorandum be altered to read as follows:
"2. The authorized share capital of the Company consists of
100,000,000 common shares without par value."
8. To consider and if though appropriate, to approve and ratify the
granting and subsequent exercise of incentive stock options to
purchase shares of the Company previously granted to insiders
which have not previously been approved by the members, and to
authorize the directors in their discretion to grant stock options
to insiders and to amend stock options granted to insiders,
subject to regulatory approvals, as more fully set forth in the
Information Circular accompanying this Notice, and to approve the
granting generally of Incentive Stock Options; and
9. To transact such other business as may properly be brought before
the Meeting, or any adjournment thereof.
Accompanying this Notice is an Information Circular and a form of
Proxy. The Information Circular contains information relating to the
matters to be addressed at the meeting and is incorporated by
reference herein.
<PAGE>
Shareholders unable to attend the meeting in person are entitled to
appoint a proxy to attend and vote in their stead. If you are unable
to attend the Meeting, please read the enclosed Information Circular,
Proxy and Notes accompanying the Proxy and then complete and return
the Proxy together with any power of attorney or other authority under
which it was signed, or a notarially certified copy thereof, to
Montreal Trust Company of Canada, 4th Floor, 510 Burrard Street,
Vancouver, British Columbia, Canada, within the time set out in the
Notes. As set out in the Notes, the enclosed Proxy is solicited by
management, but you may amend it, if you so desire, by striking out
the names listed therein and inserting in the space provided the name
of the person you wish to represent you at the Meeting.
DATED at Lewiston, Idaho, this 20th day of May, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Delbert W. Steiner
-----------------------------
Delbert W. Steiner, President
and Chief Executive Officer
<PAGE>
IDAHO CONSOLIDATED METALS
504 Main Street, Suite 470
Lewiston, ID 83501
INFORMATION CIRCULAR
for the 1996 Annual General Meeting of Members
(containing information as at 20 May 1996)
SOLICITATION OF PROXIES
-----------------------
This Information Circular is furnished in connection with the
solicitation of proxies by the management (the "Management") of Idaho
consolidated Metals Corp. (the "Company"), for use at the 1996 Annual
General Meeting (the "Meeting") of the members of the Company, to be
held at the time and place and for the purposes set forth in the
accompanying Notice of Meeting and at any adjournment thereof.
PERSONS OR COMPANIES MAKING THE SOLICITATION
--------------------------------------------
THE ENCLOSED INSTRUMENT OF PROXY (the "Proxy") IS SOLICITED BY
MANAGEMENT. Solicitations will be made by mail and possibly
supplemented by telephone or other personal contact to be made without
special compensation by regular officers and employees of the Company.
The Company may reimburse members' nominees or agents (including
brokers holding shares on behalf of clients) for the cost incurred in
obtaining authorization from their principals to execute the Proxy.
No solicitation will be made by specifically engaged employees or
solicitation agents. The cost of solicitation will be borne by the
Company. None of the directors of the Company have advised that they
intend to oppose any action intended to be taken by Management as set
forth in this Information Circular.
APPOINTMENT AND REVOCATION OF PROXIES
-------------------------------------
The persons named in the accompanying Proxy are directors or officers
of the Company. A MEMBER HAS THE RIGHT TO APPOINT A PERSON TO ATTEND
AND ACT FOR HIM ON HIS BEHALF AT THE MEETING OTHER THAN THE PERSONS
NAMED IN THE ENCLOSED INSTRUMENT OF PROXY. TO EXERCISE THIS RIGHT, A
MEMBER MUST STRIKE OUT THE NAMES OF THE PERSONS NAMED IN THE
INSTRUMENT OF PROXY AND INSERT THE NAME OF HIS NOMINEE IN THE BLANK
SPACE PROVIDED, OR COMPLETE ANOTHER INSTRUMENT OF PROXY. A Proxy will
not be valid unless the completed Proxy is delivered to the Montreal
Trust Company of Canada, 4th Floor, 510 Burrard Street, Vancouver,
British Columbia, Canada, V6C 3B9, not less than 48 hours (excluding
Saturdays, Sundays and holidays) before the time for holding the
Meeting or any adjournment thereof, or delivered to the Chairman of
the Meeting prior to the commencement of the Meeting. The Proxy must
be signed by the member or by his attorney in writing, or, if the
member is a corporation, it must either be under its common seal or
signed by a duly authorized officer.
<PAGE>
In addition to revocation in any other manner permitted by law, a
member may revoke a Proxy either by (a) signing a Proxy bearing a
later date and delivering it at the place and within the time
aforesaid, or (b) signing and dating a written notice of revocation
(in the same manner as the Proxy is required to be executed as set out
in the notes to the Proxy) and either delivering it at the place and
within the time aforesaid or with the Chairman of the Meeting on the
day of the Meeting or on the day of any adjournment thereof, or (c)
registering with the scrutineer at the Meeting as a member present in
person, whereupon such Proxy shall be deemed to have been revoked. A
revocation of a Proxy does not affect any matter on which a vote has
been taken prior to the revocation.
VOTING OF SHARES AND EXERCISE OF DISCRETION OF PROXIES
------------------------------------------------------
On any poll, the persons named in the enclosed Proxy will vote the
shares in respect of which they are appointed and, where directions
are given by the member in respect of voting for or against any
resolution, will do so in accordance with such direction. IN THE
ABSENCE OF ANY DIRECTION IN THE PROXY, IT IS INTENDED THAT SUCH SHARES
WILL BE VOTED IN FAVOUR OF THE MOTIONS PROPOSED TO BE MADE AT THE
MEETING AS STATED UNDER THE HEADINGS IN THIS INFORMATION CIRCULAR.
The Proxy, when properly signed, confers discretionary authority with
respect to amendments or variations to any matters which may properly
be brought before the Meeting. The Proxy does not confer authority to
vote for the election of any person as a director of the Company other
than for those persons named in this Information Circular. At the
time of printing of this Information Circular, the Management is not
aware that any such amendments, variations or other matters are to be
presented for action at the Meeting. However, if any other matters
which are not now known to the management should properly come before
the Meeting, the Proxies hereby solicited will be exercised on such
matters in accordance with the best judgment of the nominee.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
-------------------------------------------
The Company is authorized to issue 20,000,000 common shares without
par value. There is one class of shares only. As at 20 May 1996,
there were a total of 5,630,508 shares issued and outstanding, each
share carrying the right to one vote. Only the holders of common
shares are entitled to receive notice of or to attend and vote at any
meetings of the members of the Company. At a general meeting of the
members of the Company, on a show of hands, every member present in
person shall have one vote and, on a poll, every member shall have one
vote for each share of which he is the holder.
Only members of record on the close of business on 20 May 1996, who
either personally attend the Meeting or who complete and deliver a
Proxy in the manner and subject to the provisions set out under the
heading "Appointment and Revocation of Proxies" will be entitled to
have their shares voted at the Meeting or any adjournment thereof.
<PAGE>
To the knowledge of the directors and senior officers of the Company,
the beneficial owners or persons exercising control or direction over,
shares carrying more than 10% of the voting rights attached to all
outstanding shares of the Company are:
Approximate % of
Name Number of Shares Total Issued
--------------------------- ---------------- ----------------
Tomasovich Family Trust (1) 585,376 10.3%
(1)Theodore Tomasovich, a resident of Los Angeles, California, is the
trustee of the Tomasovich Family Trust.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
---------------------------------------------
Other than as set out elsewhere in this Information Circular, no
insider, no proposed nominee for election as a director of the Company
and no associate or affiliate of any such insider or proposed nominee,
has any material interest, direct or indirect, in any material
transaction since the commencement of the Company's last financial
year or in any proposed transaction, which, in either case, has
materially affected or will materially affect the Company, nor does
any such person have any material interest, direct or indirect, in
matters to be acted upon at the Meeting.
STATEMENT OF EXECUTIVE COMPENSATION
-----------------------------------
An "executive officer" of a company for a financial year, means an
individual who at any time during the year was:
(a) the chair of the company, if that individual performed the
functions of the office on a full-time basis;
(b) a vice-chair of the company, if that individual performed the
functions of the office on a full-time basis;
(c) the president of the company;
(d) a vice-president of the company in charge of a principal business
unit, division or function such as sales, finance or production;
or
(e) an officer of the company or any of its subsidiaries or any other
person who performed a policy-making function in respect of the
issuer,
whether or not the individual was also a director of the company or
any of its subsidiaries.
<PAGE>
SUMMARY OF COMPENSATION
There is one Named Executive Officer of the Company, namely
Delbert W. Steiner, the President and Chief Executive Officer of the
Company. The following table is a summary of the compensation paid
to Mr. Steiner for the three most recently completed financial
years:
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------ -------
Securities Restricted
Under Shares or
Name and Principal Year Other Annual Options Restricted LTIP All Other
Position Ending Salary Bonus Compensation* Granted Share Units Payouts Compensation*
------------------ ------ --------- ----- ------------- ---------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Delbert W. Steiner 1995 US$18,870 NIL NIL 70,000 NIL NIL NIL
1994 US$15,000 NIL NIL NIL NIL NIL NIL
1993 US$15,000 NIL NIL 55,000 NIL NIL NIL
</TABLE>
*In accordance with transitional provisions of the British Columbia
Securities Commission's revised rules on executive compensation,
disclosure of amounts under "All Other Compensation" has not been
included for the 1993 fiscal year.
LONG-TERM INCENTIVE PLANS - AWARDS IN MOST RECENTLY COMPLETED
FINANCIAL YEAR
During the Company's most recently completed financial year, there
were no Long-Term Incentive Plans-Awards.
<PAGE>
OPTIONS/SARS GRANTED DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table sets out incentive stock options granted to the
Named Executive Officer:
<TABLE>
<CAPTION>
Market Value
% of Total of Securities
Options Underlying
Granted to Options on the
Name of Executive Securities Under Exercise or Base Employees in Date of Grant Expiration
Officer Date of Grant Options Grant (#) Price ($/Security) Financial Year ($/Security) Date
------------------ ------------- ----------------- ------------------ -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Delbert W. Steiner 30 Oct 1995 70,000 $1.80/share 32% $126,000 30 Oct 1999
</TABLE>
AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION VALUES
The following table sets out incentive stock options held by the Named
Executive Officer, as well as the fiscal year-end value of stock
options held by the Named Executive Officer.
<TABLE>
<CAPTION>
Unexercised Options at Value of Unexercised in the
Name of Executive Securities Acquired Aggregate Value Financial Year-End Money Options at Financial Year-
Officer on Exercise Realized ($) Exercisable/Unexercisable End Exercisable/Unexercisable
------------------ ------------------- --------------- -------------------------- --------------------------------
<S> <C> <C> <C> <C>
Delbert W. Steiner NIL NIL 70,000 $108,500
</TABLE>
<PAGE>
COMPENSATION OF DIRECTORS
The Company has no standard arrangement pursuant to which directors
are compensated by the Company for their services in their capacity as
directors, except for the granting from time to time of incentive
stock options in accordance with the policies of the Vancouver Stock
Exchange. During the most recently completed financial year, the
Company granted options to directors and employees to purchase a total
of 280,000 shares at a price of $1.80 per share for a four-year
period. Of this amounts, 150,000 options were granted to directors of
the Company. No options exercised by directors during the most
recently completed financial year.
During the financial year ended 31 December 1995, the amount of
US$18,870 was paid to Delbert W. Steiner, the President and Chief
Executive Officer of the Company, for management services provided to
the Company, and (US)$2,072 was paid to Dr. E. Roy Knickel, a director
of the Company, for consulting services provided to the Company during
the same period.
EMPLOYMENT CONTRACTS
Pursuant to an agreement dated 15 August 1995, the Company employed
the services of Geoffrey S. Magnuson, the Company's Corporate
Secretary, as Vice-President in charge of Corporate Development and
Investor Relations at a salary of US$2,500 per month for the first
month and US$5,000 per month thereafter. The agreement terminated on
30 April 1996. The agreement is expected to be renewed. Mr. Magnuson
was also granted an employee's incentive stock option to purchase up
to a total of 40,000 common shares of the Company at a price of $1.80
per share. The option is exercisable until 30 October 1999.
Pursuant to an agreement dated 29 August 1995, the Company employed
the services of Wilfred J. Struck as its Chief Operating Officer and
Vice-President, Mining and Exploration at a salary of US$3,000 per
month for the first month and US$5,000 thereafter. The agreement will
terminate on 31 October 1996. Mr. Struck was also granted an
employee's incentive stock option to purchase up to a total of 60,000
common shares of the Company at a price of $1.80 per share. The
option is exercisable until 30 October 1999.
PARTICULARS OF MATTERS TO BE ACTED UPON
---------------------------------------
NUMBER OF DIRECTORS
The board proposes to fix the number of directors at five. This
requires the approval of the members by ordinary resolution at the
Meeting.
ELECTION OF DIRECTORS
The three persons named below will be presented for election at the
Meeting as Management's nominees and the persons named in the Proxy,
subject to any choice specified by the member giving such Proxy, will
vote for the election of these nominees. Although management is
<PAGE>
nominating three individuals to stand for election, the names of
further nominees for directors may come from the floor at the Meeting.
Advance notice of the Meeting was published pursuant to Section 135 of
the COMPANY ACT (BRITISH COLUMBIA) in the Province Newspaper on 24
April 1996, and no nominations for directors were received from the
members.
Each director is elected annually and each nominee named below to be
elected as a director will hold office until his successor is elected
at the next annual general meeting of the members or any adjournment
thereof unless his office is earlier vacated. In the absence of
instructions to the contrary, the shares represented by Proxy will, on
poll, be voted for the nominees herein listed. MANAGEMENT DOES NOT
CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE AS A
DIRECTOR.
The following table and the notes thereto state the names of all
persons nominated by management for election as a director, all other
positions and offices within the Company now held by them, their
principal occupation or employment during the past five years if such
nominee is not presently an elected director, their country of
ordinary residence, the date upon which each became a director of the
Company, and the number of common shares of the Company beneficially
owned, directly or indirectly, by each of them as at the date hereof.
Information regarding shares beneficially owned by the nominees,
directly or indirectly, is based on information furnished by the
Registrar and Transfer Agent of the Company and from the nominees
themselves.
<PAGE>
INFORMATION CONCERNING NOMINEES SUBMITTED BY MANAGEMENT
<TABLE>
<CAPTION>
Name, Address and Principal Occupation and, if Not at Present Date First
Current Capacity in an Elected Director, Their Occupation During Appointed a Number of
Management Past Five Years Director Shares Owned
-------------------------- -------------------------------------------- --------------- ------------
<S> <C> <C> <C>
Delbert W. Steiner President and Chief Executive Officer of the September 1988 298,801*
Lewiston, ID, U.S.A. Company, Attorney-at-Law 247,500+
President, Chief Executive
Officer and Director
Dr. E. Roy Knickel President, Kroy Industries, Ltd., Burnaby, June 1989 252,060*
Burnaby, BC, Canada BC, a private investment corporation 7,500+
Director
Geddes M. Webster Professional Engineer, Chairman, Raventures N/A NIL
Toronto, ON, Canada Inc., Chairman Round Table Resources, Inc.,
Nominee Director President Adamantis Inc. and Chairman, Heat
and Steam Power, Inc.
</TABLE>
* Free trading shares
+ Performance shares allotted but not issued and held in escrow by
the Company's registrar and transfer agent, Montreal Trust Company
of Canada.
Pursuant to the provisions of the COMPANY ACT (BRITISH COLUMBIA), the
Company is required to have an Audit Committee which, as at the date
of this Information Circular, is comprised of Delbert W. Steiner, Dr.
E. Roy Knickel and Peter Lepik. Mr. Lepik, a current director of the
Company, will not be standing for re-election.
APPOINTMENT OF AUDITOR
Members will be asked to approve the appointment of Coopers & Lybrand,
Certified Public Accountants, as auditors of the Company to hold
office until the next annual general meeting of the members at a
remuneration to be fixed by the Board of Directors. Coopers & Lybrand
was first appointed auditor of the Company in June 1995.
<PAGE>
GRANTING OF INCENTIVE STOCK OPTIONS
The Company may grant, pursuant to the policies of the Vancouver Stock
Exchange (the "VSE"), stock options to its directors, senior officers
and employees or to employees of a company providing management
services to the Company in consideration of them providing their
services to the Company. The number of shares subject to each option
is determined by the Company's Board of Directors within the
guidelines established by such regulatory authority. The options
enable such persons to purchase shares of the Company at a price fixed
pursuant to the rules of such regulatory body. The option agreements
must provide that the option can only be exercised by the optionee and
only so long as the optionee shall continue in the capacity as a
director, senior officer or employee of the Company or within a period
of not more than 30 days after ceasing to be a director, officer or
employee or, if the optionee dies, within one year from the date of
the optioned's death. The options are exercisable by the optionee
giving the Company notice and payment of the exercise price for the
number of shares to be acquired. Approval will be sought at the
Annual General Meeting in respect of all incentive stock options which
were granted to, or entered into with, insiders ("Insiders") of the
Company (as that term is defined in the SECURITIES ACT (BRITISH
COLUMBIA) subsequent to the last Annual General Meeting, the details
of which are described herein under the heading "Executive
Compensation." All such options were granted in accordance with the
policies of the VSE and were accepted for filing by the VSE.
For the purpose of satisfying any and all regulatory requirements that
shareholders approve stock options granted to Insiders prior to their
exercise, the Company is also seeking the approval of the members, IN
ADVANCE, to each amendment which may be made by the Company to the
terms of existing stock options remaining outstanding which were
granted to Insiders or to other persons whose stock options as
originally constituted were approved by the members of the Company and
to each grant by the Company of new options to Insiders and any
amendments thereafter to such new options. Any new options will be
granted and/or amended, or any alterations to existing options will be
made, only on the approval of the board of directors and in accordance
with the policies of the VSE in effect at the time of grant or
amendment. Accordingly, management of the Company is seeking
shareholder approval to the following resolution:
"RESOLVED THAT:
(a) the granting and subsequent exercise of incentive stock options
previously granted to certain Insiders of the Company is hereby
approved; and
(b) authority is hereby granted to the directors to (i) amend existing
incentive stock options; and (ii) grant additional incentive stock
options to Insiders and employees and amend any incentive stock
options, so long as such incentive stock options and amendments
are in compliance with the guidelines prescribed by the Vancouver
Stock Exchange in effect at the time of grant or amendment, and
that no further approval from the shareholders shall be required
prior to the exercise of all or part of any such incentive stock
options granted or amended."
<PAGE>
SPECIAL BUSINESS
----------------
ADOPTION OF NEW FORM OF ARTICLES
The Company's solicitors recommends that the Company adopt a new form
of Articles. The new form of Articles has been recommended based on
certain revisions made to the COMPANY ACT (BRITISH COLUMBIA), R.S.B.C.
1979, Chapter 59, as amended, and to changes in the common law in
recent years. The new form of Articles thus updates the Company's
existing Articles. Accordingly, the following special resolution will
be presented at the Meeting:
"RESOLVED, as a Special Resolution, THAT the existing Articles of
the Company as filed with the Registrar of Companies be canceled
and that the form of Articles attached hereto be adopted as the
Articles of the Company in substitution for, and to the exclusion
of, the existing Articles of the Company."
A copy of the Articles of the Company in the proposed new form will be
available for inspection at the Registered Office of the Company at
2100, 1111 West Georgia Street, Vancouver, British Columbia, Canada,
during normal business hours up to and including the day of the
Meeting.
INCREASE IN AUTHORIZED SHARE CAPITAL
Management recommends that the authorized share capital of the Company
be increased from 20,000,000 common shares without par value to
100,000,000 common shares without par value and, accordingly, the
following special resolution will be presented at the Meeting:
"RESOLVED, as a Special Resolution, THAT the authorized share
capital of the Company be increased from 20,000,000 common shares
without par value to 100,000,000 common shares without par value
AND that paragraph 2 of the Memorandum be altered to read as
follows:
2. The authorized share capital of the Company consists of
100,000,000 common shares without par value."
OTHER BUSINESS
--------------
Management is not aware of any other matter to come before the Meeting
other than as set forth above or in the Notice of Meeting accompanying
this circular. However, if any other matter properly comes before the
Meeting, it is the intention of the persons named in the Proxy to vote
the shares represented thereby in accordance with their best judgment
in respect to such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Delbert W. Steiner
-------------------------------------
Delbert W. Steiner
President and Chief Executive Officer
<PAGE>
IDAHO CONSOLIDATED METALS CORP.
FINANCIAL STATEMENTS
<PAGE>
To the Board of Directors and Shareholders of
Idaho Consolidated Metals Corp.
We have audited the accompanying balance sheets of Idaho Consolidated
Metals Corp. (an exploration stage company) as of December 31, 1995
and 1994 and the related statements of operations and cash flows for
each of the three years in the period ended December 31, 1995 and
cumulative from inception (September 15, 1988) through December 31,
1995, and the changes in shareholders' equity from inception
(September 15, 1988) through December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Idaho
Consolidated Metals Corp. as of December 31, 1995 and 1994 and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 and cumulative from
inception (September 15, 1988) through December 31, 1995 and the
changes in shareholders' equity from inception (September 15, 1988)
through December 31, 1995 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has incurred significant
losses since its inception and has a working capital deficiency at
December 31, 1995. In addition, as described in Note 1, uncertainties
exist regarding the Company's ability to obtain necessary financing to
develop its properties and processes and to successfully develop
economic ore reserves on its properties and realize profitable
production levels or proceeds from their disposition. These factors
raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans as to these matters are also
described in Note 1 to the financial statements. The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties.
COOPERS & LYBRAND L.L.P
Spokane, Washington
May 15, 1996
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Balance Sheets
December 31, 1995 and 1994
(in U.S. dollars)
1995 1994
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 167,301 $ 101,441
Share subscriptions receivable 34,150
Inventory 124,416 99,416
Other 88 4,756
----------- -----------
Total current assets 325,955 205,613
Restricted investment 10,000
Property rights, plant and equipment, net 3,919,642 3,309,964
----------- -----------
Total assets $ 4,255,597 $ 3,515,577
=========== ===========
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Balance Sheets, Continued
December 31, 1995 and 1994
(in U.S. dollars)
1995 1994
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 35,408
Accounts payable - related parties 116,873 $ 244,126
Other accounts payable 325,820 217,848
Accrued claims rental fees 183,300 122,200
Notes payable to shareholders, due
currently 444,007 400,000
----------- -----------
Total current liabilities 1,105,408 984,174
Notes payable to shareholders, noncurrent 245,993 80,000
----------- -----------
Total liabilities 1,351,401 1,064,174
----------- -----------
Commitments and contingencies (Notes 1,
3 and 8)
Shareholders' equity:
Common stock, no par value,
20,000,000 shares authorized,
5,968,308 and 5,310,044 shares issued
and outstanding 5,602,147 4,298,476
Deficit accumulated during the explora-
tion stage (2,645,366) (1,794,488)
Foreign currency transaction adjustments (52,585) (52,585)
----------- -----------
Total shareholders' equity 2,904,196 2,451,403
----------- -----------
Total liabilities and shareholders'
equity $ 4,255,597 $ 3,515,577
=========== ===========
The accompanying notes are an integral part of the financial
statements.
ON BEHALF OF THE BOARD:
/s/ Delbert W. Steiner
--------------------------------
Delbert W. Steiner, Director
/s/ E. R. Knickel
--------------------------------
E. R. Knickel, Director
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Changes in Shareholders' Equity
December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
---------------------- Exploration Translation
Shares Amounts Stage Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at inception
(September 15, 1988) 2 $ 2 $ 2
Issuance of sales for cash
($.21 per share) 288,000 60,352 60,352
Net loss for the period $ (1,553) (1,553)
Translation adjustment $ (282) (282)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1988 288,002 60,354 (1,553) (282) 58,519
Issuance of sales for cash
($.21 per share) 372,000 79,747 79,747
Net loss for the period (19,073) (19,073)
Translation adjustment 274 274
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1989 660,002 140,101 (20,626) (8) 119,467
Issuance of sales for cash
($.05 per share) 966,000 51,414 51,414
Net loss for the period (53,798) (53,798)
Translation adjustment (155) (155)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1990 1,626,002 191,515 (74,424) (163) 116,928
--------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Changes in Shareholders' Equity, Continued
December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
---------------------- Exploration Translation
Shares Amounts Stage Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1990 1,626,002 $ 191,515 $ (74,424) $ (163) $ 116,928
Issuance of shares for cash
($.48 per share), net of
$37,555 of issuance costs 750,000 322,793 51,414
Exercise of warrants
($.57 per share) 550,000 311,955 311,955
Exercise of options
($.48 per share) 30,000 14,398 14,398
Issuance of shares for
property rights
($.48 per share) 70,000 33,595 33,595
Net loss for the year (146,890) (146,890)
Translation adjustment (3,574) (3,574)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1991 3,026,002 874,256 (221,314) (3,737) 649,205
--------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Changes in Shareholders' Equity, Continued
December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
---------------------- Exploration Translation
Shares Amounts Stage Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1991 3,026,002 $ 874,256 $ (221,314) $ (3,737) $ 649,205
Issuance of shares for
exercise of options
($.43 per share) 55,000 23,633 23,633
Issuance of shares for
property rights
($1.09 per share) 700,000 765,625 765,625
Release of escrowed share
for executive compen-
sation ($1.14 per share) 58,882 58,882
Net loss for the year (271,822) (271,822)
Translation adjustment (31,370) (31,370)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1992 3,781,002 1,722,396 (493,136) (35,107) 1,194,153
Issuance of shares for
cash in May and August
($.97 per share) 166,330 161,173 161,173
Issuance of shares for cash
cash in December
($1.55 per share) 280,212 433,350 433,350
Release of escrowed shares
for executive compen-
sation ($1.34 per share) 181,323 181,323
Net loss for the year (355,691) (355,691)
Translation adjustment (6,202) (6,202)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1993 4,227,544 2,498,242 (848,827) (41,309) 1,608,106
--------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Changes in Shareholders' Equity, Continued
December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
---------------------- Exploration Translation
Shares Amounts Stage Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993 4,227,544 2,498,242 (848,827) (41,309) 1,608,106
Issuance of shares for
exercise of options
($.68 per share) 212,500 143,523 143,523
Issuance of shares for
exercise of warrants
($2.19 per share) 270,000 591,240 591,240
Issuance of shares for
equipment and process
($1.50 per share) 600,000 750,000 750,000
Release of escrowed shares
for executive compensation
($1.68 per share) 315,471 315,471
Net loss for the year (945,661) (945,661)
Translation adjustments (11,276) (11,276)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1994 5,310,044 4,298,476 (1,794,488) (52,585) 2,451,403
--------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Changes in Shareholders' Equity, Continued
December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated Foreign
Common Shares During the Currency
---------------------- Exploration Translation
Shares Amounts Stage Adjustment Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 5,310,044 $ 4,298,476 $(1,794,488) $ (52,585) $ 2,451,403
Issuance of shares for cash
($1.50 per share) 628,264 942,396 942,396
Issuance of shares for
exercise of warrants
($2.23 per share) 30,000 66,900 66,900
Release of escrowed shares
for executive compen-
sation ($1.57 per share) 294,375 294,375
Net loss for the year (850,878) (850,878)
--------- ----------- ----------- ----------- -----------
Balances, December 31, 1995 5,968,308 $ 5,602,147 $(2,645,366) $ (52,585) $ 2,904,196
========= =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Cash Flows
for the years ended December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative
from Inception
(September 15,
Year Ended December 31, 1988) through
--------------------------------------- December 31,
1995 1994 1993 1995
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (850,878) $ (945,661) $ (355,691) $(2,645,366)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation 1,524 2,856 4,333 18,505
Loss on disposal of equipment 4,576 4,576
Abandonment of property rights 4,819 4,819
Release of escrowed shares for
executive compensation 294,375 315,471 181,323 850,051
Change in:
Inventory (25,000) (54,531) (44,885) (124,416)
Other 4,668 (2,593) 1,516 (88)
Accounts payable - related
parties 97,747 80,331 163,795 341,873
Other accounts payable 107,972 164,222 11,152 325,820
----------- ----------- ------------ -----------
Cash used by operating
activities (365,016) (435,086) (38,457) (1,224,226)
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Cash Flows, Continued
for the years ended December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative
from Inception
(September 15,
Year Ended December 31, 1988) through
--------------------------------------- December 31,
1995 1994 1993 1995
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Investing activities:
Property rights, plant and
equipment:
Acquisition costs $ (252,909) $ (436,851) $ (79,264) $ (843,869)
Exploration costs (301,769) (408,856) (184,399) (1,191,153)
Deposit on property rights (100,000) (100,000)
Purchase of reclamation bond (10,000) (10,000)
----------- ----------- ----------- -----------
Cash used by investing
activities (564,678) (845,707) (363,633) (2,145,022)
----------- ----------- ----------- -----------
Financing activities:
Proceeds from note payable to bank 35,408 35,408
Proceeds from related-party notes
payable 385,000 400,000 785,000
Repayments on related-party notes
payable (400,000) (400,000)
Net proceeds from sale of common
stock 975,146 734,763 594,523 3,168,726
----------- ----------- ----------- -----------
Cash provided by
financing activities 995,554 1,134,763 594,523 3,589,134
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Cash Flows, Continued
for the years ended December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative
from Inception
(September 15,
Year Ended December 31, 1988) through
--------------------------------------- December 31,
1995 1994 1993 1995
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Effect of foreign currency
translation on cash $ (11,276) $ (6,202) $ (52,585)
Net increase (decrease) in cash
and cash equivalents $ 65,860 (157,306) 186,201 167,301
Cash and cash equivalents,
beginning of period 101,441 258,747 72,546
----------- ----------- ---------- ----------
Cash and cash equivalents,
end of period $ 167,301 $ 101,441 $ 258,747 $ 167,301
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Statements of Cash Flows, Continued
for the years ended December 31, 1995 and 1994
(in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative
from Inception
(September 15,
Year Ended December 31, 1988) through
--------------------------------------- December 31,
1995 1994 1993 1995
---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Supplemental disclosures of cash
flow information:
Cash paid during the period
for interest, net of amount
capitalized $ 5,364 $ 3,583 $ 9,880
========== =========== =========== ===========
Schedule of noncash investing and
financing activities:
Claim rental fees accrued as
exploration costs $ 61,100 $ 61,100 $ 61,100 $ 183,300
Deposit used to acquire
property rights 100,000 100,000
Debt incurred for equipment
and property rights 80,000 80,000
Common stock issued for
property rights 799,220
Common stock issued for
equipment and process rights 750,000 750,000
Release of escrowed shares for
executive compensation 294,375 315,471 181,323 850,051
Conversions of accounts payable
to notes payable 225,000 225,000
Share subscriptions receivable 34,150 34,150
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Financial Statements
1. The Company and Basis of Presentation of Financial Statements:
Idaho Consolidated Metals Corp. (the "Company") was incorporated
in British Columbia, Canada on September 15, 1988 to engage in
mineral exploration, development and processing. The Company is
presently in the development stage as revenue-producing
activities have not commenced. The Company's financial
statements have been prepared in accordance with generally
accepted accounting principles as practiced in the United States
and are stated in U.S. dollars.
These financial statements have been prepared assuming the
Company will continue as a going concern and be able to realize
assets and liquidate liabilities in the normal course of
business. Since its inception, the Company has incurred
significant losses during the exploration stage and at
December 31, 1995 has a net working capital deficit of
approximately $779,000. These factors, along with the
uncertainties regarding the Company's ability to obtain necessary
financing to develop its properties and processes, and to
successfully develop economic ore reserves on these properties
and realize profitable production levels or proceeds from their
disposition, raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do
not include any adjustments that might result from the outcome of
these uncertainties.
Management of the Company continues to seek additional sources of
financing to fund its ongoing capital needs and mitigate its
working capital deficiency.
The Company is presently considering additional funding sources
including the sale of its common stock and obtaining project
financing to fund the development of one of its mineral
properties. Additionally, the Company is seeking joint venture
partners to assist in the development of certain of its other
properties (see Note 10). There can be no assurance that the
Company will be successful in obtaining additional funds or will
be successful in locating suitable joint venture partners to
assist in the development of its mineral properties.
2. Significant Accounting Policies:
a. Inventory
Inventory, which consists of raw materials used in the
Company's mineral processing facility, is valued at the lower
of first-in, first-out cost or estimated net realizable
value.
<PAGE>
Notes to Financial Statements, Continued
2. Significant Accounting Policies, Continued:
b. Property Rights, Plant and Equipment
Property rights, plant and equipment are stated at the lower
of cost (or the predecessor's cost basis if acquired from an
affiliate) or estimated net realizable value. Maintenance,
repairs and renewals are charged to operations. Major
betterments are capitalized. When assets are retired or
sold, the costs and related accumulated depreciation and
amortization are eliminated and any resulting gain or loss is
reflected in operations.
The Company is in the process of exploring its mineral
properties and has not yet determined whether these
properties contain ore reserves that are economically
recoverable.
Acquisition, development and exploration costs are
capitalized on an individual property basis until such time
as an economic ore body is defined or the property is
abandoned. Capitalized costs associated with a producing
property will be amortized on a unit-of-production method
based on the estimated life of the ore reserves while costs
for abandoned properties are written off in the period in
which a decision is made to abandon such property.
Depreciation of furniture and fixtures is based on the
estimated lives of the assets using accelerated methods.
Depreciation of the process plant and equipment will commence
when processing begins at the facility using the
straight-line method over the estimated useful lives of the
plant and equipment.
Management periodically reviews and obtains independent
geologist reports in determining if adjustments to the
carrying values of each of its mineral properties, on a
property-by-property basis, are required to record those
properties at net realizable value. The ultimate
recoverability of the amounts capitalized for the mineral
properties is dependent upon the delineation of economically
recoverable ore reserves, the Company's ability to obtain the
necessary financing to complete their development and realize
profitable production or proceeds from the disposition
thereof. Management's estimates of recoverability of the
Company's investment in various projects have been based on
current conditions. However, it is reasonably possible that
changes could occur in the near term which could adversely
affect management's estimates.
<PAGE>
Notes to Financial Statements, Continued
2. Significant Accounting Policies, Continued:
b. Property Rights, Plant and Equipment, Continued
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121
(SFAS No. 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." SFAS
No. 121 requires that long-lived assets and certain
identifiable intangibles being held and used by an entity be
reviewed for impairment by estimating the fair values or
future cash flows from use and disposition of the assets
whenever circumstances indicate that the carrying amount of
such assets may not be recoverable. There was no effect on
the Company's financial statements of adopting SFAS No. 121
on January 1, 1996.
c. Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers
cash and cash equivalents to include amounts held in banks
and highly liquid investments with remaining maturities at
point of purchase of three months or less. Restricted cash
represents a certificate of deposit, which was purchased for
a reclamation bond requirement. The Company places its cash
and cash investments with institutions of high-credit
worthiness. At times, such investments may be in excess of
the FDIC insurance limit.
d. Net Loss Per Common Share
Net loss per common share is computed based on the weighted
average number of common shares and common stock equivalents
outstanding during each period, unless the common stock
equivalents are anti-dilutive. Due to the net losses during
each of the years presented, common stock equivalents are
anti-dilutive and have been excluded from the computation.
e. Compensation Associated with Escrowed Common Shares
The Company records compensation expense associated with the
release of escrowed common shares of the Company as those
shares become eligible for release based upon the market
value of those shares at that time (see Note 6).
f. Foreign Currency Translation
Prior to 1995, the Company's functional currency was the
Canadian dollar. All assets and liabilities of the Company's
Canadian activities were translated to U.S. dollars using the
exchange rates at the balance sheet date. Resulting foreign
currency translation adjustments were reported as a separate
component of shareholders' equity. Income and expense items
were reported using average exchange rates during the
<PAGE>
Notes to Financial Statements, Continued
2. Significant Accounting Policies, Continued:
f. Foreign Currency Translation, Continued
periods. Gains or losses from foreign currency transactions
were included in operations. As of January 1, 1995, the
Company began transacting most of its business in U.S.
dollars. Therefore, the functional currency was changed from
Canadian dollars to U.S. dollars. The change in functional
currency has been accounted for prospectively beginning on
January 1, 1995. Translation adjustments from prior periods
are included in shareholders' equity. The translated amounts
for non-monetary assets prior to the change have become the
accounting basis for those assets.
g. Management's Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could
differ from those estimates.
h. Reclassifications
Certain 1994, 1993 and cumulative amounts have been
reclassified to conform to the 1995 presentation. These
reclassifications had no effect on the net loss or deficit
accumulated during the exploration stage as previously
reported.
3. Property Rights, Plant and Equipment:
Following are the major components of property rights, plant and
equipment:
1995 1994
---------- ----------
Mining property rights $2,591,726 $2,132,657
Process plant and equipment,
including capitalized interest
of $35,696 and $23,246 1,324,360 1,167,651
Furniture and fixtures 15,602 26,637
---------- ----------
3,931,688 3,326,945
Accumulated depreciation 12,046 16,981
---------- ----------
$3,919,642 $3,309,964
========== ==========
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
The detail by major area of interest of the Company's investment
in mining property rights is as follows:
1995 1994
---------- ----------
Petsite Property $ 281,651 $ 273,817
Mallard Property 50,016 47,186
Snowstorm Property 27,771 22,535
Golden Eagle Property 1,259,307 1,101,060
Eckert Hill Property 736,333 520,088
Tuxedo Property 186,648 167,971
Dean Mine and Mill Site 50,000
---------- ----------
$2,591,726 $2,132,657
========== ==========
A number of the properties are located within the Nez Perce
National Forest, on land administered by the U.S. Forest Service.
Permits must be obtained for all exploration and development work
to be carried out on these properties. During 1993, plans of
operations were filed with the U.S. Forest Service, thereby
accomplishing the first stage of the permitting process. There
can be no assurances that the Company will be able to obtain all
necessary permits in order to place its mineral properties into
production.
Following is a summary of the agreements associated with the
Company acquisition of its mineral properties.
a. Petsite Property
Year Description Amount
---- ------------------------------------------- -------
1989 Cash payment $10,000
1991 Issuance of 20,000 common shares on the
effective date of the Company's initial
public offering 9,599
1991 Cash payment 10,000
-------
$29,599
=======
The optionor retains a 5% net profits interest in the claims.
The President of the Company had a minority interest in the
entity which controlled the Petsite Property. Accordingly,
the Petsite Property has been recorded at the lower of cost
or the predecessor's cost basis.
This property would be subject to the proposed joint venture
agreement between the Company and Cypress Gold Exploration
Company (see Note 10).
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
b. Mallard Property
By a purchase and sale agreement dated February 28, 1990 and
by subsequent amendment, the Company acquired 31 unpatented
lode mining claims in the Dixie Mining District, Idaho
County, Idaho. The acquisition was completed as follows:
Year Description Amount
---- ------------------------------------------- -------
1990 Cash payment $10,000
1991 Issuance of 50,000 common shares on the
effective date of the Company's initial
public offering 23,996
-------
$33,996
=======
The President of the Company had a minority interest in the
entity which controlled the Mallard Property. Accordingly,
the Mallard Property has been recorded at the lower of cost
or the predecessor's cost basis.
c. Snowstorm Property
By a purchase and sale agreement dated February 19, 1991, the
Company acquired an undivided 50% interest in 29 unpatented
lode mining claims in the Elk City Mining District, Idaho
County, Idaho for a cash payment during 1990 of $5,000. The
Company has a right of first refusal to acquire the remaining
undivided 50% interest. This interest was acquired from an
affiliated entity due to the President of the Company's
minority interest in the affiliated entity.
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
d. Golden Eagle Property
By a series of agreements dated October 15,1992, the Company
acquired specified, undivided working interests in certain
mineral claims located in various counties in Idaho. In order
to complete the various acquisitions, the Company has certain
expenditure requirements and has and will issue common shares
upon the completion of certain events.
<TABLE>
<CAPTION>
Common Shares to be Issued
---------------------------------------------------
Undivided Issued
Working Number Upon Phase I Expenditure
Claim Interest of Expenditure Regulatory Expenditures Requirement
Block Acquired Claims Requirement Approval Completed Completed Total
----- --------- ------ ----------- ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I 60% 17 $ 90,000 $ 25,000 50,000 25,000 100,000
II 60% 9 90,000 25,000 50,000 25,000 100,000
III 60% 62 90,000 25,000 50,000 25,000 100,000
IV 60% 25 60,000 50,000 25,000 25,000 100,000
V 60% 25 90,000 25,000 50,000 25,000 100,000
VI 60% 30 60,000 50,000 50,000 100,000
VII 60% 17 90,000 25,000 50,000 25,000 100,000
VIII 60% 49 60,000 50,000 25,000 25,000 100,000
IX 60% 20 90,000 25,000 50,000 25,000 100,000
X 60% 78 60,000 50,000 25,000 25,000 100,000
XI 60% 149 60,000 50,000 50,000 100,000
XII 100% 3 100,000 100,000
XIII 100% 3 100,000 100,000
XIV 60% 42 60,000 50,000 50,000 100,000
XV 60% 9 60,000 50,000 50,000 100,000
--- ---------- ---------- ---------- ---------- ---------
Total 538 960,000 700,000 375,000 425,000 1,500,000
===
Amounts expended or
issued through
December 31, 1995 493,682 700,000 700,000
---------- ---------- ---------- --------- ---------
Amounts remaining to
be expended or issued
at December 31, 1995 $ 466,318 $ 0 375,000 425,000 800,000
========== ========== ========== ========= =========
</TABLE>
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
d. Golden Eagle Property, Continued
The 700,000 shares issued during 1992, upon receipt of
regulatory approval of the agreement, were recorded at the
estimated fair value of the shares issued ($1.09 per share)
aggregating $765,625.
By a letter agreement dated September 10, 1991, the Company
agreed to fund $50,000 annually towards assessment work
requirements and received a right of first refusal to acquire
the remaining 40% undivided interest, on those properties not
100% acquired, from the property holders.
For the agreements covering Claim Blocks I-V and VII-X, a
qualified geologist must recommend further work programs,
approved by the regulatory authorities, prior to the Company
issuing each of the second and third issuances of common
shares. The second and third issuances of common shares are
also subject to shareholder approval.
For agreements covering Claims Blocks VI, XI, XIV and XV, a
qualified geologist must recommend a second phase work
program, approved by the regulatory authorities, prior to the
Company issuing the final balances of common shares. The
final issuance of common shares is also subject to regulatory
approval.
Should the recommendations of the geologist described above
be negative or unacceptable to the regulatory authorities,
then on an agreement-by-agreement basis, the Company shall
not issue further common shares, the property holders shall
accept the shares received to date as full payment for the
property and the Company will have no further obligation to
issue any additional shares or for further expenditures on
the related agreement.
By an agreement dated January 25, 1996, the Company agreed to
amend, subject to regulatory approval, the agreements on
Claim Blocks I-XI, XIV and XV of the agreements dated
October 15, 1992. The amended agreement allows the
expenditures made on the processing facility, located on the
Eckert Hill property, where ores from the Golden Eagle
properties are to be bulk tested and processed to qualify as
expenditures for purposes of the Company acquiring the 60%
undivided interest in these properties. Since in excess of
the required $800,000 total expenditures have been incurred
by December 31, 1995 on these claim blocks and the processing
facility, the Company has agreed to release the remaining
800,000 common shares from treasury in exchange for the
vendor transferring an undivided 60% interest in these
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
d. Golden Eagle Property, Continued
properties to the Company. The Company retains its right of
first refusal to acquire the remaining 40% undivided interest
on these properties from the vendor.
By an agreement dated February 8, 1996, subject to regulatory
approval, the Company obtained an option to acquire the
remaining 40% undivided interest in Claim Blocks I-XI, XIV
and XV of the Golden Eagle Property for a $50,000 cash
payment which was made on execution of the agreement, 100,000
shares of the Company within 60 days of the agreement,
property exploration expenditures of $30,000 during the first
year and $50,000 during the second year and $500,000 in cash
payments commencing five years from the date of execution of
the agreement. The cash payments are to be made from the
proceeds of production from the property and must be
completed within the following three years, including
interest at 8% per annum.
This property would be subject to the proposed joint venture
agreement between the Company and Cypress Gold Exploration
Company (see Note 10).
e. Eckert Hill Property
By a mineral lease agreement dated June 28, 1993, the Company
leased certain property located in Idaho County, Idaho for an
initial term of five years. In order to maintain the lease,
the Company has and must make the following payments to the
lessors:
Minimum
Minimum Advance
Rental Royalty
Description Payment Payment
-------------------------- ------- -------
On execution (paid) $13,000
By November 1, 1993 (paid) $15,000
By June 28, 1994 (paid) 15,000 15,000
By June 28, 1995 (paid) 7,500 22,500
By June 28, 1996 7,500 22,500
By June 28, 1997 22,500
------- -------
$43,000 $97,500
======= =======
The June 1997 minimum advance royalty payment forms the base
amount for subsequent advance payments due each June starting
June 1998. The base amount will be adjusted upward annually
based upon the consumer price increase in the United States.
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
e. Eckert Hill Property, Continued
The Company will pay the lessors a royalty of 4% for gross
production realized after June 1995.
The initial five-year term of the lease may be extended for
an additional term of five years, at the option of the
Company, under the same terms as the original five-year
period unless modified by mutual agreement of the parties.
The Company has further agreed to expend a minimum of
$100,000 (completed) on mineral exploration and development
of the property by June 1996, not including any costs to
develop or improve the mill, plant or any processing
equipment.
f. Tuxedo Property
Pursuant to an option agreement dated December 28, 1993 and
an addendum dated April 27, 1994, the Company acquired the
right to certain mineral rights on property located in Deer
Lodge and Silver-Bow Counties of Montana for a cash payment
of $100,000. The Company was also granted the right to
negotiate for additional mineral rights on the property.
Pursuant to an assignment dated September 30, 1994 and an
underlying purchase and sale agreement dated June 1, 1994,
the Company acquired the mineral rights to 1,380 acres in
Silver-Bow County, Montana for a cash payment of $43,000.
The underlying vendor retains a 3% net smelter return on the
property.
Pursuant to the September 30, 1994 assignment and an
underlying exploration agreement and option to lease mining
claims dated May 24, 1994, the Company acquired an option to
lease 60 acres in Silver-Bow County, Montana for a cash
payment of $25,000. The underlying agreement required an
initial payment of $5,000 (paid by the assignor) and required
an exploration program of $20,000 (completed by the
assignor). A formal lease was executed on November 25, 1995
for $15,000 annually, and the underlying optionor retained a
3% net smelter return in the property.
Effective November 25, 1995, the Company entered into a
formal lease of the property for an initial term of 10 years.
The lease shall extend beyond 10 years so long as operations
are maintained on a continuous basis until a period of 180
days elapse with no development, mining or processing
activities on the property. During the term of the lease,
the Company shall pay a minimum annual royalty payment of
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
f. Tuxedo Property, Continued
$15,000 commencing on the execution of the lease (paid) and
on each anniversary date thereafter. The lessor retains a 3%
production royalty based upon the net value of minerals
produced and sold from the property. All minimum annual
royalty payments made to the lessor are to be credited
against the 3% production royalties.
g. Dean Mine and Mill Site
By an agreement dated August 2, 1995, subject to regulatory
approval and the approval of the directors of the vendor, the
Company acquired an option to acquire a mill site, mining
property and equipment in Battle Mountain, Nevada for a cash
payment of $25,000 (paid). The original option expired
October 1, 1995 and was extended to October 30, 1995 for an
additional cash payment of $25,000 (paid). In order to
complete the acquisition, the Company must pay the vendor
$250,000 in cash and issue the vendor 164,500 common shares
from treasury within 30 days of giving notice of its
intention to exercise the option.
The agreement is currently held in abeyance pending the
vendor clearing a trading restriction with its regulatory
authorities.
h. Mineral Zone Property
By an agreement dated December 1, 1995, subject to regulatory
approval, the Company agreed to acquire a property located in
the Elk City Mining District, Idaho County, Idaho from a
shareholder. To complete the acquisition, the Company must
pay the shareholder $170,000 on completion of a financing by
the Company and issue a note payable to the shareholder in
the amount of $1,540,000 bearing interest at 7% per annum.
Payments on the note shall be interest only commencing
June 1, 1996 and thereafter on a quarterly basis until
production commences. Once the property is in production,
the principal balance will be amortized over the estimated
mine life and will continue to bear interest at 7% per annum.
The Company has the right to terminate this agreement on 90
days' written notice to the shareholder based upon its
assessment of the property and the production therefrom.
Upon the receipt of regulatory approval and the Company
completing an assessment of the property, a formal agreement
shall be drawn and the related assets and liabilities will be
recorded in the financial statements of the Company.
<PAGE>
Notes to Financial Statements, Continued
3. Property Rights, Plant and Equipment, Continued:
i. Bema Property
By letter of understanding dated December 11, 1995, subject
to regulatory approval, the Company has negotiated an option
to acquire a 100% undivided interest in certain unpatented
mining claims, state leases and patented mining claims
located near Elk City Gold Property, Elk City, Idaho. In
order to complete the acquisition, the Company must, at its
option:
* File and pay all required annual assessments on unpatented
mining claims.
* Pay all required costs of state leases.
* Commencing January 1, 1996, pay all payments pursuant to
underlying agreements. Such payments are approximately
$66,000 per annum.
* Replace all bonds of the vendor with any regulatory
authority.
* Complete work program expenditures on the properties of
$60,000 in the first year, $70,000 in the second year and
$150,000 in each of the years three to five of the
agreement.
* Replace the reclamation bond of $75,000 with the Bureau of
Land Management upon finalization of the agreement.
* Issue the vendor 125,000 of the Company's common shares
from its treasury in each of the first and second years of
the agreement.
The patented mining claims commonly known as the Bema
patented claims shall be subject to a lease to the Company.
The vendor retains the right to increase its interest in the
property at any time to 49% by reimbursing the Company for
115% of its expenditures from January 1, 1996 to the date the
vendor delivers such notice to the Company. The parties
would then form a 51%/49% joint venture to further develop
the property.
The agreement shall be for a minimum period of one year after
which the Company may terminate the agreement upon 60 days'
written notice to the vendor. The vendor retains a 3% net
smelter royalty.
<PAGE>
Notes to Financial Statements, Continued
4. Note Payable to Bank:
During 1995, the Company assumed an uncollateralized note payable
to a bank from certain executives of the Company. The
outstanding balance at December 31, 1995 was $35,408. The note
bears interest at 10.5% and is due in May 1996.
5. Notes Payable to Shareholders:
Details of notes payable to shareholders are as follows at
December 31, 1995 and 1994:
1995 1994
--------- ---------
Uncollateralized note payable bearing
interest at 8.00% per annum, due and
paid in full June 1, 1995 $ 400,000
Uncollateralized note payable bearing
interest at the bank's prime rate
plus 3.25% (12.25% at December 31,
1995), due in full May 15, 1996. The
note is convertible into common shares
of the Company at $1.50 per share $ 75,000
Uncollateralized note payable bearing
interest at 9.00% per annum, due in
full January 1, 1997 225,000
Note payable bearing interest at the
bank's prime rate plus 2.50% (11.50%
at December 31, 1995), collateralized
by a pledge of equipment located at the
Eckert Hill property, due on demand 250,000
Uncollateralized note payable bearing
interest at 9.00% per annum, due on
demand after September 1, 1995 35,000
Uncollateralized note payable, due in
monthly payments of $460 including
interest at 9.00% per annum 25,000
Uncollateralized, non-interest bearing
note, due in full July 1, 1996 80,000 $ 80,000
--------- ---------
690,000 480,000
Less current portion (444,007) (400,000)
--------- ---------
$ 245,993 $ 80,000
========= =========
<PAGE>
Notes to Financial Statements, Continued
5. Notes Payable to Shareholders, Continued:
The principal payments on notes payable become due as follows:
Year Ending
December 31,
------------
1996 $444,007
1997 228,784
1998 4,139
1999 4,527
2000 4,953
Thereafter 3,590
--------
$690,000
========
6. Common Shares:
The Company has a stock option plan which covers its officers and
directors. The options are granted for varying terms ranging
from two to seven years and are immediately vested upon grant.
Following is a schedule of the activity pursuant to this stock
option plan.
<TABLE>
<CAPTION>
Price Per
Share (in
Number of Canadian
Shares Dollars) Expiration Date
--------- ----------- ---------------
<S> <C> <C> <C> <C>
Balance, January 1, 1989 and
December 31, 1989 0
Options granted 235,000 $0.55 April 1996
-------- -----------
Balance, December 31, 1990 235,000 $0.55 April 1996
Options exercised (30,000) $0.55
-------- -----------
Balance, December 31, 1991 205,000 $0.55 April 1996
New options granted 17,500 $1.85 September 1993
New options granted 62,500 $1.85 September 1994
Options exercised (55,000) $0.55
-------- -----------
Balance, December 31, 1992 230,000 $0.55-$1.85
Options expired (17,500) $1.85
-------- -----------
Balance, December 31, 1993 212,500 $0.55-$1.85
Options exercised (150,000) $0.55
Options exercised (62,500) $1.85
-------- -----------
Balance, December 31, 1994 0
New options granted 250,000 $1.80 October 1999
-------- -----------
Balance, December 31, 1995 250,000 $1.80
======== ===========
</TABLE>
<PAGE>
Notes to Financial Statements, Continued
6. Common Shares, Continued:
Additionally, the Company has committed to grant certain
executives options to purchase a total of 100,000 shares of the
Company's stock based on current market value when the option is
granted. Also, the Company has commitments to issue common stock
for the acquisition of mineral properties (see Note 3).
During the year ended December 31, 1994, the Company issued
300,000 special warrants pursuant to an agreement dated March
1993 and subsequent amendments (see Note 7(1)) which allow the
holder to acquire 300,000 common shares at a price of $2.19
($3.00 Cdn). During the year ended December 31, 1994, the
Company received $591,240 ($810,000 in Cdn.) on exercise of
270,000 of these warrants and issued 270,000 common shares. The
remaining 30,000 warrants were exercised in January 1995 for
approximately $67,000.
In conjunction with the Company's initial public offering,
certain Company officers and directors were required to place
750,000 common shares of the Company in escrow in accordance with
policies of the Vancouver Stock Exchange ("VSE"). The shares are
subject to release from escrow as the Company expends funds on
exploration and development of its mineral properties and with
VSE approval. As the shares become eligible for release based
upon the expenditure of exploration and development funds, the
Company has recorded stock compensation expense based upon the
number of shares eligible for release from escrow and the market
value of the shares at that time. Accordingly, the Company has
recorded compensation expense associated with these shares of
$294,375, $315,471, and $181,323 during the years ended
December 31, 1995, 1994 and 1993, respectively. If the shares
have not been released from escrow pursuant to the release
provisions by the year 2001, the remaining shares in escrow will
be surrendered to the Company for cancellation. At December 31,
1995, 562,500 shares remain in escrow pursuant to this
arrangement; however, the Company has not as yet requested
release of eligible shares pertaining to 1994 and 1995's
expenditures for exploration and development which, when
requested and approved by the VSE, would allow for the release of
an additional 375,000 common shares.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS No.
123), "Accounting for Stock-Based Compensation." SFAS No. 123
establishes financial accounting and reporting standards for
stock-based employee compensation plans. The statement
encourages all entities to adopt a fair value based method of
accounting, but allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based
<PAGE>
Notes to Financial Statements, Continued
6. Common Shares, Continued:
method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company
implemented SFAS No. 123 on January 1, 1996. Management has not
adopted the measurement provisions of SFAS No. 123 although the
Company will provide the pro forma disclosure requirements of the
statement in its 1996 annual financial statements.
7. Related-Party Transactions:
In addition to related-party transactions included in Notes 3, 4
and 5, the Company has paid or accrued for payment the following
amounts to related parties:
1995 1994 1993
------- ------- -------
Management fees to the President
and director $18,870 $10,880 $11,634
Management fees to a director 2,072
Management fees to a relative of
a director 4,815 19,412 16,588
Office rent to directors 5,660 14,180 9,154
Interest expense on notes payable
to shareholders 37,456 23,246
------- ------- -------
$68,873 $67,718 $37,376
======= ======= =======
The Company had the following transactions with Idaho Mining and
Development Company ("IMD"), a shareholder:
1) By an agreement dated March 1993, subsequently amended and
completed August 31, 1994, the Company acquired certain
mining and processing equipment and the joint use and license
of a certain metallurgical process developed by IMD and the
controlling shareholder of IMD. The purchase price is
payable as follows:
Amount Shares
-------- -------
Cash payment on or before July 1996 $ 80,000
Cash payment due on demand 84,175
Common shares of the Company issued
at an estimated fair value of
$1.25 per share 750,000 600,000
-------- -------
$914,175 600,000
======== =======
<PAGE>
Notes to Financial Statements, Continued
7. Related-Party Transactions, Continued:
The required cash payments are included in the $225,000 and
$80,000 notes payable to shareholders at December 31, 1995
(see Note 5).
The parties have further agreed to license the process to
third parties with any licensing royalties, payments or other
considerations to be divided 50% to IMD and 50% to the
Company.
2) By an agreement dated September 10, 1991, the Company agreed
to pay IMD $50,000 annually towards assessment work
requirements on the Company's mineral properties. During the
years ended December 31, 1995, 1994 and 1993, the Company has
paid/accrued $50,000, $50,000, and $25,000, respectively,
under this agreement (see Note 3(d)).
3) By a construction contract dated December 26, 1993 and a
subsequent amendment, the Company has entered into an
agreement with Silver Crystal Mines, Inc. ("Silver Crystal")
to develop and upgrade the metallurgical facility acquired
from IMD. The controlling shareholder of IMD is also the
president and director of Silver Crystal. Under the terms of
the agreement, the contractor was to complete construction
for a price not to exceed $650,000. During the years ended
December 31, 1995, 1994 and 1993, the Company paid Silver
Crystal $111,000, $557,000 and $50,000, respectively. Also
included in capitalized costs in 1995 are consulting fees of
$11,000 paid to a related party.
Periodically, Silver Crystal and IMD are reimbursed for
direct costs incurred by them on behalf of the Company.
8. Contingency:
During 1993, the Bureau of Land Management ("BLM") of the United
States introduced a new claim rental fee of $100 per claim per
year which was payable by August 31, 1993 with the first payment
required to cover rental fees for 1993 and 1994. Based on the
Company's approximate 2,300 unpatented claims it held at that
time, the total claim rental payments would have amounted to
approximately $460,000. Management of the Company requested a
waiver of the claim rental fee from the BLM which was denied.
The Company appealed that decision to the United States
Department of the Interior, which was also denied.
<PAGE>
Notes to Financial Statements, Continued
8. Contingency, Continued:
Management has identified approximately 1,700 peripheral claims
which were dropped as a result of this decision because they do
not materially affect the control of the mineral rights in the
various areas of interest. The key claims in each claim block
covered by the various property agreements have been retained
with less cost to the Company by way of certain existing
provisions within the new BLM claim rental regulations.
Accordingly, during the years ended December 31, 1995, 1994 and
1993, the Company has accrued $183,300 ($61,100 in each year) in
claim rental fees associated with the key claims that have been
retained by the Company.
9. Income Taxes:
No income tax provision or benefit has been provided for any of
the periods presented due to the Company's net operating loss
carryforward position.
Net deferred tax assets consist of the following at December 31,
1995, 1994 and 1993:
1995 1994 1993
--------- --------- ---------
Deferred tax assets $ 662,000 $ 408,000 $ 283,000
Valuation allowance (662,000) (408,000) (283,000)
--------- --------- ---------
Net deferred tax assets $ 0 $ 0 $ 0
========= ========= =========
The deferred tax assets are primarily comprised of the tax effect
of net operating loss carryforwards. The Company has recorded a
valuation allowance equal to the net deferred tax asset as it is
uncertain that these benefits will be realized through the
generation of future taxable income. The net change in the
valuation allowance for 1995, 1994 and 1993 was due to the
increase in net operating loss carryforwards and the uncertainty
of their realization.
The Company has recorded the above valuation allowance to reflect
the estimated amount of the deferred tax asset which may not be
realized principally due to uncertainty regarding the generation
of future taxable income to utilize existing net operating
losses. If it becomes more likely than not that the Company will
generate future taxable income, the valuation allowance could be
adjusted in the near term.
<PAGE>
Notes to Financial Statements, Continued
9. Income Taxes, Continued:
The Company files its income tax return in Canada. As of
December 31, 1995, the Company had income tax losses carried
forward available to reduce future taxable income, if any, as
follows:
Amount (in
Canadian
Year Dollars)
---- ----------
1996 $ 22,600
1997 62,600
1998 172,600
1999 271,800
2000 229,400
2001 902,700
2002 713,500
----------
$2,375,200
==========
10. Proposed Joint Venture Agreement:
On February 1, 1996, the Company and Cypress Gold Exploration
Corporation ("Cypress") reached an understanding regarding the
principle terms of a proposed joint venture arrangement to
develop the Company's Petsite and Golden Eagle properties. A
final agreement has not as yet been executed and will be subject
to regulatory approval. Under the letter of arrangement
describing the principal terms of the proposed joint venture
agreement, Cypress has the right to earn up to a 70% joint
venture interest if it expends $1.5 million towards the
development of the properties by the fourth anniversary date of
the proposed joint venture agreement.
11. Fair Value of Financial Instruments:
The following estimated fair value amounts have been determined
using available market information and appropriate valuation
methodologies. However, considerable judgment is required to
interpret market data and to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current
market exchange.
<PAGE>
Notes to Financial Statements, Continued
11. Fair Value of Financial Instruments, Continued:
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practical to estimate that value. Potential income tax
ramifications related to the realization of unrealized gains and
losses that would be incurred in an actual sale or settlement
have not been taken into consideration.
The carrying amounts for cash and cash equivalents and the
restricted investment are a reasonable estimate of their fair
value. Due to the nature of the $285,000 of notes payable which
are due on demand, the carrying value of these notes is a
reasonable estimate of their fair value. The fair value of all
other notes payable is based on the discounted value of
contractual cash flows. The discount rate is estimated using the
rates currently offered for debt with similar remaining
maturities. The estimated values of financial instruments at
December 31, 1995 are as follows:
Carrying Fair
Amount Value
-------- --------
Financial assets:
Cash and cash equivalents $167,301 $167,301
Restricted investment 10,000 10,000
Financial liabilities:
Note payable to bank 35,408 35,408
Notes payable to shareholders, other
than demand notes payable 405,000 406,293
12. Differences Between United States and Canadian Generally Accepted
Accounting Principles ("GAAP"):
These financial statements are prepared in accordance with
accounting principles generally accepted in the United States.
The significant differences between U.S. and Canadian GAAP are as
follows:
Under U.S. GAAP, stock compensation expense is recorded as
shares held in escrow become eligible for release based upon
the number of shares eligible for release and the market value
of the shares at that time (see Note 6). Under Canadian GAAP,
no value is attributed to such shares released and no
compensation expense is recorded.
<PAGE>
Notes to Financial Statements, Continued
12. Differences Between United States and Canadian Generally Accepted
Accounting Principles ("GAAP"), Continued:
A reconciliation of U.S. financial statement presentation to
Canadian financial statement presentation is as follows:
1995 1994 1993
---------- ---------- ----------
Net loss - U.S. basis $ 850,878 $ 945,661 $ 355,691
Stock compensation expense (294,375) (315,471) (181,323)
---------- ---------- ----------
Net loss - Canadian basis $ 556,503 $ 630,190 $ 174,368
========== ========== ==========
Net loss per share -
Canadian basis $ 0.10 $ 0.14 $ 0.04
========== ========== ==========
Deficit accumulated during
the exploration stage -
U.S. basis $2,645,366 $1,794,488 $ 848,827
Stock compensation expense,
current year (294,375) (315,471) (181,323)
Stock compensation expense,
prior year's cumulative (555,676) (240,205) (58,882)
---------- ---------- ----------
Deficit accumulated during
the exploration stage -
Canadian basis $1,795,315 $1,238,812 $ 608,622
========== ========== ==========
<PAGE>
SCHEDULE B
1. YEAR-TO-DATE REQUIREMENTS
a. Deferred costs, exploration and development:
See attached Schedule B.1 for details.
b. General and administrative:
See attached Schedule B.2 for details.
c. Expenditures to non-arms length parties:
Cdn. Funds
----------
Paid management fees to president and director $25,901
Paid office rent to president and director 7,769
Paid management fees to a director 2,844
Paid management fees to a relative of a
director 6,609
Interest expense on notes payable to
shareholders 51,412
-------
$94,535
=======
2. FOR THE QUARTER ENDED 31 DECEMBER 1995
a. Securities issued:
NONE
b. Options granted:
<TABLE>
<CAPTION>
Date Granted Number Type Name Price Expiration Date
--------------- ------- -------- ------------ ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
30 October 1995 70,000 Director D. Steiner $1.80 30 October 1999
30 October 1995 50,000 Director E.R. Knickel $1.80 30 October 1999
30 October 1995 30,000 Director P. Lepik $1.80 30 October 1999
30 October 1995 60,000 Employee W. Struck $1.80 30 October 1999
30 October 1995 40,000 Employee G. Magnuson $1.80 30 October 1999
-------
250,000
=======
</TABLE>
<PAGE>
SCHEDULE B
3. AS AT 31 DECEMBER 1995
a. Authorized and issued share capital:
<TABLE>
<CAPTION>
Authorized Issued
---------- ----------------------
Cdn. Funds
Class Par Value Number Number Amount
-------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Common N.P.V. 20,000,000 5,630,508 $5,510,097
Common share subscriptions 337,800 695,496
--------- ----------
5,968,308 $6,205,593
========= ==========
</TABLE>
b. Summary of options, warrants and convertible securities
outstanding:
<TABLE>
<CAPTION>
Date Granted Number Type Name Price Expiration Date
--------------- ------- -------- ------------ ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
30 October 1995 70,000 Director D. Stiner $1.80 30 October 1999
30 October 1995 50,000 Director E.R. Knickel $1.80 30 October 1999
30 October 1995 30,000 Director P. Lepik $1.80 30 October 1999
30 October 1995 60,000 Employee W. Struck $1.80 30 October 1999
30 October 1995 40,000 Employee G. Magnuson $1.80 30 October 1999
-------
250,000
=======
</TABLE>
c. Shares in escrow or subject to pooling:
562,500 common shares
d. List of Directors:
D. W. Steiner
E. R. Knickel
P. Lepik
<PAGE>
SCHEDULE B.1
IDAHO CONSOLIDATED METALS CORP.
SCHEDULE OF RESOURCE PROPERTY COSTS
FOR THE YEAR ENDED 31 DECEMBER 1995
PREPARED BY MANAGEMENT
Canadian U.S.
Funds Funds
-------- --------
Direct - Mineral:
Idaho County, Idaho, U.S.A.:
Test mill construction $215,102 $156,711
Acquisition and filing 356,321 259,596
Geological and geochemical 81,232 59,181
Taxes, licenses and leases 74,697 54,420
Assaying 29,074 21,182
Camp and general 35,000 25,499
Environmental 8,137 5,928
Survey 2,630 1,916
Stripping 43,024 31,345
-------- --------
Costs for the year $845,217 $615,778
======== ========
<PAGE>
SCHEDULE B.2
IDAHO CONSOLIDATED METALS CORP.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED 31 DECEMBER 1995
PREPARED BY MANAGEMENT
Canadian U.S.
Funds Funds
-------- --------
General and administrative expenses:
Professional fees $260,124 $189,512
Finance fees 64,116 46,711
Office and general 78,452 57,156
Advertising and promotion 3,622 2,639
Travel 56,330 41,039
Management fees 95,748 69,757
Wages and benefits 27,888 20,318
Transfer agent and filing fees 12,329 8,982
Loss on disposal of capital assets 4,512 4,576
Shareholder information 119,825 87,298
Bank charges and interest, net 3,541 26,991
Amortization 2,092 1,524
Executive remuneration (Note) - 294,375
-------- --------
$728,579 $850,878
======== ========
NOTE: See Note 1e and Note 6 to the 31 December 1995 financial
statements. For U.S. purposes only, executive remuneration
must be recorded as funds are expended on qualifying resource
property expenditures which result in releases of performance
shares from escrow.
<PAGE>
SCHEDULE C
IDAHO CONSOLIDATED METALS CORP.
MANAGEMENT DISCUSSION
4th QUARTER 1995
Discussions and meetings were held with Cyprus Gold Exploration
Corporation ("Cyprus") regarding a Joint Venture partnership on two of
Idaho Consolidated Metals Corporation's ("ICMC") properties located in
the Orogrande area, Idaho County, Idaho. The properties are the
Petsite property and the Golden Eagle property located on the
Orogrande shear zone. The target is a multi-million ounce
disseminated gold deposit with similar characteristics to a deposit
that Cyprus Amax is currently putting into production. A letter of
understanding with terms favourable to the Company was signed, subject
to regulatory approval. To earn up to a 70% interest in the
properties, Cyprus must incur expenditures of $1,500,000 over a four-
year period and carry ICMC through the feasibility stage, subject to
the completion of a formal agreement.
Discussions were also held with Bema Gold Corporation ("Bema") on
their properties located in the Elk City area called the Buffalo Gulch
Deposit, Deadwood Zone and the Friday property. A letter of
understanding was signed, subject to regulatory approval, optioning
those areas to the Company. The terms are a work commitment of
$580,000 over a five-year period and 250,000 shares of ICMC stock over
a two-year period. The Buffalo Gulch deposit is a bulk minable gold
deposit with a minable reserve of approximately 100,000 ounces, and
the oxidized portion of the deposit may overlie a significant sulphide
resource. The addition of Bema's properties will allow sharing of
infrastructure as the Company brings their properties into production.
A Letter of Understanding was also signed on the Mineral Zone
property, subject to regulatory approval, located in the Elk City
area. The agreement is with Idaho Mining and Development Corporation
and the terms of the agreement are $170,000 down with the $1,540,000
to be paid over the life of the project in equal installments with an
interest rate of 7% per annum, the Company has the right to withdraw
at any time. The property has a drill proven reserve of 40,000 ounces
gold and a parallel zone with significant potential.
Construction work continued at the Eckert's Mine and Millsite, with
the main emphasis being on the filtration circuit. The belt filter
was raised and receiver tanks were constructed. Due to slow progress
on completion of funding, capital expenditures at the millsite were
kept to a minimum.
1st QUARTER 1996
A letter agreement was completed with Idaho Mining and Development
Corporation, subject to regulatory approval, on acquisition of their
remaining 40% interest on the Golden Eagle property. The Company will
have an initial payment of $50,000 and then $500,000 to be paid out of
production. This 40% will be included in the Joint Venture with
Cyprus and the $50,000 will come from Cyprus.
<PAGE>
Progress was made on finalization of the Cyprus Joint Venture
agreement with review of the draft contract. Additional information
has been provided to Cyprus.
Minimal work on the bromination plant continued at the Eckert's Hill
Mine and Millsite as capital expenditures were held to a minimum.
Bromination amendability test work was conducted on samples submitted
by two outside companies. The initial tests were very encouraging and
discussions were held regarding further test work and future
involvement.
<PAGE>
IDAHO CONSOLIDATED METALS CORP.
(the "Company")
INSTRUMENT OF PROXY
Solicited on Behalf of the Management of the Company
THIS PROXY IS SOLICITED BY MANAGEMENT OF THE COMPANY FOR THE ANNUAL
GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON MONDAY, THE 24TH DAY OF
JUNE, 1996 AT 10:00 A.M. (VANCOUVER TIME).
The undersigned, a registered shareholder of the Company, hereby
appoints DELBERT W. STEINER, the President and a Director of the
Company or DR. E. ROY KNICKEL, a Director of the Company, or instead
of either of the foregoing ____________________ as Proxy, with full
power of substitution, to attend and vote on behalf of the undersigned
at the Annual General Meeting of shareholders to be held on Monday,
the 24th day of June 1996 at the hour of 10 o'clock in the forenoon
(Vancouver time) and at any adjournments thereof.
1. To receive the financial statements of the Company as at 31
December 1995 together with the Auditor's Report thereon:
FOR: AGAINST:
------------------------ ------------------------
2. To determine the number of Directors at five:
FOR: AGAINST:
------------------------ ------------------------
3. a. To elect DELBERT W. STEINER as a Director:
FOR: WITHHOLD VOTE:
------------------------ ------------------
b. To elect DR. E. ROY KNICKEL as a Director:
FOR: WITHHOLD VOTE:
------------------------ ------------------
c. To elect GEEDES M. WEBSTER as a Director:
FOR: WITHHOLD VOTE:
------------------------ ------------------
4. To appoint Coopers & Lybrand as auditors for the ensuring year and
to authorize the directors of the Company to fix the remuneration
of the auditors:
FOR: WITHHOLD VOTE:
------------------------ -------------------
<PAGE>
5. To approve the granting and subsequent exercise of incentive stock
options previously granted to certain Insiders of the Company:
FOR: AGAINST:
------------------------ -----------------------
<PAGE>
IDAHO CONSOLIDATED METALS CORP.
(the "Company")
SUPPLEMENTAL MAILING LIST FORM
TO REGISTERED AND NON-REGISTERED SHAREHOLDERS:
National Policy No. 41 adopted by Canadian Securities Regulators
provides shareholders with the opportunity to elect annually to have
their names added to a supplemental mailing list in order to receive
quarterly financial statements of the Company. If you wish to receive
such statements, please complete and return this form to:
Idaho Consolidated Metals Corp.
504 Main Street, Suite 470
P.O. Box 1124
Lewiston, ID 83501
Please note that both registered and non-registered shareholders
should return the form. Registered shareholders will not
automatically receive unaudited financial statements. (Registered
shareholders are those with shares registered in their name; non-
registered shareholders have their shares registered in an agent,
broker or bank's name.)
AS AN OWNER OF SHARES OF THE COMPANY, I REQUEST THAT MY NAME AND
ADDRESS BE PLACED ON YOUR SUPPLEMENTAL MAILING LIST TO RECEIVE INTERIM
FINANCIAL STATEMENTS.
NAME OF SHAREHOLDER:
------------------------------------------------
Please Print Name
ADDRESS: ------------------------------------------------
------------------------------------------------
------------------------------------------------
SIGNATURE: ------------------------------------------------
I certify that I am a registered shareholder
SIGNATURE: ------------------------------------------------
I certify that I am a non-registered shareholder
DATED at , this day of , 1996.
---------------- ------- ----------------
<PAGE>
NOTES TO INSTRUMENT OF PROXY
1. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON ITEMS 1-8
INCLUSIVE AS THE SHAREHOLDER MAY HAVE SPECIFIED BY MARKING AN "X"
IN THE SPACES PROVIDED FOR THAT PURPOSE. IF NO CHOICE IS
SPECIFIED, THE SHARES WILL BE VOTED AS IF THE SHAREHOLDER HAD
SPECIFIED AN AFFIRMATIVE VOTE. IN RESPECT TO AMENDMENTS OR
VARIATIONS OF MATTERS IDENTIFIED IN THE NOTICE OF MEETING OR OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING, THE PROXY
CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDER TO VOTE AS THE
PROXY HOLDER SEES FIT.
2. IF THE SHAREHOLDER DOES NOT WISH TO APPOINT THE PERSONS NAMED IN
THE INSTRUMENT OF PROXY, HE SHOULD STRIKE OUT THOSE NAMES AND
INSERT IN THE BLANK SPACE PROVIDED THE NAME OF THE PERSON HE
WISHES TO ACT AS HIS PROXY. SUCH OTHER PERSON NEED NOT BE A
SHAREHOLDER OF THE COMPANY.
3. The Instrument of Proxy will not be valid unless it is DATED AND
SIGNED BY THE SHAREHOLDER OR BY HIS ATTORNEY DULY AUTHORIZED BY
HIM IN WRITING, OR, IN THE CASE OF A CORPORATION, IS EXECUTED
UNDER ITS CORPORATE SEAL OR BY AN OFFICER OR OFFICERS OR ATTORNEY
FOR THE CORPORATION DULY AUTHORIZED. If the Instrument of Proxy
is executed by an attorney for an individual shareholder or joint
shareholders or by an officer or officers or an attorney of a
corporate shareholder not under its corporate seal, the instrument
so empowering the officer or officers or the attorney, as the case
may be, or a notarial copy thereof, should accompany the proxy
instrument.
4. The Instrument of Proxy will not be used at the annual General
Meeting or any adjournment thereof unless the same is deposited at
the office of the Registrar and Transfer Agent of the Company,
Montreal Trust Company of Canada, 4th Floor, 510 Burrard Street,
Vancouver, British Columbia, Canada, V6C 3B9, at least 48 hours
(excluding Saturdays and holidays) before the holding of the said
Annual General Meeting or with the Chairman of the Meeting at any
time prior to the vote on which it is to be exercised.
<PAGE>
FORM 21
(Section 371)
PROVINCE OF BRITISH COLUMBIA
Certificate of Incorporation No. 351563
COMPANY ACT
-----------
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned
Company on the date stated:
Name of Company: IDAHO CONSOLIDATED METALS CORP.
Date resolution passed: June 24, 1996
Resolution:
"RESOLVED, as a Special Resolution, THAT:
(a) the authorized capital be increased from 20,000,000 common
shares without par value to 100,000,000 common shares without
par value AND THAT paragraph 2 of the Memorandum be altered
to read as follows:
'2 The authorized capital of the Company consists of
100,000,000 common shares without par value.'
(b) the existing Articles of the Company as filed with the
Registrar of Companies be canceled AND THAT the form of
Articles attached hereto and marked Schedule "A" be adopted
as the Articles of the Company in substitution for, and to
the exclusion of, the existing Articles of the Company."
The Memorandum as altered is attached.
Certified a true copy the 24th day of June, 1996.
(Signature) ____________________________________
(Relationship to Company): Solicitor
<PAGE>
COMPANY ACT
IDAHO CONSOLIDATED METALS CORP.
ALTERED MEMORANDUM
------------------
(As altered by special resolution passed June 24, 1996)
1. The name of the Company is Idaho Consolidated Metals Corp.
2. The authorized capital of the Company consists of 100,000,000
common shares without par value.
<PAGE>
SCHEDULE "A"
Articles of
IDAHO CONSOLIDATED METALS CORP.
TABLE OF CONTENTS
-----------------
Part
1. Interpretation
2. Shares and Share Certificates
3. Issue of Shares
4. Share Registers
5. Transfer of Shares
6. Transmission of Shares
7. Alteration of Capital
8. Purchase and Redemption of Shares
9. Borrowing Powers
10. General Meetings
11. Proceedings at General Meetings
12. Votes of Members
13. Directors
14. Election and Removal of Directors
15. Powers and Duties of Directors
16. Disclosure of Interest of Directors
17. Proceedings of Directors
18. Executive and Other Committees
19. Officers
20. Indemnity and Protection of Directors, Officers and Employees
21. Dividends and Reserve
22. Record Dates
23. Documents, Records and Financial Statements
24. Notices
25. Seal
26. Prohibitions
<PAGE>
COMPANY ACT
ARTICLES
IDAHO CONSOLIDATED METALS CORP.
PART 1 - INTERPRETATION
-----------------------
1.1 In these Articles, unless the context otherwise requires:
(a) "Company Act" means the Company Act of the Province of
British Columbia from time to time in force and all
amendments thereto and includes all regulations and
amendments thereto made pursuant to that Act;
(b) "designated security" means a security of the company that
is not a debt security and that:
(i) carries a voting right in all circumstances or
under some circumstances that have occurred and are
continuing, or
(ii) carries a residual right to participate in the
earnings of the Company or, upon the liquidation or
winding up of the Company, in its assets;
(c) "Directors", "Board of Directors" or "Board" means the
Directors or, if the company has only one Director, the
Director of the Company for the time being;
(d) "month" means calendar month;
(e) "registered address" of a Director means the address of
the Director recorded in the register of directors;
(f) "registered address" of a member means the address of the
member recorded in the register of members;
(g) "registered owner" or "registered holder" when used with
respect to a share in the capital of the Company means the
person registered in the register of members in respect of
such shares;
(h) "regulations" means the regulations made pursuant to the
Company Act;
(i) "seal" means the common seal of the Company, if the
Company has one.
<PAGE>
1.2 Expressions referring to writing shall be construed as
including references to printing, lithography, typewriting,
photography and other modes of representing or reproducing
words in a visible form.
1.3 Words importing the singular include the plural and vice versa,
words importing male persons include female persons and words
importing persons shall include corporations.
1.4 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.
1.5 The rules of construction contained in the Interpretation Act
shall apply, mutatis mutandis, to the interpretation of these
Articles.
1.6 The provisions contained in Table A in the First Schedule to
the Company Act shall not apply to the Company.
<PAGE>
PART 2 - SHARES AND SHARE CERTIFICATES
--------------------------------------
2.1 Every share certificate issued by the Company shall be in such
form as the Directors may approve from time to time and shall
contain such statements as are required by, and shall otherwise
comply with, the Company Act.
2.2 Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him
except that, in respect of a share or shares held jointly by
several members, the Company shall not be bound to issue more
than one certificate, and delivery of a certificate for a share
to one of several joint registered holders or to his duly
authorized agent shall be sufficient delivery to all. The
Company shall not be bound to issue certificates representing
redeemable shares if such shares are to be redeemed within one
month on the date on which they were allotted.
2.3 Any share certificate may be sent by registered mail to the
member entitled thereto, and neither the Company nor any
transfer agent shall be liable for any loss occasioned to the
member resulting from the loss or theft of any such share
certificate so sent.
2.4 If a share certificate:
(a) is worn out or defaced, the Directors may, upon production
to the Company of the certificate and upon such other
terms, if any, as they may think fit, order the
certificate to be canceled and issue a new certificate in
lieu thereof;
(b) is lost, stolen or destroyed, the Directors may, upon
proof thereof to their satisfaction and upon such
indemnity, if any, being given as they consider adequate,
issue a new share certificate in lieu thereof 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, the Directors
shall cancel the certificate so surrendered and issue in
lieu thereof certificates in accordance with such request.
<PAGE>
2.5 If a member owns shares of a class or series represented by
more than one share certificate and surrenders the certificates
to the Company with a written request that the Company issue in
his name one certificate representing in the aggregate the same
number of shares as the certificates so surrendered, the
Directors shall cancel the certificates so surrendered and
issue in lieu thereof a certificate in accordance with such
request.
2.6 The Directors may from time to time determine the amount of a
charge, not exceeding an amount prescribed by the regulations
or the Company Act, to be imposed for each certificate issued
pursuant to Articles 2.4 and 2.5.
2.7 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 or otherwise mechanically reproduced and, in such
event, a certificate 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 he is stated on such certificate to hold at the
date of the issue of the certificate.
2.8 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 as provided by
law, statute or these Articles 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.
<PAGE>
PART 3 - ISSUE OF SHARES
------------------------
3.1 Except as provided in the Company Act, the Memorandum of the
Company and these Articles, and subject to any direction to the
contrary contained in a resolution of the members authorizing
any increase or alteration of capital, the shares of the
Company shall be under the control of the Directors who may,
subject to the rights of the holders of issued shares of the
Company, allot and issue, or grant options in respect of shares
authorized but not issued or issued and redeemed or purchased,
at such times and to such persons, including Directors, and in
such manner and upon such terms and conditions, and at such
price or for such consideration, as the Directors in their
absolute discretion may determine.
3.2 If the Company is, or becomes, a company which is not a
reporting company and 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 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 its shares, or
procuring or agreeing to procure subscriptions, whether
absolutely or conditionally, for any such shares, but if the
Company is not a specially limited company, the rate of the
commission and discount shall not in the aggregate exceed 25%
of the amount of the subscription price of such shares.
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.
A document evidencing indebtedness of the allottee is not
property for the purpose of this Article. The value of
property or services for the purpose of this Article shall be
the value determined by the Directors by resolution to be, in
all the circumstances of the transaction, no greater than the
fair market value thereof. The full consideration received for
a share issued by way of dividend shall be the amount
determined by the Directors to be the amount of the dividend.
<PAGE>
PART 4 - SHARES 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 may appoint a trust company to keep
the aforesaid registers 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 registers for each
class of shares. The Directors 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 within the Province one or more branch
registers of members and may, if the Company is, or becomes, a
reporting company, cause to be kept outside the Province one or
more branch register of members.
4.3 The Company shall not at any time close its register of
members.
<PAGE>
PART 5 - TRANSFER OF SHARES
---------------------------
5.1 Subject to the provisions of the Memorandum of the Company and
these Articles and to restrictions on transfer, if any,
contained in these Articles, any member may transfer any of his
shares by instrument of transfer executed by or on behalf of
such member and delivered to the Company or its transfer agent.
The instrument of transfer 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. If the
Directors so require, each instrument of transfer shall be in
respect of only one class of shares. Except to the extent that
the Company Act may otherwise provide, the transferor shall be
deemed to remain the holder of the shares until the name of the
transferee is entered in the register of members or a branch
register of members in respect thereof.
5.2 The signature of the registered owner 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 in 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 owner
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 on whose behalf any certificate for the shares to be
transferred is deposited with the Company for the purpose of
having the transfer registered, the number of shares specified
in the instrument of transfer or, if no number is specified,
all the shares represented by all share certificates deposited
with the instrument of transfer.
5.3 The Company and its Directors, officers and transfer agent or
agents shall not be bound to enquire 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 owner or by any intermediate owner or
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 share shave been registered a valid title to
such shares.
<PAGE>
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, the transfer agent or registrar may require to prove
the title of the transferor or his right to transfer the shares
and the right of the transferee to have the transfer
registered. All instruments of transfer where the transfer is
registered shall be retained by the Company or its transfer
agent or registrar and any instrument of transfer, where the
transfer is not registered, shall be returned to the person
depositing the same together with the share certificate which
accompanied the same when tendered for registration.
5.5 There shall be paid to the Company in respect of the
registration of any transfer such sum, if any, as the Directors
may from time to time determine.
<PAGE>
PART 6 - TRANSMISSION OF SHARES
-------------------------------
6.1 In the case of the death of a member, the survivor or survivors
where the deceased was a joint registered holder of shares, and
the legal personal representative of the deceased member 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 produce a certified copy of a
grant of probate or letters of administration, or grant of
representation, will, order or other instrument or other
evidence of the death under which title to the share is claimed
to vest, and such other documents as the Company Act requires.
6.2 Upon the death or bankruptcy of a member, his personal
representative or trustee in bankruptcy, as the case may be,
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.
6.3 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, have
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 or trustee in bankruptcy, 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.
<PAGE>
PART 7 - ALTERATION OF CAPITAL
------------------------------
7.1 The Company may by ordinary resolution amend its Memorandum to
increase its authorized capital by:
(a) creating shares with par value or shares 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.
7.2 The Company may by special resolution alter its Memorandum to:
(a) subdivide all or any of its unissued or fully paid issued
shares with par value into shares with smaller par value;
(b) subdivide all or any of its unissued or fully paid issued
shares without par value so that the number of those
shares is increased;
(c) consolidate all or any of its shares with par value into
shares of larger par value;
(d) consolidate all or any of its shares without par value so
that the number of those shares authorized is reduced;
(e) change all or any of its unissued or fully paid issued
shares with par value into shares without par value;
(f) change all or any of its unissued shares without par value
into shares with par value;
(g) alter the name or designation of all or any of its issued
or unissued shares; or
(h) alter the provisions as to the maximum price or
consideration at or for which shares without par value may
be issued,
but only to such extent, in such manner and with such consents
of members holding shares of a class or series which are the
subject of or are affected by such alteration as the Company
Act provides.
<PAGE>
7.3 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, whether
issued or unissued, 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 or restrictions
attached to any shares, whether issued or unissued,
and in each case by filing a certified 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 or series whose right
or special right is so prejudiced or interfered with consent
thereto in writing, or unless a separate resolution is
consented thereto by the members holding shares of each such
class or series passed by a majority of 3/4 of the votes cast,
or such greater majority as may be specified by the special
rights attached to the class or series, of the issued shares of
such class or series.
7.4 Notwithstanding such consent in writing or such separate
resolution, no such alteration shall be valid as to any part of
the issued shares of any class or series unless the holders of
the rest of the issued shares of such class or series either
all consent thereto in writing or consent thereto by a separate
resolution passed by a majority of 3/4 of the votes cast.
7.5 If the Company is, or becomes, a reporting company, no
resolution to create, vary or abrogate any special right of
conversion or exchange attaching to any shares shall be
submitted to any general meeting, class meeting or series
meeting of members unless, if so required by the Company Act,
the Superintendent of Brokers, the British Columbia Securities
Commission, or other applicable regulatory authority, as the
case may be, has first consented to the resolution.
7.6 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 or series meeting but the quorum at a class
meeting or series meeting shall be one person holding or
representing by proxy one-third of the shares affected.
<PAGE>
PART 8 - PURCHASE AND REDEMPTION OF SHARES
------------------------------------------
8.1 Subject to the special rights and restrictions attached to any
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 shares that have a right of redemption attached to
them 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.
8.2 Unless shares are to be purchased by the Company through a
stock exchange or the Company is purchasing the shares from a
dissenting member pursuant to the requirements of the Company
Act or the Company is purchasing the shares from a bona fide
employee or bone fide former employee of the Company or of an
affiliate of the Company, the Company shall make its offer to
purchase pro rata to every member who holds shares of the class
or series to be purchased.
8.3 If the Company proposes at its option to redeem some but not
all of the shares of a particular class or series, the
Directors may, subject to the special rights and restrictions
attached to the shares of such class or series, decide the
manner in which the shares to be redeemed shall be selected.
8.4 Subject to the provisions of the Company Act, the Company may
reissue a canceled share that it has redeemed or purchased, or
sell a share that it has redeemed or purchased but not
canceled, but the Company may not vote or pay or make any
dividend or other distribution in respect of a share that it
has redeemed or purchased.
<PAGE>
PART 9 - BORROWING POWERS
-------------------------
9.1 The Directors may from time to time in their discretion
authorize the Company to:
(a) borrow money in such amount, in such manner, on such
security, from such sources and upon such terms and
conditions as they think fit;
(b) guarantee the repayment of money borrowed by any person or
the performance of any obligation of any person;
(c) issue bonds, debentures, notes and other debt obligations
wither outright or as continuing security for any
indebtedness or liability, direct or indirect, or
obligations of the Company or of any other person; and
(d) 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.
9.2 Any bonds, debentures, notes 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,
drawing, allotment of or conversion into or exchange for shares
or other securities, attending and voting at general meetings
of the Company, appointment of Directors or 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.
9.3 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 debenture holders,
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 be resolutions, regulation or otherwise make such
provisions as they think fit respecting the keeping of such
branch registers.
<PAGE>
9.4 Every bond, debenture, note 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, note or other debt obligation
appointed by the company or under any instrument under which
the bond, debenture, note 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, note 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 he is stated on such bond,
debenture, note or other debt obligation to hold at the date of
the issue thereof.
9.5 If the Company is, or becomes, a reporting company, it shall
keep or cause to be kept a register of its indebtedness to
every Director or officer of the Company or an associate of any
of them in accordance with the provisions of the Company Act.
<PAGE>
PART 10 - GENERAL MEETINGS
--------------------------
10.1 Subject to any extensions of time permitted under the Company
Act, the first annual general meeting of the Company shall be
held within 15 months from the date of incorporation and
thereafter an annual general meeting shall be held once in
every calendar year at such time (not being more than 13 months
after the date that the last annual general meeting was held or
was deemed to have been held) and place as may be determined by
the Directors.
10.2 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 the
business required to be transacted at such meeting, the meeting
shall be deemed to have been held on the date specified in the
consent or in the resolutions consented to in writing dealing
with such business and the meeting need not be held.
10.3 The Directors may, whenever they think fit, convene a general
meeting. A 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.
10.4 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.
10.5 A notice convening a general meeting, specifying the place,
date and hour of the meeting and, in case of special business,
the general nature of that business, shall be given as provided
in the Company Act and in the manner provided in these
Articles, 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
pursuant to 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.
10.6 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.
<PAGE>
10.7 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 11 - PROCEEDINGS AT GENERAL MEETINGS
-----------------------------------------
11.1 All business shall be deemed special business which is
transacted at:
(a) an annual general meeting, with the exception of the
conduct of and voting at such meeting, consideration of
the financial statements and the respective reports of the
Directors and the auditor, fixing or changing the number
of directors, the election of Directors, the appointment
of an auditor, fixing of the remuneration of the auditor
and such other business as by these Articles or the
Company Act may be transacted at a general meeting without
prior notice thereof being given to the members or any
business which is brought under consideration by the
report of the Directors; and
(b) any other general meeting, with the exception of the
conduct of and voting at such meeting.
11.2 No business, other than election of chairman or the adjournment
or termination of the meeting, shall be conducted at any
general meeting unless the required quorum of members, entitled
to attend and vote, is present at the commencement of the
meeting, but a quorum need not be present throughout the
meeting.
11.3 Except as provided in the company Act and these Articles a
quorum shall be two persons present and being, or representing
by proxy, members holding not less than 10% of the shares
entitled to be voted at the meeting. If there is only one
member the quorum is one person present and being, or
representing by proxy, such member. The Directors, the senior
officers of the Company, the solicitor of the Company and the
auditor of the Company, if any, 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 at such
meeting.
11.4 If within half an hour from the time appointed for a general
meeting a quorum is not present, the meeting, if convened upon
the requisition of members, shall be terminated. In any other
case the meeting 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 person or persons present
and being, or representing by proxy, a member of members
entitled to attend and vote at the meeting shall be a quorum.
<PAGE>
11.5 The Chairman of the Board or in his absence, or if there is no
Chairman of the Board, the President or in his absence a Vice-
President, if any, shall be entitled to preside as chairman at
every general meeting of the Company.
11.6 If at any general meeting neither the Chairman of the Board nor
the President nor a Vice-President is present within 15 minutes
after the time appointed for holding the meeting or if any of
them is present and none of them is willing 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 so choose or if no Director is present,
the members present shall choose one of their number or any
person to be chairman.
11.7 The chairman of a general meeting may, with the consent of the
meeting if a quorum is present, 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 30 days or more, notice, but not
"advance notice," of the adjourned meeting shall be given as in
the case of the 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.
11.8 No motion proposed at a general meeting need be seconded and
the chairman may propose or second a motion.
11.9 Subject to the provisions of the Company Act, every motion or
question submitted to a general meeting shall be decided on 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 motion or question in
accordance with the result of the show of hands or the poll,
and such decision shall be entered in the record of the
proceedings of the Company. A declaration by the chairman that
a motion or question 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 record
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 motion or question.
11.10 The chairman of the meeting shall be entitled to vote any
shares carrying the right to vote held by him but in the case
of an equality of votes, whether on a show of hands or on a
poll, the chairman shall not have a second or casting vote in
addition to the vote or votes to which he may be entitled as a
member.
<PAGE>
11.11 No poll may be demanded on the election of a chairman. A poll
demanded on a question of adjournment shall be taken forthwith.
A poll demanded on any other question shall be taken as soon
as, in the opinion of the chairman, is reasonably convenient,
but in no event later than 7 days after the meeting and at such
time and place and in such manner as the chairman of the
meeting directs. The result of the poll shall be deemed to be
the resolution of and passed at the meeting at which the poll
was demanded. Any business other than that upon which the poll
has been demanded may be proceeded with pending the taking of
the poll. A demand for a poll may be withdrawn. In any
dispute as to the admission or rejection of a vote the decision
of the chairman made in good faith shall be final and
conclusive.
11.12 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 be subject to such inspection
as the Company Act may provide.
11.13 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 cotes he
uses in the same way.
11.14 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.
<PAGE>
PART 12 - VOTES OF MEMBERS
--------------------------
12.1 Subject to any voting rights or restrictions attached to any
class of shares and the restrictions as to voting on joint
registered holders of shares, on a show of hands every member
who is present in person and entitled to vote at a general
meeting or class meeting shall have one vote and on a poll
every member entitled to vote 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.
12.2 Any person who is not registered as a member but is entitled to
vote at a general meeting or class 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.
12.3 Any corporation, not being a subsidiary of the Company, which
is a member of the Company may be 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 and to speak and vote at any such meeting or to sign
resolutions of members. The person so authorized shall be
entitled to exercise in respect of and at any such meeting the
same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual member
of the Company personally present, including, without
limitation, the right, unless restricted by such resolution, to
appoint a proxyholder to represent such corporation, and he
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, telegraph, telex, telecopier or any method of
transmitting legibly recorded messages. Notwithstanding the
foregoing, a corporation being a member may appoint a
proxyholder.
12.4 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.
<PAGE>
12.5 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 hand 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.
12.6 A member holding more than one share in respect of which he is
entitled to vote shall be entitled to appoint one or more
proxyholders to attend, act and vote for him on the same
occasion. If such a member should appoint more than one
proxyholder for the same occasion he shall specify the number
of shares each proxyholder shall be entitled to vote. A member
may also appoint one or more alternate proxyholders to act in
the place and stead of an absent proxyholder.
12.7 A form of proxy shall be in writing under the hand of the
appointor or of his attorney duly authorized in writing, or, if
the appointor is a corporation, either under the seal of the
corporation or under the hand of a duly authorized officer or
attorney.
12.8 Any person may act as proxyholder whether or not he is a
member. The proxy may authorize the proxyholder to act as such
for the appointor for such period, at such meeting or meetings
and to the extent permitted by the Company Act.
12.9 A form of proxy and the power of attorney or other authority,
if any, under which it is signed or a notarially certified copy
thereof shall be deposited at the registered office of the
Company or at such other place as is specified for that purpose
in the notice calling the meeting, or shall be deposited with
the chairman of the meeting. 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 providing for particulars of such proxies to be sent to the
Company or any agent of the Company in writing or by letter,
telegram, telex, telecopier or any method of transmitting
legibly recorded messages so as to arrive before the
commencement of the meeting or adjourned meeting at the
registered office of the Company or at the office of any agent
of the Company appointed for the purpose of receiving such
particulars and also providing that proxies so deposited may be
acted upon as though the proxies themselves were deposited as
required by this Part, and votes given in accordance with such
regulations shall be valid and shall be counted.
<PAGE>
12.10 Unless the Company Act or any other statute or law which is
applicable to the Company or to any class or series of its
shares requires any other form of proxy, a proxy, whether for a
specified meeting or otherwise, shall be in the following form,
or in such other form that the Directors or the chairman of the
meeting shall approve:
(Name of Company)
The undersigned, being a member of the above Company,
hereby appoints ___________________________ or failing him
__________________________ as proxyholder for the
undersigned to attend, act and vote for and on behalf of
the undersigned at the general meeting of the Company to
be held on the ____ day of _______________, 19___ and at
any adjournment thereof.
Signed this _____ day of _______________, 19___.
________________________________________
(Signature of member)
12.11 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 revocation of the proxy or of the authority
under which the proxy was executed or transfer of the share or
shares in respect of which the proxy is given unless
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 is given before the vote is taken.
12.12 Every proxy may be revoked by an 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 at the registered office of the Company
at any time up to and including the last business day
preceding the day of the meeting or adjourned meeting for
which the proxy is given, 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
given shall have been taken, or in any other manner
provided by law.
<PAGE>
PART 13 - DIRECTORS
-------------------
13.1 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 all the subscribers or by resolution
passed at meeting of the subscribers or, if not so appointed,
they shall by 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.
13.2 The remuneration of the Directors as such may from time to time
be determined by the Directors or, if the Directors shall so
decided, by the member. 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 repaid such reasonable traveling,
accommodation 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. Unless otherwise
determined by ordinary resolution, the Directors on behalf of
the Company may pay a gratuity, pension or retirement allowance
to any Director who has held any office or appointment 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.
13.3 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 to become or act as a Director as required by the
Company Act.
<PAGE>
PART 14 - ELECTION AND REMOVAL OF DIRECTORS
-------------------------------------------
14.1 At each annual general meeting of the Company all the Directors
shall retire and the members entitled to vote at the meeting
shall elect 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 all the member entitled to attend and
vote at an annual general meeting consent in writing to the
business required to be transacted at such meeting, the meeting
shall be deemed for the purpose of this Part to have been held
on the date specified in the consent or in the resolutions
consented to in writing dealing with such business.
14.2 A retiring Director shall be eligible for re-election.
14.3 Where the Company fails to hold an annual general meeting or
the member fail to consent to the business required to be
transacted at such meeting, 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 continue to hold
office until other Directors are appointed or elected or until
the day on which the next annual general meeting is held.
14.4 If at any general meeting at which there should be an election
of Directors, the places of any of the retiring Directors are
not filled by such election, such of the 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 these Articles such number shall
be fixed at the number of Directors actually elected or
continued in office.
14.5 Any casual vacancy occurring in the Board of Directors may be
filled by the remaining Directors or Director.
14.6 The office of a Director shall be vacated if the Director:
(a) resigns his office by notice in writing delivered to the
registered office of the Company; or
(b) ceases to be qualified to act as a Director pursuant to
the Company Act
<PAGE>
14.7 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.
14.8 Notwithstanding anything contained in these Articles, the
Company may at any time by ordinary resolution, increase the
number of Directors previously fixed or determined and may by
ordinary resolution elect such person or persons to fill the
vacancy or vacancies thereby created.
14.9 Between successive annual general meetings the Directors shall
have power to appoint one or more additional Directors but the
number of additional Directors shall not at any time exceed 1/3
of the number of Directors elected or appointed at the last
annual general meeting of the Company. Any additional 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.
14.10 Any Director may by instrument in writing, telegram, telex,
telecopier or any other method of transmitting legibly recorded
messages delivered or sent 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 disapproved of the appointment of such person as an
alternate and shall have given notice to that effect to the
Director appointing the alternate within a reasonable time
after delivery of such instrument to the Company. Every such
alternate shall be entitled to notice of 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 by whom he was appointed in addition to his own vote.
A Director may at any time by instrument, telegram, telex,
telecopier or any other method of transmitting legibly recorded
messages delivered or sent to the Company revoke the
appointment of an alternate appointed by him. The remuneration
payable to such an alternate shall be payable out of the
remuneration of the Director appointing him.
<PAGE>
PART 15 - POWERS AND DUTIES OF DIRECTORS
----------------------------------------
15.1 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, the Memorandum of the Company or these Articles,
required to be exercised by the Company in general meeting.
15.2 The Directors may from time to time by power of attorney or
other instrument under the seal of the Company 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 favor of any of the
Directors or any of the member of the company or in favor 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 16 - DISCLOSURE OF INTEREST OF DIRECTORS
---------------------------------------------
16.1 A Directors who is, in any way, directly or indirectly
interested in an existing or proposed contractor 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 a
Director shall declare the nurture and extent of his interest
in such contract or transaction or of 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.
16.2 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:
(a) any such contract or transaction relating to a loan to the
company, which a Director or a specified corporation or a
specified firm in which he has an interest has guaranteed
or joined in guaranteeing the repayment of the loan or any
part of the loan;
(b) 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;
(c) 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;
(d) determining the remuneration of the Directors;
(e) purchasing and maintaining insurance to cover Directors
against liability incurred by them as Directors; or
(f) the indemnification of any Director or officer by the
Company.
The foregoing exceptions may from time to time be suspended or
amended to any extent approved by the Company in general
meeting and permitted by the Company Act, either generally or
in respect of any particular contract or transaction or for the
particular period.
<PAGE>
16.3 A Director may hold any office or appointment with the Company
(except as 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 appointment 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.
16.4 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 of the company) and he or his firm
shall be entitled to remuneration for professional services as
if he were not a Director.
16.5 A Director may be or become a director or officer or employee
of, or otherwise interested in, any corporation or firm in
which the Company may be interested as a member 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 director,
officer or employee of, or from his interest in, such other
corporation or firm, unless the company in general meeting
otherwise directs.
<PAGE>
PART 17 - PROCEEDINGS OF DIRECTORS
----------------------------------
17.1 The Chairman of the Board or, in his absence or if there is no
Chairman of the board, the President shall preside as chairman
at every meeting of the Directors.
17.2 If at any meeting of Directors neither the Chairman of the
Board nor the President is present within 15 minutes after the
time appointed for holding the meeting or if either of them is
present but is not willing to act as chairman or if the
Chairman of the Board, if any, and the President have advised
the Secretary that they will not be present at the meeting, the
Directors present shall choose one of their number to be
chairman of the meeting.
17.3 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 case of an equality of votes the
chairman shall not have a second or casting vote.
17.4 A Director may participate in a meeting of the board or of any
committee of Directors by means of telephone or other
communication facility by means of which all Directors
participating in the meeting can hear each other and provided
that all such Directors agree to such participation. A meeting
so held in accordance with this Article shall be deemed to be
an actual meeting of the board and any resolution passed at
such meeting shall be as valid and effectual as if it had been
passed at a meeting where the Directors are physically present.
A Director participating in a meeting in accordance with this
Article shall be deemed to be present at the meeting and to
have so agreed and shall be counted in the quorum therefor and
be entitled to speak and vote at the meeting.
17.5 A Director may at any time, and the Secretary or an Assistant
Secretary upon request of a Director shall, call a meeting of
the Board.
17.6 Notice of a meeting of the Board shall be given to each
Director and alternate Director at least 48 hours before the
time fixed for the meeting and may be given orally, personally
or by telephone , or in writing, personally or by delivery
through the post or by letter, telegram, telex, telecopier or
any other method of transmitting legibly recorded messages in
common use. When written notice of a meeting is given to a
Director, it shall be addressed to him at his registered
<PAGE>
address. Where the Board has established a fixed time and
place for the holding of its meetings, no notices of meetings
to be held at such fixed time and place need be given to any
Director. A Director entitled to notice of a meeting may waive
or reduce the period of notice convening the meeting and may
give such waiver before, during or after the meeting.
17.7 For the first meeting of the Board to be held immediately
following the election of a Director at an annual general
meeting of the Company or for a meeting of the Board at which a
Director is appointed to fill a vacancy on the Board, no notice
of such meeting shall be necessary to such newly appointed or
elected Director in order for the meeting to be properly
constituted.
17.8 Any Director who may be absent temporarily from the Province
may file at the registered office of the Company a waiver of
notice, which may be by letter, telegram, telex, telecopier or
any other method of transmitting legibly recorded messages, of
meetings of the Directors and may at any time withdraw the
waiver, and until the waiver is withdrawn, no notice of
meetings of Directors shall be sent to that Director, and any
and all meetings of Directors, notice of which has not been
given to that Director shall, provided a quorum of the
Directors is present, be valid and effective.
17.9 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.
17.10 The continuing Directors may act notwithstanding any vacancy in
the body but, notwithstanding Article 17.9, if and so long as
their number is reduced below the number fixed pursuant to
these Articles as the necessary quorum of Directors, the
continuing Directors may act 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.
17.11 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 such Directors or
of the members of such committee or person acting as 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.
<PAGE>
17.12 A resolution consented to in writing, whether by document,
telegram, telex, telecopier or any method of transmitting
legibly recorded messages or other means, by all of the
Directors for the time being in office without their meeting
together shall be as valid and effectual as if it had been
passed at a meeting of the Directors duly called and held,
shall be deemed to relate back to any date stated therein to be
the effective date thereof and shall be filed in the minute
book of the Company accordingly. Any such resolution may
consist of one or several documents each duly signed by one or
more Directors which together shall be deemed to constitute one
resolution in writing.
<PAGE>
PART 18 - EXECUTIVE AND OTHER COMMITTEES
----------------------------------------
18.1 The Directors may by resolution appoint an Executive Committee
consisting of such member or members of the Board 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 in 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 books kept
for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time
to time require. The 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 acts done before such
revocation or overriding and to terminate the appointment or
change the membership of such Committee and to fill vacancies
in it.
18.2 The Directors may by resolution appoint one or more other
committees consisting of such member or members of the Board as
they think fit and may delegate to any such committee between
meetings of the Board such powers of the Board (except the
power to fill vacancies in the Board, the power to change the
membership of or fill vacancies in any committee of the Board,
the power to appoint or remove officers appointed by the Board
and such other powers as may be specified in the resolution)
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 the
same to the Board of Directors at such times as the Board of
Director 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 committee 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.
18.3 Committees appointed under the Part 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.
<PAGE>
18.4 Committees appointed under this Part may meet and adjourn as
they think proper. Questions arising at any meeting of a
committee shall be determined by a majority of votes of the
members of the committee present, and in case of an equality of
votes the chairman shall not have a second or casting vote.
The provisions of Article 17.12 shall apply mutatis mutandis to
resolutions consented to in writing by the members of a
committee appointed under this Part.
<PAGE>
PART 19 - OFFICERS
------------------
19.1 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.
19.2 One person may hold more than one of such offices except that
the offices of President and Secretary shall be held by
different persons unless the company has only one member. Any
person appointed as the Chairman of the Board, President or
Managing Director shall be a Director. The other officers need
not be Directors.
19.3 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 gratuity, pension or
retirement allowance.
19.4 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.
19.5 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 20 - INDEMNITY AND PROTECTION OF DIRECTORS,
OFFICERS AND EMPLOYEES
------------------------------------------------
20.1 Subject to the provisions of the Company Act, the Directors
may, with the approval of the Court, cause the Company to
indemnify a Director or former Director of the Company or a
director or former director of a corporation of which the
Company is or was a member, and the heirs and personal
representatives of any such person, against all costs, charges
and expenses, including an amount paid to settle an action or
satisfy a judgment, actually and reasonably incurred by him,
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 made a party by reason of being or
having been a Director of the Company or a director of such
corporation, including any action or proceeding 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.
20.2 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 member (notwithstanding that he is also a Director) and
his heirs and personal representatives against all cost,
charges and expenses whatsoever incurred by him 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 heirs and
personal representatives against all costs, charges and
expenses whatsoever incurred by him and arising out of the
functions assigned to the Secretary by the Company Act or these
Articles. Each such Secretary and Assistant Secretary on being
appointed shall be deemed to have contracted with the Company
on the terms of the foregoing indemnity.
20.3 For the purposes of Article 20.1, a civil, criminal or
administrative action or proceeding shall include a civil,
criminal, administrative or other investigation or inquiry the
subject of which concerns the acts or conduct of the Director
or former Director of the Company while a Director of the
company.
<PAGE>
20.4 The failure of a Director or officer of the company to comply
with the provisions of the Company Act, the Memorandum of the
Company or these Articles shall not invalidate any indemnity to
which he is entitled under this Part.
20.5 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 member and his heirs or personal
representatives against any liability incurred by him as such
Director, director, officer, employee or agent.
<PAGE>
PART 21 - DIVIDENDS AND RESERVE
-------------------------------
21.1 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 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, bond, 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.
21.2 Any dividend declared on shares of any class may be made
payable on such date as is fixed by the Directors.
21.3 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
such shares held.
21.4 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 pending 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.
21.5 If several persons are registered as joint holder of any share,
any one of them may give an effective receipt for any dividend,
interest or other moneys payable in respect of the share.
<PAGE>
21.6 No dividend shall bear interest. 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.
21.7 Any dividend, interest or other moneys payable in respect of
shares may be paid by cheque or warrant sent by mail directed
to the registered address of the holder, or in the case of
joint holder, to the registered address of that one of the
joint holder who is first named on the register, or to such
person and to such address as the holder or joint holders may
direct in writing. Every such cheque or warrant shall, to the
extent of the sum represented thereby (plus the amount of any
tax required by law to be deducted) discharge all liability for
the dividend, unless such cheque or warrant shall not be paid
on presentation or the amount of tax so deducted shall not be
paid on presentation or the amount of tax so deducted shall not
be paid to the appropriate taxing authority.
21.8 Notwithstanding anything contained in these Articles the
directors may from time to time capitalize any undistributed
surplus on hand of the company and may from time to time issue
as fully paid and non-assessable any unissued shares or any
bonds, debentures or other debt obligation of the Company as a
dividend representing such undistributed surplus on hand or any
part thereof.
21.9 A transfer of a share shall not pass the right to any dividend
declared thereon before the registration of the transfer in the
register.
<PAGE>
PART 22 - RECORD DATES
----------------------
22.1 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 or any class
or series thereof or of the payment of any dividend or of the
proposed taking of any other proper action requiring the
determination of members, as the record date for the
determination of the members entitled to notice of, or to
attend and vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend or
for any other proper purpose and, in such case, notwithstanding
anything elsewhere contained in these Articles, only members of
record on the date so fixed shall be deemed to be members for
the purposes aforesaid.
22.2 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 passed, as the case may be, shall be the record
date for such determination.
<PAGE>
PART 23 - DOCUMENTS, RECORDS AND FINANCIAL STATEMENTS
-----------------------------------------------------
23.1 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.
23.2 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 properly to recorded the
financial affairs and condition of the Company and to comply
with the Company Act.
23.3 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.
23.4 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.
23.5 Every member shall be entitled to be furnished 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 24 - NOTICES
-----------------
24.1 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 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
and mailing the notice, statement or report and 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 and mailed shall be conclusive evidence
thereof.
24.2 A notice, statement or report may be given or delivered by the
Company to the joint holders of a share by giving or delivering
it to the joint holder first named in the register of members
in respect of that share.
24.3 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 addressed to them by name or by the title of
representatives 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 it in a manner in which the same
might have been given if the death, bankruptcy or incapacity
had not occurred.
24.4 Notice of every general meeting or meeting of members holding
shares of a class or series shall be given a 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.
<PAGE>
PART 25 - SEAL
--------------
25.1 The Directors may provide a seal for the Company and, if they
do so, shall provide for the safe custody and use of the seal
which shall not be affixed to any instrument except in the
presence of, or attested by the signatures of, the following
persons, namely:
(a) any two Directors, or
(b) any one of the Chairman of the Board, the President, the
Managing Director, a Director and a Vice-President
together with any of the Secretary, the Treasurer, the
Secretary-Treasurer, an Assistant Secretary, an Assistant
Treasurer and an Assistant Secretary-Treasurer, or
(c) if the Company shall have only one member, the President
or the Secretary, or
(d) such person or persons as the Directors may from time to
time by resolution appoint, and any such resolution may be
general in its nature,
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.
25.2 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
of 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, an Assistant Secretary, an Assistant Treasurer or an
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 or 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.
<PAGE>
25.3 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.
<PAGE>
PART 26 - PROHIBITIONS
----------------------
26.1 If the Company is, or becomes, a company which is not a
reporting company, the number of persons who beneficially own
designated securities of the Company (counting any two or more
joint registered owners as one beneficial owner) shall be
limited to 50, excluding persons that:
(a) are employed by the Company or an affiliate of it, or
(b) beneficially owned, directly or indirectly, designated
securities of the Company while employed by it or by an
affiliate of it and, at all times since ceasing to be so
employed, have continued to beneficially own, directly or
indirectly, at least one designated security of the
Company.
26.2 If the Company is, or becomes, a company which is not a
reporting company, no designated securities of the Company, and
no securities that are convertible into or exchangeable for
designated securities of the Company, shall be:
(a) offered for sale to the public; or
(b) 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 to
consent to any such proposed transfer.
<PAGE>
JOINT VENTURE AGREEMENT
Dated May 20, 1996
BETWEEN
IDAHO CONSOLIDATED METALS CORPORATION
AND
CYPRUS GOLD EXPLORATION CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
ARTICLE 2 REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
2.1 Capacity of Participants
2.2 Representations and Warranties
2.3 Representations and Warranties
2.4 Disclosures
2.5 Record Title
2.6 Joint Loss of Title
ARTICLE 3 NAME, PURPOSES AND TERM
3.1 General
3.2 Name
3.3 Purposes
3.4 Limitation
ARTICLE 4 RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership
4.2 U.S. Tax Elections and Allocations
4.3 Other Business Opportunities
4.4 Waiver of Right to Partition
4.5 Implied Covenants
ARTICLE 5 CONTRIBUTIONS BY PARTICIPANTS
5.1 Participants' Initial Contributions
5.2 Failure to Make Initial Contributions
5.3 Obligations Prior to Earn-In
5.4 Additional Cash Contributions
5.5 Earn-In
5.6 Additional Interest
5.7 Reports
5.8 Development by ICMC
ARTICLE 6 INTERESTS OF PARTICIPANTS;
DEFAULTS AND REMEDIES; FINANCING
6.1 Participating Interests
6.2 Changes in Participating Interests
6.3 Voluntary Reduction in Participation
6.4 Default in Making Contributions
6.5 Conversion of Interest
6.6 Continuing Liabilities Upon Adjustments of
Participating Interests
6.7 Financing by Cyprus
<PAGE>
ARTICLE 7 MANAGEMENT COMMITTEE
7.1 Organization and Composition
7.2 Decisions
7.3 Meetings
7.4 Action Without Meeting
7.5 Matters Requiring Approval
ARTICLE 8 MANAGER
8.1 Appointment
8.2 Powers and Duties of Manager
8.3 Standard of Care
8.4 Resignation; Deemed Offer to Resign
8.5 Payments to Manager
8.6 Transactions With Affiliates
8.7 Activities During Deadlock
ARTICLE 9 PROGRAMS AND BUDGETS
9.1 Initial Program and Budget
9.2 Operations Pursuant to Programs and Budgets
9.3 Presentation of Programs and Budgets
9.4 Review and Approval of Proposed Programs and
Budget
9.5 Election to Participate
9.6 Deadlock on Proposed Programs and Budgets
9.7 Budget Overruns; Program Changes
9.8 Emergency or Unexpected Expenditures
ARTICLE 10 ACCOUNTS AND SETTLEMENTS
ARTICLE 11 DISPOSITION OF PRODUCTION
11.1 Taking in Kind
11.2 Failure of Participant to Take in Kind
ARTICLE 12 WITHDRAWAL AND TERMINATION
12.1 Termination by Expiration or Agreement
12.2 Withdrawal
12.3 Continuing Obligations
12.4 Disposition of Assets on Termination
12.5 Right to Data after Termination
12.6 Continuing Authority
12.7 Non-Compete Covenants
12.8 Mutual Withdrawal
ARTICLE 13 SURRENDER OF PROPERTY
13.1 Surrender of Property
13.2 Reacquisition
<PAGE>
ARTICLE 14 TRANSFER OF INTEREST
14.1 General
14.2 Limitations on Free Transferability
14.3 Right of First Refusal
14.4 Exceptions to Right of First Refusal
ARTICLE 15 CONFIDENTIALITY AND RELEASES
15.1 General
15.2 Exceptions
15.3 Duration of Confidentiality
15.4 Releases
ARTICLE 16 AREA OF INTEREST
16.1 Acquisitions in Area of Interest
ARTICLE 17 GENERAL PROVISIONS
17.1 Notices
17.2 Waiver
17.3 Modification
17.4 Force Majeure
17.5 Economic Force Majeure
17.6 Governing Law
17.7 Rule Against Perpetuities
17.8 Further Assurances
17.9 Survival of Terms and Conditions
17.10 Entire Agreement; Successors and Assigns
17.11 Memorandum
17.12 Funds
<PAGE>
JOINT VENTURE AGREEMENT
THIS AGREEMENT, made effective as of May 20, 1996 between IDAHO
CONSOLIDATED METALS CORPORATION ("ICMC") with an address of P.O. Box
1124, Lewiston, Idaho 83501 and CYPRUS GOLD EXPLORATION CORPORATION
("Cyprus") with an address of 9100 East Mineral Circle, P.O. Box 3299,
Englewood, Colorado 80155-3299.
RECITALS
A. ICMC owns and/or controls one hundred percent (100%) interest in
certain unpatented mining claims, such claims being located in
Idaho County, State of Idaho, which are described in Exhibit A-1,
attached hereto and made a part hereof.
B. Cyprus owns and/or controls one hundred percent (100%) interest in
certain unpatented mining claims, such claims being located in
Idaho County, State of Idaho, which are described in Exhibit A-2,
attached hereto and made a part hereof.
C. The claims described in Exhibits A-1 and A-2 shall herein be
collectively referred to as the "Property".
D. Cyprus wishes to participate with ICMC in the exploration,
evaluation, development and mining of minerals within the Property
and ICMC is willing to grant such right to Cyprus.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, ICMC and Cyprus agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
-----------
1.1 "ACCOUNTING PROCEDURE" means the procedures set forth in
Exhibit B.
1.2 "AFFILIATE" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or
indirectly controls, is controlled by, or is under common
control with, a Participant. For purposes of the preceding
sentence, "control" means possession, directly or indirectly,
of the power to direct or cause direction of management and
policies through ownership of voting securities, contract,
voting trust or otherwise.
1.3 "AGREEMENT" means this Joint Venture Agreement, including all
amendments and modifications thereof, and all schedules and
exhibits, which are incorporated herein by this reference.
1.4 "ASSETS" means the Property, Products and all other real and
personal property, tangible and intangible, held for the
benefit of the Participants hereunder.
1.5 "BUDGET" means a detailed estimate of all costs to be incurred
by the Participants with respect to a Program and a schedule of
cash advances to be made by the Participants.
1.6 "COMMENCEMENT OF COMMERCIAL PRODUCTION" means the date upon
which the production and processing facilities developed under
this Agreement achieve an ore production and processing rate
for a continuous thirty-day period equal to at least seventy
percent (70%) of the design rate established in a Feasibility
Study.
1.7 "DEVELOPMENT" means all preparation for the removal and
recovery of Products, including the construction or
installation of a mill or any other improvements to be used for
the mining, handling, milling, processing or other
beneficiation of Products, and all Exploration work conducted
subsequent to a decision to commence Development as
contemplated by a feasibility study.
1.8 "EARN-IN" means the date upon which Cyprus earns its interest
in the Property pursuant to Section 5.5.
1.9 "EXPLORATION" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value
of deposits of Products.
<PAGE>
1.10 "EXPLORATION EXPENDITURES" means the cost of evaluation of the
Property defined as further exploring and developing the
Property, including drilling, excavating and searching by
recognized prospecting techniques, sampling, assaying, testing
and evaluating materials removed from the Property, mapping,
plotting, surveying, constructing and maintaining camps, roads,
works and structures necessary to carry out such evaluation,
sampling or testing, all studies including but not limited to a
Feasibility Study required to develop a mine and all work that
may be required in preparing a mine for operating, the cost or
payments to maintain the Property, including costs to locate
and/or relocate the unpatented mining claims, Property
acquisition costs, taxes and/or fees to maintain Property and
filings together with an allowance for overhead and
administrative expenses as described in Section 5.3(a).
1.11 "FEASIBILITY STUDY" means a detailed study compiled by Manager
or an independent third party conducted to determine commercial
feasibility and viability of placing a prospective orebody or
deposit into production and may include, but not be limited to:
(a) such geophysical, geochemical, geological, aerial or other
survey as may be necessary to provide a reasonable
estimate of the quality and extent of the deposit;
(b) such technical or assay reports as may be necessary to
evaluate any proposed method of extraction and processing;
(c) the area required for optimum development of the orebody
or deposit;
(d) a mine construction program setting forth the descriptions
of the work, permits, equipment, facilities, supplies and
mines required to bring the prospective orebody or
deposits of Products into Commercial Production, and the
estimated costs thereof or a schedule of expenditures by
year of the costs necessary to bring the project into
production;
(e) details of a proposed annual program for initial
development of the deposit;
(f) a plan for such reclamation of the Properties as is
required by law and the estimated costs hereof;
(g) conclusions and recommendations regarding the economic
feasibility and timing for bringing the prospective
orebody or deposits of Products into Commercial
Production, taking into account items (a) through (e)
above;
(h) such other information as the Management Committee may
deem appropriate to allow banking or other financial
institutions familiar with the mining business to make a
decision to loan funds sufficient to construct the
proposed mine with security based solely on the reserves
and mine described in a Feasibility Study.
<PAGE>
1.12 "INITIAL CONTRIBUTION" means that contribution each Participant
has made or agrees to make pursuant to Section 5.1.
1.13 "JOINT ACCOUNT" means the account maintained in accordance with
the Accounting Procedure showing the charges and credits
accruing to the Participants.
1.14 "MANAGEMENT COMMITTEE" means the committee established under
Article 7.
1.15 "MANAGER" means Cyprus during the Earn-In phase or the person
or entity appointed under Article 8 to manage Operations, or
any successor Manager.
1.16 "MINING" means the mining, extracting, producing, handling,
milling or other processing of Products.
1.17 "NET PROCEEDS OF PRODUCTION ROYALTY" means certain amounts
calculated as provided in Exhibit C, which may be payable to a
Participant under Section 6.4.
1.18 "OPERATIONS" means the activities carried out under this
Agreement after Earn-In.
1.19 "PARTICIPANT" and "PARTICIPANTS" means the persons or entities
that have a Participating Interest.
1.20 "PARTICIPATING Interest" means the percentage interest
representing the operating ownership interest of a Participant
in Assets, and all other rights and obligations arising under
this Agreement, as such interest may from time to time be
adjusted hereunder. Participating Interests shall be
calculated to three decimal places and rounded to two (e.g.,
1.519% rounded to 1.52%). Decimals of .005 or more shall be
rounded up to .01, decimals of less than .005 shall be rounded
down. The initial Participating Interests of the Participants
are set forth in Section 6.1.
1.21 "PRIME RATE" means the prime interest rate quoted as "Prime" by
the Wall Street Journal as said rate may change from day to day
(which quoted rate may not be the lowest rate averaged on a
month-to-month basis at which a financing institution loans
funds).
1.22 "PRODUCTION DECISION" means a decision by the Management
Committee to commence Development and put the Property into
production.
1.23 "PRODUCTS" means all ores, minerals, and mineral resources
produced from the Property under this Agreement.
1.24 "PROGRAM" means a description in reasonable detail of the
activities of the Venture which are to be conducted by the
Manager during a period.
1.25 "PROPERTY" means those interests in property described in
Exhibits A-1 and A-2.
<PAGE>
1.26 "SIMPLE MAJORITY" means a decision by the Management Committee
by greater than 50% of the votes being entitled to be cast.
1.27 "TRANSFER" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.28 "VENTURE" means the business arrangement of the Participants
under this Agreement.
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
-----------------------------------------------
2.1 CAPACITY OF PARTICIPANTS. Each of the parties hereto
represents and warrants as follows:
(a) that it is a corporation duly incorporated and in good
standing in its state of incorporation and that it is
qualified to do business and is in good standing in those
jurisdictions where necessary in order to carry out the
purposes of this Agreement;
(b) that it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and
that all corporate and other actions required to authorize
it to enter into and perform this Agreement have been
properly taken;
(c) that it will not breach any other agreement or arrangement
by entering into or performing this Agreement; and
(d) that this Agreement has been duly executed and delivered
by it and is valid and binding upon it in accordance with
its terms.
2.2 REPRESENTATIONS AND WARRANTIES. ICMC makes the following
representations and warranties effective the date hereof:
(a) ICMC has the full and exclusive right and power to act on
behalf of ICMC, and on behalf of any other interested
person or entities, to enter into this Agreement and to
grant the rights granted to Cyprus hereunder.
(b) To the best of its knowledge and belief with respect to
unpatented mining claims set forth in Exhibit A-1 and that
are included within the Property, subject to the paramount
title of the United States and except as disclosed in
writing to Cyprus: (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required
location and validation work was properly performed; (iii)
location notices and certificates were properly recorded
and filed with appropriate governmental agencies; (iv) the
claims are free and clear of defects, liens and
encumbrances arising by, through or under ICMC, except
those of record or disclosed in writing to Cyprus and
defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this Agreement; (v)
ICMC has not received notice from anyone asserting
conflicting claims and (vi) the unpatented mining claims
are in good standing and compliance with all federal and
state regulations in force as of the effective date of
this Agreement. Nothing in this Section 2.2(b), however,
shall be deemed to be a representation or a warranty that
any of the unpatented mining claims contains a discovery
of minerals.
<PAGE>
(c) except as otherwise provided herein, Cyprus may with
ICMC's prior written consent, such consent to not be
unreasonably withheld, take all action necessary
(including judicial proceedings) to remove any cloud from
or cure any defect in ICMC's title to the Property. ICMC
agrees to cooperate with Cyprus in any such action taken
and agrees to pay its proportionate share of all costs and
expenses (including attorney's fees) incurred by Cyprus.
Cyprus' share of such costs and expenses shall be credited
against Cyprus Earn-In obligations set forth in Section
5.3(a).
(d) ICMC knows of no violation of any applicable federal,
state, regional, or county law or regulation relating to
zoning, land use, environmental protection, or otherwise
with respect to the Property or activities relating
thereto; and,
(e) With respect to the Property, ICMC knows of no pending or
threatened actions, suits, claims or proceedings.
(f) With respect to certain of the Property acquired by ICMC
pursuant to an Option to Purchase Interest in Mining
Claims Agreement with Idaho Mining and Development Company
dated February 8, 1996 and an agreement being negotiated
with Idaho Gold Corporation for the Friday, Friday
Fraction, Alaska No. 3 and Alaska No. 4 patented claims,
MS 1834, patent no. 41174 and the Regina patented claim,
MS 1833, patent no. 39226, which will become Property
subject to this Agreement, ICMC shall be responsible for
all costs associated with such acquisitions except for the
contribution by Cyprus as set forth in Section 5.3(b)
herein.
The representations and warranties set forth above shall
survive the execution and delivery of any documents of
Transfer provided under this Agreement.
2.3 REPRESENTATIONS AND WARRANTIES. Cyprus makes the following
representations and warranties effective the date hereof:
(a) To the best of its knowledge and belief with respect to
unpatented mining claims that are set forth in Exhibit A-2
and included within the Property, subject to the paramount
title of the United States and except as disclosed in
writing to ICMC: (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required
location and validation work was properly performed; (iii)
location notices and certificates were properly recorded
and filed with appropriate governmental agencies; (iv) the
claims are free and clear of defects, liens and
encumbrances arising by, through or under Cyprus, except
those of record or disclosed in writing to ICMC and
defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this Agreement;
<PAGE>
(v) Cyprus has not received notice from any one asserting
conflicting claims; and (vi) the unpatented mining claims
are in good standing and compliance with all federal and
state regulations in force as of the effective date of
this Agreement. Nothing in this Section 2.2(b), however,
shall be deemed to be a representation or a warranty that
any of the unpatented mining claims contains a discovery
of minerals.
2.4 DISCLOSURES. Each of the Participants represents and warrants
that it is unaware of any material facts or circumstances which
have not been disclosed in this Agreement, which would be
disclosed to the other Participant in order to prevent the
representations in this Article 2 from being materially
misleading.
2.5 RECORD TITLE. Title to the Assets shall be held by the Manager
for the benefit of the Venture after Cyprus has earned its
interest.
2.6 JOINT LOSS OF TITLE. Any failure or loss of title to the
Assets, and all costs of defending title, shall be charged to
the Joint Account, except that all costs and losses arising out
of or resulting from breach of the representations and
warranties of ICMC shall be charged to ICMC and all such costs
and losses arising out of gross negligence by Cyprus or the
Manager shall be charged to Cyprus or the Manager as the case
may be.
<PAGE>
ARTICLE 3
NAME, PURPOSES AND TERM
-----------------------
3.1 GENERAL. ICMC and Cyprus hereby enter into this Agreement for
the purposes hereinafter stated, and they agree that all of
their rights and all of the Operations on or in connection with
the Property shall be subject to and governed by this
Agreement.
3.2 NAME. The name of this Venture shall be the Petsite Venture.
The Manager shall accomplish any registration required by
applicable assumed or fictitious name statutes and similar
statutes.
3.3 PURPOSES. This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive
means by which the Participants, or either of them, accomplish
such purposes:
(a) to conduct Exploration within the Property,
(b) to evaluate the possible Development of the Property,
(c) to engage in Development and Mining Operations on the
Property, if feasible.
(d) to engage in marketing Products, but only to the extent
permitted by Article 11, and
(e) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 LIMITATION. Unless the Participants otherwise agree in
writing, the Operations shall be limited to the purposes
described in Section 3.3, and nothing in this Agreement shall
be construed to enlarge such purposes.
<PAGE>
ARTICLE 4
RELATIONSHIP OF THE PARTICIPANTS
--------------------------------
4.1 NO PARTNERSHIP. Nothing contained in this Agreement shall be
deemed to constitute either Participant the partner of the
other, nor, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal representative
of the other, nor to create any fiduciary relationship between
them. It is not the intention of the Participants to create,
nor shall this Agreement be construed to create, any mining,
commercial or other partnership. Neither Participant shall
have any authority to act for or to assume any obligation or
responsibility on behalf of the other Participant, except as
otherwise expressly provided herein. The rights, duties,
obligations and liabilities of the Participants shall be
several and not joint or collective. Each Participant shall be
responsible only for its obligations as herein set out and
shall be liable only for its share of the costs and expenses as
provided herein, it being the express purpose and intention of
the Participants that their ownership of Assets and the rights
acquired hereunder shall be as tenants in common. Each
Participant, its directors, officers, employees, agents and
attorneys shall be indemnified from and against any and all
losses, claims, damages and liabilities arising out of any act
or any assumption of liability by the indemnifying Participant,
or any of its directors, officers, employees, agents and
attorneys done or undertaken, or apparently done or undertaken,
on behalf of the other Participant, except pursuant to the
authority expressly granted herein or as otherwise agreed in
writing between the Participants.
4.2 U.S. TAX ELECTIONS AND ALLOCATIONS. Each of the parties hereto
agrees and elects to be excluded from the application of all of
the provisions of Subchapter K of the Internal Revenue Code of
1986, as authorized by Treasury Regulation Section 1.761-2. The
parties hereto agree to execute or join in such instruments as
are necessary to make such election effective, and hereby
authorize and direct Manager to take such action as is
necessary to effectuate such purpose, including filing of the
partnership tax return required by Treasury Regulation Section
1.761-2(b)(2). Each party shall be entitled to claim all tax
benefits, write-offs, and deductions with respect to all and
any costs which it has incurred.
4.3 OTHER BUSINESS OPPORTUNITIES. Except as expressly provided in
this Agreement, each Participant shall have the right
independently to engage in and receive full benefits from
business activities, whether or not competitive with the
Operations, without consulting the other. The doctrines of
"corporate opportunity" or "business opportunity" shall not be
applied to any other activity, venture, or operation of either
Participant. Unless otherwise agreed in writing, no
Participant shall have any obligation to mill, beneficiate or
otherwise treat any Products or any other Participant's share
of Products in any facility owned or controlled by such
Participant.
<PAGE>
4.4 WAIVER OF RIGHT TO PARTITION. The Participants hereby waive
and release all rights of partition, or of sale in lieu
thereof, or other division of Assets, including any such right
provided by statute.
4.5 IMPLIED COVENANTS. There are no implied covenants contained in
this Agreement other than those of good faith and fair dealing.
<PAGE>
ARTICLE 5
CONTRIBUTIONS BY PARTICIPANTS
-----------------------------
5.1 PARTICIPANTS' INITIAL CONTRIBUTIONS. ICMC, as its Initial
Contribution, hereby contributes the Property described in
Exhibit A-1 to the purposes of this Agreement. Cyprus, as its
Initial Contribution, shall contribute the Property described
in Exhibit A-2 and the Exploration Expenditures and payment as
hereinafter set forth.
5.2 FAILURE TO MAKE INITIAL CONTRIBUTIONS. Cyprus' failure to make
its Initial Contribution in accordance with the provisions of
this Article 5 shall not be deemed to be a withdrawal of Cyprus
from this Agreement and the termination of its Interest
hereunder. In the event Cyprus fails to make its firm
commitment and its Initial Contribution pursuant to this
Article 5, ICMC shall provide Cyprus written notice of such
failure. If within thirty (30) days of receipt of notice
Cyprus does not cure such failure, then Cyprus shall be deemed
to have withdrawn from this Agreement. Additionally, at any
time prior to Earn-In, but only after Cyprus completes its firm
commitment, Cyprus may provide ICMC with sixty (60) days
written notice of Cyprus' decision to terminate its interest in
this Agreement. Upon such event, Cyprus shall have no further
right, title or interest in and to the Property or this
Agreement. Cyprus' withdrawal shall be effective sixty (60)
days after such failure or notice, but such withdrawal shall
not relieve Cyprus of its reclamation or any other obligations
or liabilities resulting from its work on the Property. Cyprus
shall be responsible only for reclamation resulting directly
from its work on the Property, but shall not be responsible for
reclamation liability incurred prior to the effective date of
this Agreement or for any liability incurred by ICMC as a
result of conduct of mining operations pursuant to Section 5.8
herein. Except as provided in this Section 5.2, Cyprus'
withdrawal shall relieve Cyprus from any other obligation to
make contributions hereunder.
5.3 OBLIGATIONS PRIOR TO EARN-IN. Prior to earning its interest in
the Property, and subject to the termination provisions
contained herein, Cyprus shall be required, but not obligated
to make the following Exploration Expenditures on or for the
benefit of the Property to extend this Agreement into the next
period with the exception of a firm commitment to incur Three
Hundred Thousand Dollars ($300,000) in Exploration Expenditures
by the first anniversary date of this Agreement.
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
----------------------- ----------- -----------------
By 1st anniversary date $300,000 $300,000
(Firm Commitment)
By 2nd anniversary date 400,000 700,000
<PAGE>
Ten percent (10%) of all Exploration Expenditures, except
property payments, taxes and/or fees to maintain the
Property, to cover Cyprus' overhead and administrative
costs shall be charged by Cyprus and shall qualify as
Exploration Expenditures but shall be limited to five
percent (5%) on contracts in excess of One Hundred
Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any
Exploration Expenditures in excess of the minimum required
in any period shall be credited and applied toward any
subsequent Exploration Expenditures.
(b) Payments:
Upon execution of this Agreement, Cyprus shall provide
Fifty Thousand Dollars ($50,000) to complete ICMC's
acquisition of certain of the Property described in
Exhibit A-1 and being the claims subject to the Option to
Purchase Interest in Mining Claims Agreement dated
February 8, 1996 between Idaho Mining and Development
Company and ICMC. This Fifty Thousand Dollar ($50,000)
cash payment shall be credited against Cyprus' firm
commitment of Three Hundred Thousand Dollars ($300,000) in
Exploration Expenditures. Additionally, Cyprus shall
during the Earn-In period be responsible for maintaining
the unpatented lode claims which comprise the Property and
may relocate any of the unpatented claims which Cyprus
believes may be defective.
(c) Cyprus may terminate this Agreement at any time during the
Earn-In period for any reason or no reason after Cyprus
completes the firm commitment by providing ICMC sixty (60)
days written notice of such termination. Until Cyprus has
earned its interest in the Property, Cyprus shall have
complete discretion in conducting exploration activities,
maintaining the Property and shall conduct operations
according to its own plans. Cyprus shall hold ICMC
harmless from any liabilities resulting from Cyprus'
activities on the Property during the Earn-In period.
5.4 ADDITIONAL CASH CONTRIBUTIONS. At such time as Cyprus has
earned its fifty percent (50%) interest in the Property,
pursuant to Section 5.5, the Participants, subject to any
election permitted by Sections 6.1, 6.2 and 6.3, shall be
obligated to contribute funds to adopted Programs and Budgets
in proportion to their respective Participating Interest.
5.5 EARN-IN. Cyprus shall earn a fifty percent (50%) Participating
Interest in the Property upon completion of the Exploration
Expenditures and payment set forth under Section 5.3. Except
as provided for in Section 6.2, subsequent to Cyprus earning
fifty percent (50%) interest in the Property, all expenditures
for the benefit of the Property shall be contributed by the
Parties in accordance to their Participating Interest.
<PAGE>
Immediately upon Cyprus satisfying its Earn-In requirements
under Section 5.3 (a) and (b), ICMC shall execute and deliver
to Cyprus such documents that are necessary to transfer an
appropriate percentage of interest in ICMC's interest in and to
the Property to Cyprus.
5.6 ADDITIONAL INTEREST. Within sixty (60) days after Cyprus
completes its requirements to earn fifty percent (50%)
Participating Interest in the Property, Cyprus, by providing
written notice to ICMC, may elect to earn an additional twenty
percent (20%) Participating Interest in the Property, bringing
its interest to seventy percent (70%), by completing the
following:
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
----------------------- ----------- -----------------
By 3rd anniversary date $400,000 $1,100,000
By 4th anniversary date 400,000 1,500,000
Ten percent (10%) of all Exploration Expenditures, except
property payments, taxes and/or fees to maintain the
Property, to cover Cyprus' overhead and administrative
costs shall be charged by Cyprus and shall qualify as
Exploration Expenditures but shall be limited to five
percent (5%) on contracts in excess of One Hundred
Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any
Exploration Expenditures in excess of the minimum required
in any period, including Exploration Expenditures incurred
in the first and second years of this Agreement, shall be
credited and applied toward any subsequent Exploration
Expenditures.
(b) Cyprus shall, during this Earn-In period, continue to be
responsible for maintaining the unpatented lode claims
which comprise the Property.
5.7 REPORTS. Cyprus shall, during the Earn-In period, provide ICMC
with copies of periodic reports describing its activities on
the Property and shall conduct a semi-annual review with ICMC
to discuss the progress Cyprus has made during the preceding
period as well as the plans and programs being contemplated for
the next period.
5.8 DEVELOPMENT BY ICMC. Cyprus and ICMC acknowledge that a
Mineral Resource has been identified on certain of the Eagle
and Golden Eagle Claims, such claims being described in the
attached Exhibit F . For the purposes of this Section 5.8, a
Mineral Resource shall be defined as being equal to or less
than fifty thousand ounces (50,000 ozs.) of gold. ICMC may
<PAGE>
propose to develop such Mineral Resource, shall do so at its
sole risk, and shall be responsible for all costs to develop
such Mineral Resource, so long as in the opinion of Cyprus it
does not interfere with or adversely impact any Operations or
planned Operations on the Property. ICMC shall submit to
Cyprus for Cyprus' approval, such approval not to be
unreasonably withheld, their detailed plans on each phase of
mining activity. ICMC hereby indemnifies, defends and holds
harmless Cyprus, its affiliates, their successors and assigns
and their respective directors, officers, employees and
shareholders from and against any and all past, present and
future obligations, liabilities, claims, damages, losses or
expenses (including interest and penalties, legal fees and
other reasonable expenses of defending any actions relating
thereto) sustained in any way relating to all activities on or
pertaining to the Mineral Resource, including without
limitation, reclamation and environmental liabilities and
obligations.
If at any time prior to Cyprus earning seventy percent (70%)
interest in the Property production from the Mineral Resource
is projected to exceed fifty thousand ounces (50,000 ozs.),
ICMC shall provide Cyprus with a written notice of the
projected date production will exceed the fifty-thousand ounce
(50,000 ounce) level, such notice to be provided to Cyprus at
least sixty (60) days prior to such projected date. Cyprus
shall have the right, but not the obligation, to participate in
the production beyond the initial fifty thousand ounces (50,000
ozs.) by providing its share of the production costs and
expenses.
Notwithstanding the above, at its sole election after vesting
in a seventy percent (70%) Participating Interest in the
Property, Cyprus may require that production of the Mineral
Resource be terminated.
<PAGE>
ARTICLE 6
INTERESTS OF PARTICIPANTS;
DEFAULTS AND REMEDIES; FINANCING
--------------------------------
6.1 PARTICIPATING INTERESTS. The Participants shall have the
following Participating Interests upon Cyprus' completion of
the obligations set forth in Section 5.3:
Cyprus - 50%
ICMC - 50%
Cyprus shall have no Participating Interest unless and until it
has completed the Exploration Expenditures set forth in Section
5.3 during the Earn-In period. At such time as Cyprus
completes the obligations set forth in Section 5.3 and has
earned its fifty percent (50%) Participating Interest in the
Property and determines it will not elect to earn an additional
twenty percent (20%) Participating Interest in the Property as
set forth in Section 5.6, ICMC and Cyprus shall have a period
of sixty (60) days to either (a) elect to participate in the
Venture and contribute to each Program and Budget for their
entire respective Participating Interest, or (b) to elect to
participate in the Venture pursuant to Section 6.3(a), or (c)
elect to withdraw from the Venture and convert to a five
percent (5%) Net Proceeds of Production as set out in Exhibit
C. In no event shall the cumulative Net Proceeds of Production
payable to the withdrawing party, whether one or more, exceed
an aggregate of five percent (5%). A Management Committee
shall then be formed as provided for in Section 7.1.
At Earn-In Cyprus and ICMC shall, irrespective of their actual
expenditures on or with respect to the Property, be deemed to
have incurred expenditures as follows:
Cyprus $700,000
ICMC 700,000
In the event Cyprus, pursuant to Section 5.6, elected to earn
an additional twenty percent (20%) Participating Interest in
the Property, at such time as Cyprus completes the obligations
set forth in such Section 5.6 and has earned its seventy
percent (70%) Participating Interest in the Property, ICMC and
Cyprus shall have a period of ninety (90) days to either (a)
elect to participate in the Venture and contribute to each
Program and Budget for their entire respective Participating
Interest, or (b) to elect to participate in the Venture
pursuant to Section 6.3(a), or (c) elect to withdraw from the
venture and convert to a five percent (5%) Net Proceeds of
Production Royalty as set out in Exhibit C. In no event shall
the cumulative Net Proceeds of Production Royalty payable to
the withdrawing party, whether one or more, exceed an aggregate
of five percent (5%). A Management Committee shall then be
formed as provided for in Section 7.1.
<PAGE>
At Earn-In Cyprus and ICMC shall, irrespective of their actual
expenditures on or with respect to the Property, be deemed to
have incurred expenditures as follows:
Cyprus $1,500,000
ICMC 642,857
6.2 CHANGES IN PARTICIPATING INTERESTS. A Participant's
Participating Interest shall be changed as follows:
(a) As provided in Section 6.5; or
(b) Upon an election by a Participant pursuant to Section 6.3
to contribute less to an adopted Program and Budget than
the percentage reflected by its Participating Interest; or
(c) In the event of default by a Participant in making its
agreed-upon contribution to an adopted Program and Budget,
followed by an election by the other Participant to invoke
Section 6.4(b); or
(d) Transfer by a Participant of less than all its
Participating Interest in accordance with Article 14; or
(e) Acquisition of less than all of the Participating Interest
of the other Participant, however arising.
(f) Pursuant to Section 5.6.
6.3 VOLUNTARY REDUCTION IN PARTICIPATION. A Participant may elect,
as provided in Section 9.5, to limit its contributions to an
adopted Program and Budget as follows:
(a) To some lesser amount than its respective Participating
Interest; or
(b) Not at all.
If a Participant elects to contribute to an adopted Program and
Budget some lesser amount than its respective Participating
Interest, or not at all, the Participating Interest of that
Participant shall be recalculated at the time of election by
dividing: (i) the sum of (a) the agreed value of the
Participant's deemed expenditure under Section 6.1 and (b) the
total of all of the Participant's actual expenditures including
the amount the Participant elects to contribute to the adopted
Program and Budget; by (ii) the sum of (a) and (b) above for
all Participants; and then multiplying the result by one
hundred. The Participating Interest of the other Participant
shall thereupon become the difference between 100% and the
recalculated Participating Interest.
<PAGE>
6.4 DEFAULT IN MAKING CONTRIBUTIONS.
(a) If a Participant defaults in making a contribution or cash
call required by an approved Program and Budget, the non-
defaulting Participant may advance the defaulted
contribution on behalf of the defaulting Participant and
treat the same, together with any accrued interest, as a
demand loan bearing interest from the date of the advance
at the Prime Rate plus two percent (2%) compounded
quarterly. The failure to repay said loan upon demand
shall be a default. Each Participant hereby grants to the
other a lien upon its interest in the Property and a
security interest in its rights under this Agreement and
in its Participating Interest in other Assets, and the
proceeds therefrom, to secure any loan made hereunder,
including interest thereon, reasonable attorneys' fees and
all other reasonable costs and expenses incurred in
recovering the loan with interest and in enforcing such
lien or security interest, or both. A non-defaulting
Participant may elect the applicable remedy under this
Section 6.4, or, to the extent a Participant has a lien or
security interest under applicable law, it shall be
entitled to its rights and remedies at law and in equity.
All such remedies shall be cumulative. The election of
one or more remedies shall not waive the election of any
other remedies. Each Participant hereby irrevocably
appoints the other its attorney-in-fact to execute, file
and record all instruments necessary to perfect or
effectuate the provisions hereof.
(b) The Participants acknowledge that if a Participant
defaults in making a contribution, a cash call, in
repaying a loan or any payment, as required hereunder, it
will be difficult to measure the damages resulting from
such default. In the event such default is not cured by
the defaulting Participant within thirty (30) days after
receiving notice of such default, as reasonable liquidated
damages, the defaulting Participant shall be deemed to
have withdrawn from the Venture and to have automatically
relinquished its Participating Interest to the non-
defaulting Participant; provided, however, the defaulting
Participant shall have the right to receive only from five
percent (5%) of Net Proceeds of Production Royalty, as set
out in Exhibit C, and not from any other source, an amount
equal to the defaulting Participant's actual expenditures
contributed hereunder. Upon receipt of such amount the
defaulting Participant shall thereafter have no further
right, title, or interest under this Agreement or in the
Assets.
<PAGE>
6.5 CONVERSION OF INTEREST. If at any time the Participating
Interest of a Participant is reduced to ten percent (10%) or
less by an affirmative election not to contribute all or some
portion of its share pursuant to a Program and Budget as
provided in Article 9 and the resulting application of the
dilution formula in Section 6.3, the diluted Participant shall
be deemed to have withdrawn from the Venture and this Agreement
shall terminate; provided, however, the diluting Participant
shall have the right to receive only from five percent (5%) of
Net Proceeds of Production Royalty, as set out in Exhibit C,
and not from any other source, an amount equal to one hundred
and fifteen percent (115%) of the diluting Participant's actual
or deemed expenditures contributed hereunder, whichever is
greater. Upon receipt of such amount the diluting Participant
shall thereafter have no further right, title, or interest
under this Agreement or in the Assets.
6.6 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING
INTERESTS. Any reduction of a Participant's Participating
Interest under this Section 6 shall not relieve such
Participant of its share of any liability, whether it accrued
before or after such reduction, arising out of Operations
conducted prior to such reduction. For purposes of this
Article 6, such Participant's share of such liability shall be
equal to its Participating Interest at the time such liability
was incurred. The increased Participating Interest accruing to
a Participant as a result of the reduction of the other
Participant's Participating Interest shall be free of
royalties, liens or other encumbrances arising by, through or
under such other Participant, other than those existing at the
time the Property was acquired or those to which both
Participants have given their written consent. An adjustment
to a Participating Interest need not be evidenced during the
term of this Agreement by the execution and recording of
appropriate instruments, but each Participant's Participating
Interest shall be shown in the books of the Manager. However,
either Participant, at any time upon the request of the other
Participant, shall execute and acknowledge instruments
necessary to evidence such adjustment in form sufficient for
recording in the jurisdiction where the Property is located.
6.7 FINANCING BY CYPRUS. Within sixty (60) days after Cyprus
completes its requirements to earn an additional twenty percent
(20%) Participating Interest in the Property as set forth in
Section 5.6, bringing its Participating Interest to seventy
percent (70%), and ICMC and Cyprus have elected to participate
in the Venture in proportion to their respective Participating
Interest, ICMC may elect in writing to have Cyprus fund ICMC's
share of Exploration Expenditures until the completion of a
Feasibility Study. In such event, such expenditures by Cyprus
on behalf of ICMC shall be treated as a loan and shall bear
interest at the Prime Rate plus two percent (2%), compounded
quarterly. Such loan shall be secured by ICMC's interest in
the Property and the Assets. Cyprus shall be repaid from
eighty-five percent (85%) of the proceeds received by ICMC from
<PAGE>
the sale of its proportionate share of Products, after
deduction of operating costs. ICMC shall execute a document
securing the loan with its interest in the Property and the
Assets and assigning to Cyprus such eighty-five percent (85%)
of the proceeds in form and content acceptable to the legal
counsel of both Cyprus and ICMC.
In the event a Feasibility Study is completed and Development
is not recommended and the Management Committee votes to
continue Exploration, Cyprus will continue to fund ICMC's share
of Exploration Expenditures until the completion of another
Feasibility Study. Such additional expenditures by Cyprus on
behalf of ICMC shall also be treated as a loan and recouped by
Cyprus as previously set forth in this Section 6.7.
If the Management Committee, after completion of a Feasibility
Study, votes to suspend Operations on the Property for any
reason, no additional interest would accrue on the Exploration
Expenditures provided by Cyprus on behalf of ICMC until
Operations are again commenced.
In the event a Feasibility Study recommends development, but
for reasons beyond the control of the Participants (e.g.
government taking, Force Majeure, etc.) the Property can never
be developed, accrual of interest on the Exploration
Expenditures provided by Cyprus on behalf of ICMC would cease.
Repayment to Cyprus of such loan and any interest accrued would
be repaid from ICMC's share of any compensation that the
Participants may be entitled to as a result of the prohibition
of Mining. If no compensation is received by the Participants,
the loan and its accrued interest would be forgiven when the
Participants agree to drop their interest in the Property,
discontinue any litigation which may have commenced and
dissolve the Venture.
<PAGE>
ARTICLE 7
MANAGEMENT COMMITTEE
--------------------
7.1 ORGANIZATION AND COMPOSITION. After completion of Cyprus'
Earn-In and the election by ICMC and Cyprus to participate in
the Venture as provided in Section 6.1, the Participants shall
establish a Management Committee to determine overall policies,
objectives, procedures, methods and actions under this
Agreement. The Management Committee shall consist of one
member appointed by ICMC and one member appointed by Cyprus.
Each Participant may appoint one or more alternates to act in
the absence of a regular member. Any alternate so acting shall
be deemed a member. Appointments shall be made or changed by
notice in writing to the other Participant.
7.2 DECISIONS. Each Participant, acting through its appointed
member(s) shall have a vote equal to its Participating Interest
in the Property. Decisions of the Management Committee shall
be decided by Simple Majority of the Participating Interests.
In the event of a deadlock, the Manager shall hold the deciding
vote.
7.3 MEETINGS. The Management Committee shall hold regular meetings
at least annually at mutually agreed places. The Manager shall
give thirty (30) days' written notice to the Participants of
such regular meetings. Additionally, either Participant may
call a special meeting upon thirty (30) days' written notice to
the Manager and the other Participant. In case of emergency,
reasonable notice of a special meeting shall suffice. There
shall be a quorum if at least one member representing each
Participant is present. The Management Committee shall not
transact any business at a meeting unless a quorum is present
at the commencement of the meeting. If a quorum is not present
at the commencement of the meeting or within one-half hour
after the time fixed for the commencement of the meeting, the
meeting shall be adjourned to the same time and day of the next
week at the same place. If a quorum is not present at the
commencement of the adjourned meeting, one representative shall
be deemed to constitute a quorum. Each notice of a meeting
shall include an itemized agenda and detailed back-up
information prepared by the Manager in the case of a regular
meeting, or by the Participant calling the meeting in the case
of a special meeting, but any matters may be considered with
the consent of all Participants. The Manager shall prepare
minutes of all meetings and shall distribute copies of such
minutes to the Participants within thirty (30) days after the
meeting. The minutes, when signed by all Participants, shall
be the official record of the decisions made by the Management
Committee and shall be binding on the Manager and the
Participants. If personnel employed in Operations are required
to attend a Management Committee meeting, reasonable costs
incurred in connection with such attendance shall be a Venture
cost. All other costs shall be paid by the Participants
individually.
<PAGE>
7.4 ACTION WITHOUT MEETING. In lieu of meetings, the Management
Committee may hold telephone conferences, so long as all
decisions are immediately confirmed in writing by the
Participants.
7.5 MATTERS REQUIRING APPROVAL. Except as otherwise delegated to
the Manager in Section 8.2, the Management Committee shall have
exclusive authority to determine all management matters related
to this Agreement.
<PAGE>
ARTICLE 8
MANAGER
--------
8.1 APPOINTMENT. Following completion of Cyprus' Earn-In as
provided for in Sections 5.5 or 5.6 Cyprus shall be the initial
Manager.
8.2 POWERS AND DUTIES OF MANAGER. Subject to the terms and
provisions of this Agreement, the Manager shall have the
following powers and duties which shall be discharged in
accordance with adopted Programs and Budgets:
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall implement the decisions of the
Management Committee, shall make all expenditures
necessary to carry out adopted Programs and Budgets, and
shall promptly advise the Management Committee if it lacks
sufficient funds to carry out its responsibilities under
this Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and
transportation services required for Operations, such
purchases and acquisitions to be made on the best terms
available, taking into account all of the circumstances;
(ii) obtain such customary warranties and guarantees as
are available in connection with such purchases and
acquisitions; and (iii) keep the Assets free and clear of
all liens and encumbrances, except for those existing at
the time of, or created concurrent with, the acquisition
of such Assets, or mechanic's or materialmen's liens which
shall be released or discharged in a diligent manner, or
liens and encumbrances specifically approved by the
Management Committee.
(d) The Manager shall conduct such title examinations and cure
such title defects as may be advisable in the reasonable
judgment of the Manager.
(e) The Manager shall: (i) make or arrange for all payments
required by leases, licenses, permits, contracts and other
agreements related to the Assets; (ii) pay all taxes,
assessments and like charges on Operations and Assets
except taxes determined or measured by a Participant's
sales revenue or net income. If authorized by the
Management Committee, the Manager shall have the right to
contest in the courts or otherwise, the validity or amount
of any taxes, assessments or charges if the Manager deems
them to be unlawful, unjust, unequal or excessive, or to
undertake such other steps or proceedings as the Manager
may deem reasonably necessary to secure a cancellation,
reduction, readjustment or equalization thereof before the
Manager shall be required to pay them, but in no event
<PAGE>
shall the Manager permit or allow title to the Assets to
be lost as the result of the nonpayment of any taxes,
assessments or like charges; and (iii) shall do all other
acts reasonably necessary to maintain the Assets.
(f) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) comply with applicable
federal, provincial, municipal and local laws and
regulations; (iii) notify promptly the Management
Committee of any allegations of substantial violation
thereof; and (iv) prepare and file all reports or notices
required for Operations. The Manager shall not be in
breach of this provision if a violation has occurred in
spite of the Manager's good faith efforts to comply, and
the Manager has timely cured or disposed of such violation
through performance, or payment of fines and penalties.
(g) The Manager shall prosecute and defend, but shall not
initiate without consent of the Management Committee, all
litigation or administrative proceedings greater than
$50,000 arising out of Operations. The non-managing
Participant shall have the right to participate, at its
own expense, in such litigation or administrative
proceedings. The non-managing Participant's approval
shall be required in advance of any settlement involving
payments, commitments or obligations, if the non-managing
Participant's share is in excess of Twenty-Five Thousand
Dollars ($25,000) in cash or value.
(h) The Manager shall provide insurance for the benefit of the
Participants as provided in Exhibit D.
(i) The Manager may dispose of Assets, whether by release,
abandonment, surrender or Transfer in the ordinary course
of business, except that Property may be released,
abandoned or surrendered only as provided in Article 13.
However, without prior authorization from the Management
Committee, the Manager shall not: (i) dispose of Assets
in any one transaction having a value in excess of
$250,000: (ii) enter into any sales contracts or
commitments for Product, except as permitted in Section
11.2; (iii) begin a liquidation of the Venture; or (iv)
dispose of all or a substantial part of the Assets
necessary to achieve the purposes of the Venture.
(j) The Manager shall have the right to carry out its
responsibilities hereunder through agents, affiliates or
independent contractors.
(k) The Manager shall be obligated to perform or cause to be
performed during the term of this Agreement all
obligations required by law in order to maintain the
Property which obligations shall be included in Programs
and Budgets.
<PAGE>
(l) The Manager shall keep and maintain all required
accounting and financial records pursuant to the
Accounting Procedure and in accordance with customary cost
accounting practices in the mining industry.
(m) The Manager shall keep the Management Committee advised of
all Operations by submitting in writing to the Management
Committee: (i) monthly progress reports which include
statements of expenditures and comparisons of such
expenditures to the adopted Budget; (ii) periodic
summaries of data acquired; (iii) copies of reports
concerning Operations; (iv) a detailed final report within
forty-five (45) days after completion of each Program and
Budget, which shall include comparisons between actual and
budgeted expenditures and comparisons between the
objectives and results of Programs; and (v) such other
reports as the Management Committee may reasonably
request. At all reasonable times the Manager shall
provide the Management Committee or the representative of
any Participant, upon the request of any member of the
Management Committee, access to, and the right to inspect
and copy all maps, drill logs, core tests, reports,
surveys, assays, analyses, production reports, operations,
technical, accounting and financial records, and other
information acquired in Operations. In addition, the
Manager shall allow the non-managing Participant, at the
latter's sole risk and expense, and subject to reasonable
safety regulations, to inspect the Assets and Operations
at all reasonable times, so long as the inspecting
Participant does not unreasonably interfere with
Operations.
(n) The Manager shall undertake all other activities
reasonably necessary to fulfill the foregoing.
The Manager shall not be in default of any duty under this
Section 8.2 if its failure to perform results from the failure
of the non-managing Participant to perform acts or to
contribute amounts required of it by this Agreement.
8.3 STANDARD OF CARE. The Manager shall conduct all Operations in
a good, workmanlike and efficient manner, in accordance with
all applicable laws, sound mining and other applicable industry
standards and practices, and in accordance with the terms and
provisions of leases, licenses, permits, contracts and other
agreements pertaining to Assets. The Manager shall not be
liable to the non-managing Participant for any act or omission
resulting in damage or loss except to the extent caused by or
attributable to the Manager's willful misconduct or gross
negligence.
8.4 RESIGNATION; DEEMED OFFER TO RESIGN. The Manager may resign
upon thirty (30) days prior notice to the other Participant.
If any of the following shall occur, the Manager shall be
deemed to have offered to resign, which offer shall be accepted
by the other Participant, if at all, within ninety (90) days
following such deemed offer:
<PAGE>
(a) The Participating Interest of the Manager becomes less
than fifty percent (50%); or
(b) The Manager fails to perform a material obligation imposed
upon it under this Agreement and such failure continues
for a period of thirty (30) days after written notice from
the other Participant demanding performance; or
(c) The Manager fails to pay or contest in good faith its
bills within thirty (30) days after receiving written
notice that they are due; or
(d) A receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for a substantial part of
its assets is appointed and such appointment is neither
made ineffective nor discharged within sixty (60) days
after receiving written notice of the making thereof, or
such appointment is consented to, requested by, or
acquiesced in by the Manager; or
(e) The Manager commences a voluntary case under any
applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or consents to the entry of an order
for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or
other similar official of any substantial part of its
assets; or makes a general assignment for the benefit of
creditors; or fails generally to pay its or Venture debts
as such debts become due; or takes corporate or other
action in furtherance of any of the foregoing; or
(f) Entry is made against the Manager of a judgment, decree or
order for relief affecting a substantial part of its
assets by a court of competent jurisdiction in an
involuntary case commenced under any applicable
bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect.
8.5 PAYMENTS TO MANAGER. The Manager shall be compensated for its
services and reimbursed for its costs hereunder in accordance
with the Accounting Procedure.
8.6 TRANSACTIONS WITH AFFILIATES. If the Manager engages
Affiliates to provide services hereunder, it shall do so on
terms no more favorable than would be the case with unrelated
persons in arm's-length transactions.
8.7 ACTIVITIES DURING DEADLOCK. If the Management Committee for
any reason fails to adopt a Program and Budget, subject to the
contrary direction of the Management Committee and to the
receipt of necessary funds, the Manager shall continue
Operations at levels comparable with the last adopted Program
and Budget. For purposes of determining the required
contributions of the Participants and their respective
Participating Interests, the last adopted Program and Budget
shall be deemed extended.
<PAGE>
ARTICLE 9
PROGRAMS AND BUDGETS
--------------------
9.1 INITIAL PROGRAM AND BUDGET. The initial Program and Budget
will be provided by the Management Committee within ninety (90)
days of the Management Committee being formed.
9.2 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Except as
otherwise provided in Sections 7.2 and 9.7, Operations shall be
conducted, expenses shall be incurred, and Assets shall be
acquired only pursuant to approved Programs and Budgets.
9.3 PRESENTATION OF PROGRAMS AND BUDGETS. Proposed Programs and
Budgets shall be prepared by the Manager for a period of up to
one year. Each adopted Program and Budget, regardless of
length, shall be reviewed at least once a year at the annual
meeting of the Management Committee. During the period
encompassed by any Program and Budget, and at least two months
prior to its expiration, a proposed Program and Budget for the
succeeding period shall be prepared by the Manager and
submitted to the Management Committee.
9.4 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS. Within
thirty (30) days after submission of a proposed Program and
Budget to the Management Committee, the Management Committee
shall:
(a) Approve the proposed Program and Budget; or
(b) Propose modifications of the proposed Program and Budget;
or
(c) Reject the proposed Program and Budget.
If the Management Committee makes the elections pursuant to
Section 9.4(b) or (c), then the Manager will review the
modifications and/or any recommendations of the Management
Committee and will resubmit a Program and Budget within thirty
(30) days.
9.5 ELECTION TO PARTICIPATE. By written notice to the Management
Committee within thirty (30) days after approving a Program and
Budget except as provided for in Section 6.1, a Participant may
elect to contribute to such Program and Budget in an amount
equal to its Participating Interest or a lesser amount as
provided for in Section 6.3. If a Participant fails to so
notify the Management Committee, the Participant shall be
deemed to have elected not to contribute to such Program and
Budget and the provisions of Section 6.3 shall apply. Subject
to Section 9.6 if a Participant elects not to participate in
the Program and Budget and the other Participant elects to
contribute to the Program and Budget the provisions of Section
6.2 shall apply.
<PAGE>
9.6 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS. If the
Participants, acting through the Management Committee, fail to
approve a Program and Budget by the beginning of the period to
which the proposed Program and Budget applies, the provisions
of Section 8.7 shall apply.
9.7 BUDGET OVERRUNS; PROGRAM CHANGES. The Manager shall
immediately notify the Management Committee of any material
departure from an adopted Program and Budget. If the Manager
exceeds an adopted Budget by more than ten percent (10%), then
such excess over ten percent (10%), shall be for the sole
account of the Manager, not creditable to the calculation of
Participating Interests, unless such excess amount is directly
caused by an emergency or unexpected expenditure made pursuant
to Section 9.8 or is otherwise authorized by the approval of
the Management Committee. Budget overruns of ten percent (10%)
or less shall be borne by the Participants in proportion to
their respective Participating Interests as of the time the
overrun occurs.
9.8 EMERGENCY OR UNEXPECTED EXPENDITURES. In case of emergency,
the Manager may take any reasonable action it deems necessary
to protect life, limb or property, to protect the Assets or to
comply with law or government regulation. The Manager may also
make reasonable expenditures for unexpected events which are
beyond its reasonable control and which do not result from a
breach by it of its standard of care. The Manager shall
promptly notify the Participants of the emergency or unexpected
expenditures, and the Manager shall be reimbursed for all
resulting costs by the Participants in proportion to their
respective Participating Interests at the time the emergency or
unexpected expenditures are incurred.
<PAGE>
ARTICLE 10
ACCOUNTS AND SETTLEMENTS
------------------------
Matters of accounts and settlements shall be governed by the
provisions in Exhibit "B" (Accounting Procedures) attached hereto.
<PAGE>
ARTICLE 11
DISPOSITION OF PRODUCTION
-------------------------
11.1 TAKING IN KIND. Each Participant shall take in kind or
separately dispose of its share of all Products in accordance
with its Participating Interest. Any extra expenditure
incurred in the taking in kind or separate disposition by any
Participant of its proportionate share of Products shall be
borne by such Participant. Nothing in this Agreement shall be
construed as providing, directly or indirectly, for any joint
or cooperative marketing or selling of Products or permitting
the processing of Products of any parties other than the
Participants at any processing facilities constructed by the
Participants pursuant to this Agreement. The Manager shall
give the Participants notice at least ten (10) days in advance
of the delivery date upon which their respective shares of
Products will be available.
11.2 FAILURE OF PARTICIPANT TO TAKE IN KIND. If a Participant fails
to take in kind, the Manager shall have the right, but not the
obligation, for a period of time consistent with the minimum
needs of the industry, but not to exceed one year, to purchase
the Participant's share for its own account or to sell such
share as agent for the Participant at not less than the
prevailing market price in the area. Subject to the terms of
any such contracts of sale then outstanding, during any period
that the Manager is purchasing or selling a Participant's share
of production, the Participant may elect by notice to the
Manager to take in kind. The Manager shall be entitled to
deduct from proceeds of any sale by it for the account of a
Participant reasonable expenses incurred in such a sale.
<PAGE>
ARTICLE 12
WITHDRAWAL AND TERMINATION
--------------------------
12.1 Termination BY EXPIRATION OR AGREEMENT. This Agreement shall
terminate as expressly provided in this Agreement, unless
earlier terminated by written agreement.
12.2 WITHDRAWAL. A Participant may elect to withdraw as a
Participant from this Agreement by giving forty-five (45) days
written notice to the other Participant of the effective date
of withdrawal. Upon such withdrawal, this Agreement shall
terminate, and the withdrawing Participant shall be deemed to
have transferred to the remaining Participant, without cost and
free and clear of royalties owing to the withdrawing
Participant, liens or other encumbrances arising by, through or
under such withdrawing Participant, all of its Participating
Interest in the Assets and in this Agreement. Any withdrawal
under this Section 12.2 shall not relieve the withdrawing
Participant of its share of liabilities to third parties
(whether such accrues before or after such withdrawal)
including environmental liabilities arising out of Operations
conducted prior to such withdrawal. For purposes of this
Section 12.2, the withdrawing Participant's share of such
liabilities shall be equal to its Participating Interest at the
time such liability was incurred.
12.3 CONTINUING OBLIGATIONS. On termination of this Agreement under
Section 12.1 or 12.2, the Participants shall remain liable for
continuing obligations hereunder until final settlement of all
accounts and for any liability, whether it accrues before or
after termination, if it arises out of Operations during the
term of the Agreement.
12.4 DISPOSITION OF ASSETS ON TERMINATION. Promptly after
termination under Section 12.1, the Manager shall take all
action necessary to wind up the activities of the Venture, and
all costs and expenses incurred in connection with the
termination of the Venture shall be expenses chargeable to the
Venture. Any Participant that has a negative Joint Account
balance when the Venture is terminated for any reason shall
contribute to the Assets of the Venture an amount sufficient to
raise such balance to zero. The Assets shall first be paid,
applied, or distributed in satisfaction of all liabilities of
the Venture to third parties and then to satisfy any debts,
obligations, or liabilities owed to the Participants. Before
distributing any funds or Assets to Participants, the Manager
shall have the right to segregate amounts which, in the
Manager's reasonable judgment, are necessary to discharge
continuing obligations or to purchase for the account of
Participants, bonds or other securities for the performance of
such obligations. The foregoing shall not be construed to
include the repayment of any Participant's contributions or
Joint Account balance. Thereafter, any remaining cash and all
<PAGE>
other Assets, including property shall be distributed (in
undivided interests unless otherwise agreed) to the
Participants, first in the ratio and to the extent of their
respective Joint Accounts and then in proportion to their
respective Participating Interests, subject to any dilution,
reduction, or termination of such Participating Interests as
may have occurred pursuant to the terms of this Agreement. No
Participant shall receive a distribution of any interest in
Products or proceeds from the sale thereof if such
Participant's Participating Interest therein has been
terminated pursuant to this Agreement.
12.5 RIGHT TO DATA AFTER TERMINATION. After termination of this
Agreement pursuant to Section 12.1, each Participant shall be
entitled to copies of all information acquired hereunder before
the effective date of termination not previously furnished to
it, but a terminating or withdrawing Participant shall not be
entitled to any such copies in respect to a later termination
or withdrawal.
12.6 CONTINUING AUTHORITY. On termination of this Agreement under
Section 12.1 or the deemed withdrawal of a Participant pursuant
to Section 6.4 or 6.5, the Manager shall have the power and
authority, subject to control of the Management Committee, if
any, to do all things on behalf of the Participants which are
reasonably necessary or convenient to: (a) wind up Operations
and (b) complete any transaction and satisfy any obligation,
unfinished or unsatisfied, at the time of such termination or
withdrawal, if the transaction or obligation arises out of
Operations prior to such termination or withdrawal. The
Manager shall have the power and authority to grant or receive
extensions of time or change the method of payment of an
already existing liability or obligation, prosecute and defend
actions on behalf of the Participants and the Venture, mortgage
Assets, and take any other reasonable action in any matter with
respect to which the former Participants continue to have, or
appear or are alleged to have, a common interest or a common
liability.
12.7 NON-COMPETE COVENANTS. A Participant that withdraws pursuant
to Section 12.2, or is deemed to have withdrawn pursuant to
Section 5.2, 6.4, or 6.5, shall not directly or indirectly
acquire any interest in property within the Area of Interest
for two (2) years after the effective date of withdrawal. If a
withdrawing Participant, or an Affiliate of a withdrawing
Participant, breaches this Section 12.7, such Participant or
Affiliate shall be obligated to offer to convey to the non-
withdrawing Participant, without cost, any such property or
interest so acquired. Such offer shall be made in writing and
can be accepted by the non-withdrawing Participant at any time
within forty-five (45) days after it is received by such non-
withdrawing Participant.
<PAGE>
12.8 MUTUAL WITHDRAWAL. If a Participant elects to withdraw from
this Agreement pursuant to Section 12.2, the other Participant
may also elect to withdraw as a Participant by giving written
notice thereof to the other Participant within thirty (30) days
after receipt of the first Participant's notice of withdrawal,
in which event the Participants shall be deemed to have agreed
to terminate the Venture as of the first date of withdrawal
pursuant to Section 12.1.
<PAGE>
ARTICLE 13
SURRENDER OF PROPERTY
---------------------
13.1 SURRENDER OF PROPERTY. The Management Committee may authorize
the Manager to surrender part or all of the Property. If the
Management Committee authorizes any such surrender over the
objection of a Participant, the Participant that desires to
surrender shall assign to the objecting Participant, without
cost to the objecting Participant, all of the surrendering
Participant's interest in the Property to be surrendered, and
the surrendered Property shall cease to be part of the
Property.
13.2 REACQUISITION. If any Property is surrendered under the
provisions of this Article 13, then, unless this Agreement is
earlier terminated, neither Participant nor any Affiliate
thereof shall acquire any interest in such Property or a right
to acquire such Property for a period of two years following
the date of such surrender. If a Participant reacquires any
Property in violation of this Section 13.2, the other
Participant may elect by notice to the reacquiring Participant
within forty-five (45) days after it has actual notice of such
reacquisition, to have such Property made subject to the terms
of this Agreement. In the event such an election is made, the
reacquired properties shall thereafter be treated as Property,
and the costs of reacquisition shall be borne pro rata by the
Participants and shall be included for purposes of calculating
the Participants' respective Participating Interests.
<PAGE>
ARTICLE 14
TRANSFER OF INTEREST
--------------------
14.1 GENERAL. A Participant shall have the right to Transfer to any
third party all or any part of its interest in or to this
Agreement, its Participating Interest, or the Assets solely as
provided in this Article 14.
14.2 LIMITATIONS ON FREE TRANSFERABILITY. The Transfer right of a
Participant in Section 14.1 shall be subject to the following
terms and conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest,
or the Assets shall have the rights of a Participant
unless and until the transferring Participant has provided
to the other Participant notice of the Transfer, and
except as provided in Sections 14.2(e) and 14.2(f), the
transferee, as of the effective date of the Transfer, has
committed in writing to be bound by this Agreement to the
same extent as the transferring Participant;
(b) No Transfer permitted by this Article 14 shall relieve the
transferring Participant of its share of any liability,
whether accruing before or after such Transfer, which
arises out of Operations conducted prior to such Transfer;
(c) In the event of a Transfer of less than all of a
Participating Interest, the transferring Participant and
its transferee shall act and be treated as one
Participant;
(d) Except as provided in Section 14.4 (c), no Participant
shall transfer any interest in this Agreement or the
Assets except by Transfer of part or all of its
Participating Interest;
(e) From the date of execution of this Agreement, if the
Transfer is the grant of a security interest by mortgage,
deed of trust, pledge, lien or other encumbrance of any
interest in this Agreement, any Participating Interest or
the Assets to secure a loan or other indebtedness of a
Participant in a bona fide transaction, such security
interest shall be subordinate to the terms of this
Agreement and the rights and interests of the other
Participant hereunder. Upon any foreclosure or other
enforcement of rights in the security interest the
acquiring third party shall be deemed to have assumed the
position of the encumbering Participant with respect to
this Agreement and the other Participant, and it shall
comply with and be bound by the terms and conditions of
this Agreement; and
<PAGE>
(f) If a sale or other commitment or disposition of Products
or proceeds from the sale of Products by a Participant
upon distribution to it pursuant to Article 11 creates in
a third party a security interest in Products or proceeds
therefrom prior to such distribution, such sales,
commitment or disposition shall be subject to the terms
and conditions of this Agreement.
14.3 RIGHT OF FIRST REFUSAL. Except as otherwise provided in
Sections 14.2 and 14.4, if either Participant receives an offer
to Transfer or otherwise dispose of all or a part of its
Participating Interest in the Property to a third party, prior
to accepting such offer the transferring Participant shall
first offer the interest to the non-transferring Participant at
the same terms and conditions as set forth in the third party
offer. The non-transferring Participant may accept the offer
by written notice to the transferring Participant given within
sixty (60) days of receipt of the transferring Participant s
offer. If the non-transferring Participant does not accept the
offer, then the transferring Participant may sell or otherwise
dispose of its interest under terms and conditions not less
favorable to it than those set forth in the third party offer,
provided that the sale or other disposition is effectuated
within one hundred and eighty (180) days from the effective
date of the third party offer.
14.4 EXCEPTIONS TO RIGHT OF FIRST REFUSAL. Section 14.3 shall not
apply to the following:
(a) Transfer by a Participant of all or any part of its
interest in this Agreement, any Participating Interest, or
the Assets to an Affiliate, to Amax Gold, Inc. or Amax
Gold Exploration, Inc.;
(b) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a
Participant by which the surviving entity shall possess
substantially all of the stock, or all of the property
rights and interests, and be subject to substantially all
of the liabilities and obligations of that Participant;
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest, or
the Assets by mortgage, deed of trust, pledge, lien or
other encumbrance which shall be subordinate as set forth
above; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon
distribution to it pursuant to Article 11.
<PAGE>
ARTICLE 15
CONFIDENTIALITY AND RELEASES
----------------------------
15.1 GENERAL. The financial terms of this Agreement and all
information obtained in connection with the performance of this
Agreement shall be the exclusive property of the Participants
and, except as provided in Section 15.2, shall not be disclosed
to any third party or the public without the prior written
consent of the other Participant, which consent shall not be
unreasonably withheld.
15.2 EXCEPTIONS. The consent required by Section 15.1 shall not
apply to a disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor
that has a bona fide need to be informed;
(b) To any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest
in or to this Agreement, its Participating Interest, or
the Assets; or
(c) Which the disclosing Participant is required by pertinent
law or regulation or the rules of any stock exchange to
disclose; provided that in any case to which this Section
15.2 is applicable, the disclosing Participant shall give
written notice to the other Participant prior to the
making of any such disclosure.
(d) As necessary to administer or enforce this Agreement.
As to any disclosure pursuant to Section 15.2(a) or (b), only
such confidential information as such third party shall have a
legitimate business need to know shall be disclosed and such
third party shall first agree in writing to protect the
confidential information from further disclosure to the same
extent as the Participants are obligated under this Article 15.
15.3 DURATION OF CONFIDENTIALITY. The provisions of this Article 15
shall apply during the term of this Agreement and for two (2)
years following a termination pursuant to Section 12.1 or
following withdrawal pursuant to Section 12.2, and shall
continue to apply to any Participant who withdraws, who is
deemed to have withdrawn, or who Transfers its Participating
Interest, for two years following the date of such occurrence.
15.4 RELEASES. There shall be no public release by either party of
any information concerning the Property, the Operations or the
Venture without the prior written consent of the other party
(such consent not to be unreasonably withheld or delayed)
unless such information is required by a lawful authority of or
other regulatory body having jurisdiction in which case the
party making such required disclosure shall first deliver a
copy thereof to the other party and allow the other party
twenty-four (24) hours to comment on the nature and extent of
such required disclosure.
<PAGE>
ARTICLE 16
AREA OF INTEREST
----------------
16.1 ACQUISITIONS IN AREA OF INTEREST. If at any time during the
subsistence of this Agreement any Participant or any non-
Participant that has a production royalty interest as provided
for herein, (in this section only called the "Acquiring Party")
stakes or otherwise acquires any right to or interest in any
properties within the exterior boundaries of the area depicted
on Exhibit E attached hereto and made a part hereof, ("Area of
Interest"), the Acquiring Party shall forthwith give notice to
the other parties of such acquisition, the total cost thereof
and all details in the possession of that Participant with
respect to the details of the acquisition, the nature of the
property and the known mineralization. Each other Participant
may, within thirty (30) days of receipt of the Acquiring
Party's notice, elect, by notice to the Acquiring Party, to
require that the properties and the right or interest acquired
be included in and thereafter form part of the Property for all
purposes of this Agreement.
If the election aforesaid is made, the other Participants shall
reimburse the Acquiring Party for that portion of the cost of
acquisition which is equivalent to their respective
Participating Interests.
If no other Participant makes the election aforesaid within
that period of thirty (30) days, the right or interest acquired
shall not form part of the Property and the Acquiring Party
shall be solely entitled thereto.
Notwithstanding the provisions of this Article 16, should
either Cyprus or ICMC or their Affiliates control any
properties within the Area of Interest on the effective date of
this Agreement and such properties are not included in Exhibits
A-1 or A-2, such properties shall be considered Property and
become subject to this Agreement.
<PAGE>
ARTICLE 17
GENERAL PROVISIONS
------------------
17.1 NOTICES. All notices, payments and other required
communications ("Notices") to the Participants shall be in
writing, and shall be addressed respectively as follows:
If to ICMC:
Idaho Consolidated Metals Corporation
P.O. Box 1124
Lewiston, Idaho 83501
Attn: President
Fax: (208) 746-6678
If to Cyprus:
Cyprus Gold Exploration Corporation
9100 East Mineral Circle
P.O. Box 3299
Englewood, Colorado 80155-3299
Attn: Exploration Manager, North America
Fax: (303) 643-5943
With a copy to:
Cyprus Gold Exploration Corporation
9100 E. Mineral Circle
P.O. Box 3299
Englewood, CO 80155-3299
Attn: Land Management Department
Fax: (303) 643-5250
All Notices shall be given (i) by personal delivery to the
Participant, or (ii) by electronic communication or facsimile,
with a confirmation sent by registered or certified mail return
receipt requested, (iii) by registered or certified mail return
receipt requested or (iv) by express mail. All Notices shall
be effective and shall be deemed delivered (i) if by personal
delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business
hours, on the next business day following delivery, (ii) if by
electronic communication or facsimile on the next business day
following receipt of the electronic communication or facsimile,
and (iii) if solely by mail on the next business day after
actual receipt. A Participant may change its address by Notice
to the other Participant.
17.2 WAIVER. The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise
any right, power or remedy upon a breach hereof shall not
constitute a waiver of any provision of this Agreement or limit
the Participant's right thereafter to enforce any provision or
exercise any right.
<PAGE>
17.3 MODIFICATION. No modification of this Agreement shall be valid
unless made in writing and duly executed by the Participants.
17.4 FORCE MAJEURE. Except for the obligation to make payments when
due hereunder, the obligations of a Participant shall be
suspended to the extent and for the period that performance is
prevented by any cause, whether foreseeable or unforeseeable,
beyond its reasonable control, including, without limitation,
lack of satisfactory market, labor disputes (however arising
and whether or not employee demands are reasonable or within
the power of the Participant to grant); acts of God; laws,
regulations, orders, proclamations, instructions or requests of
any government or governmental entity; judgments or orders of
any court; inability to obtain on reasonably acceptable terms
any public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal,
provincial or local environmental standards; acts of war or
conditions arising out of or attributable to war, whether
declared or undeclared; riot, civil strife, insurrection or
rebellion; fire, explosion, earthquake, storm, flood, sink
holes; drought or other adverse weather condition; delay or
failure by suppliers or transporters of materials, parts,
supplies, services or equipment or by contractors' or
subcontractors' shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies,
utilities or services; accidents; breakdown of equipment,
machinery or facilities; or any other cause whether similar or
dissimilar to the foregoing. The affected Participant shall
promptly give notice to the other Participant of the suspension
of performance, stating therein the nature of the suspension,
the reasons therefor, and the expected duration thereof and
this Agreement shall be extended by the total period of such
delays or suspension. The affected Participant shall resume
performance as soon as reasonably possible. During the period
of suspension the obligations of the Participants to advance
funds pursuant to Section 9.2 shall be reduced to levels
consistent with Operations.
17.5 ECONOMIC FORCE MAJEURE. If, at any time after the Management
Committee reaches a determination, in its reasonable judgment,
that the minerals encompassed within the Property cannot be
profitably mined under the terms and conditions of this
Agreement as it is then in effect, the Management Committee may
declare that a condition of Force Majeure exists as provided in
Section 17.4, above; provided, that in no event shall a
condition of Force Majeure declared pursuant to this Section
16.5 be in effect for more than five (5) consecutive years.
17.6 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho.
17.7 RULE AGAINST PERPETUITIES. Any right or option to acquire any
interest in real or personal property under this Agreement must
be exercised, if at all, so as to vest such interest in the
acquirer within twenty-one (21) years after the effective date
of this Agreement.
<PAGE>
17.8 FURTHER ASSURANCES. Each of the Participants agrees to take
from time to time such actions and execute such additional
instruments as may be reasonably necessary or convenient to
implement and carry out the intent and purpose of this
Agreement.
17.9 SURVIVAL OF TERMS AND CONDITIONS. The following Sections shall
survive the termination of this Agreement to the full extent
necessary for their enforcement and the protection of the
Participant in whose favor they run: Sections 2.2, 4.3, 6.4,
6.6, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 13.2, 17.6 and Exhibit
"B".
17.10 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement
contains the entire understanding of the Participants and
supersedes all prior agreements and understandings between the
Participants relating to the subject matter hereof. This
Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the
Participants. In the event of any conflict between this
Agreement and any Exhibit attached hereto, the terms of this
Agreement shall be controlling.
17.11 MEMORANDUM. At the request of either Participant, a Memorandum
or short form of this Agreement, as appropriate, which shall
not disclose financial information contained herein, shall be
prepared and recorded by Manager. This Agreement shall not be
recorded.
17.12 FUNDS. All references to dollar amounts contained in this
Agreement are references to United States dollars.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the day and year first above written.
CYPRUS GOLD EXPLORATION CORPORATION
By: /s/ Milton H. Ward
---------------------------------
Title: President
------------------------------
IDAHO CONSOLIDATED METALS CORPORATION
By: /s/ Delbert W. Steiner
---------------------------------
Title: President and CEO
------------------------------
Tax ID#: 82-0465571
----------------------------
<PAGE>
EXHIBIT "A-1"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims located in
Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------- ----------
Petsite #1 175109 Eagle #1 11134
Petsite #2 175110 Eagle #2 11135
Petsite #3 175111 Eagle #3 11136
Petsite #4 175112 Eagle #4 11137
Petsite #5 175113 Eagle #5 11138
Petsite #6 175114 Eagle #6 11139
Petsite #7 16203 Eagle #7 11140
Petsite Fraction 175115 Eagle #9 11142
Toronto #1 175116 Eagle #10 11143
Toronto No. 2 16193 Eagle #12 11145
Badger 16195 Eagle #13 11146
Side Hill Gouger 175117 Eagle #15 11148
Ville Maria 175118 Eagle #16 11149
Frog 7 18660 Eagle #18 11151
Frog 9 18661 Eagle #19 11152
Frog 10 18662 Eagle #21 11154
Frog 12 18664 Eagle #22 11155
Frog 16 18667 Eagle #23 11156
Frog 18 18669 Eagle #24 11157
Frog 19 18670 Eagle #25 11158
Frog 20 18671 Eagle #26 11159
Frog 21 18672 Eagle #27 11160
Frog 22 18673 Eagle #28 11161
Frog 23 18674 Eagle #29 11162
Frog 24 18675 Eagle #30 423
Frog 26 18677 Eagle #30 175127
Frog 33 18681 Eagle #31 11163
Frog 35 18683 Eagle #32 175128
Frog 55 82197 Eagle #33 421
Frog 56 82198 Eagle #34 175129
Frog 57 82199 Eagle #34 11164
Frog 58 82200 Eagle #35 11165
Surprise #15 82187 Eagle #36 11166
Surprise #16 82188 Eagle #37 11167
Surprise No. 17 82189 Eagle #38 11168
Surprise No. 18 82190 Eagle #39 9325
Lost Wheelbarrow #1 123246 Eagle #39 175130
Lost Wheelbarrow #2 123247 Eagle #40 9326
Lost Wheelbarrow #3 123248 Eagle #40 175131
This Is It Placer 29189 Eagle #41 11169
This Is It Placer 175152 Eagle #41 175132
<PAGE>
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------- ----------
Eagle #42 11170 Eagle #97 9349
Eagle #42 175133 Eagle #98 9350
Eagle #43 11171 Eagle #99 9351
Eagle #44 11172 Eagle #100 9352
Eagle #45 11173 Eagle #101 9353
Eagle #46 11174 Eagle #102 9354
Eagle #47 11175 Eagle #103 9355
Eagle #48 11176 Eagle #104 9356
Eagle #49 11177 Eagle #105 9357
Eagle #50 11178 Eagle #106 9358
Eagle #51 11179 Eagle #107 9359
Eagle #52 11180 Eagle #108 9360
Eagle #53 11659 Eagle #109 44037
Eagle #54 420 Eagle #110 44038
Eagle #54 175134 Eagle #111 44039
Eagle #55 417 Eagle #112 44040
Eagle #56 416 Eagle #113 44041
Eagle #57 415 Eagle #114 44042
Eagle #58 4009 Eagle #115 44043
Eagle #59 4010 Eagle #116 44044
Eagle #60 4011 Eagle #117 44045
Eagle #61 4012 Eagle #118 44046
Eagle #62 4013 Eagle #119 44047
Eagle #63 175135 Eagle #119A 44048
Eagle #64 4015 Eagle #120 44049
Eagle #65 4016 Eagle #121 44050
Eagle #66 4017 Eagle #122 44051
Eagle #67 4018 Eagle #123 44052
Eagle #68 4019 Eagle #124 44053
Eagle #71 4022 Eagle #125 44054
Eagle #75 175136 Eagle #126 44055
Eagle #78 9330 Eagle #127 44056
Eagle #79 9331 Eagle #128 44057
Eagle #80 9332 Eagle #129 44058
Eagle #81 9333 Eagle #130 44059
Eagle #82 9334 Eagle #131 95654
Eagle #83 9335 Eagle #132 95655
Eagle #84 9336 Eagle #133 175137
Eagle #85 9337 Eagle #134 95657
Eagle #86 9338 Eagle #135 95658
Eagle #87 9339 Eagle #136 95659
Eagle #88 9340 Eagle #137 95660
Eagle #89 9341 Eagle #138 95661
Eagle #90 9342 Eagle #139 95662
Eagle #91 9343 Eagle #140 95663
Eagle #92 9344 Eagle #141 95664
Eagle #93 9345 Eagle #142 95665
Eagle #94 9346 Eagle #143 95666
Eagle #95 9347 Eagle #144 95667
Eagle #96 9348 Eagle #145 95668
<PAGE>
BLM BLM
Claim Name Serial No. Claim Name Serial No.
------------------- ---------- ------------------ ----------
Eagle #146 95669 Golden Eagle #16 11124
Eagle #147 95670 Golden Eagle #17 11125
Eagle #148 95671 Golden Eagle #18 175124
Eagle #149 95672 Golden Eagle #18 425
Eagle #150 95673 Golden Eagle #19 424
Eagle #151 95674 Golden Eagle #19X 13965
Eagle #152 95675 Golden Eagle #20F 11126
Eagle #153 95676 Golden Eagle #21F 11127
Eagle #154 95677 Golden Eagle #21F 175125
Eagle #155 95678 Golden Eagle #22F 11128
Eagle #156 95679 Golden Eagle #22F 175126
Eagle #157 95680 Golden Eagle #23 11129
Eagle #178 101736 Golden Eagle #24 11130
Eagle #182 101740 Golden Eagle #25 11131
Eagle #185 101743 Golden Eagle #26 11132
Golden Eagle 175119 Golden Eagle #27 11133
Golden Eagle #2 175120 Golden Eagle #28 418
Golden Eagle #3 175121 Golden Eagle #29 3996
Golden Eagle #4 175122 Golden Eagle #30 3997
Golden Eagle #5 11113 Golden Eagle #31 3998
Golden Eagle #6 11114 Golden Eagle #32 3999
Golden Eagle #7 175123 Golden Eagle #33 4000
Golden Eagle #8 11116 Golden Eagle #34 4001
Golden Eagle #9 11117 Golden Eagle #35 4002
Golden Eagle #10 11118 Golden Eagle #36 4003
Golden Eagle #11 11119 Golden Eagle #37 4004
Golden Eagle #12 11120 Golden Eagle #38 4005
Golden Eagle #13 11121 Golden Eagle #39 4006
Golden Eagle #14 11122 Golden Eagle #40 4007
Golden Eagle #15 11123 Golden Eagle #41 4008
<PAGE>
EXHIBIT "A-2"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims
located in Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------ ----------
PT 1 177154 PT 43 177196
PT 2 177155 PT 44 177197
PT 3 177156 PT 45 177198
PT 4 177157 PT 46 177199
PT 5 177158 PT 47 177200
PT 6 177159 PT 48 177201
PT 7 177160 PT 49 177202
PT 8 177161 PT 50 177203
PT 9 177162 PT 51 177204
PT 10 177163 PT 52 177205
PT 11 177164 PT 53 177206
PT 12 177165 PT 54 177207
PT 13 177166 PT 55 177208
PT 14 177167 PT 56 177209
PT 15 177168 PT 57 177210
PT 16 177169 PT 58 177211
PT 17 177170 PT 59 177212
PT 18 177171 PT 60 177213
PT 19 177172 PT 61 177214
PT 20 177173 PT 62 177215
PT 21 177174 PT 63 177216
PT 22 177175 PT 64 177217
PT 23 177176 PT 65 177218
PT 24 177177 PT 66 177219
PT 25 177178 PT 67 177220
PT 26 177179 PT 68 177519
PT 27 177180 PT 69 177520
PT 28 177181 PT 70 177521
PT 29 177182 PT 71 177522
PT 30 177183 PT 72 177523
PT 31 177184 PT 73 177524
PT 32 177185 PT 74 177525
PT 33 177186 PT 75 177526
PT 34 177187 PT 76 177527
PT 35 177188 PT 77 177528
PT 36 177189 PT 78 177529
PT 37 177190 PT 79 177530
PT 38 177191 PT 80 177531
PT 39 177192 PT 81 177532
PT 40 177193 PT 82 177533
PT 41 177194 PT 83 177534
PT 42 177195 PT 84 177535
<PAGE>
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------ ----------
PT 85 177536 PT 99 177550
PT 86 177537 PT 100 177551
PT 87 177538 PT 101 177552
PT 88 177539 PT 102 177553
PT 89 177540 PT 103 177554
PT 90 177541 PT 104 177555
PT 91 177542 PT 105 177556
PT 92 177543 PT 106 177557
PT 93 177544 PT 107 177558
PT 94 177545 PT 108 177559
PT 95 177546 PT 109 177560
PT 96 177547 PT 110 177561
PT 97 177548 PT 111 177562
PT 98 177549
<PAGE>
EXHIBIT "B"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
ACCOUNTING PROCEDURES
---------------------
The purpose of these Accounting Procedures is to establish equitable
methods for determining charges and credits applicable to Operations
under the captioned Agreement (the "Agreement"). It is the intent of
the Manager and any Participant that is not acting as the Manager
("the non-Manager") that neither of them shall gain nor lose by reason
of their duties and responsibilities as the Manager or the non-Manager
but that the Manager should be reimbursed for the value of services
provided hereunder. If any method proves unfair or inequitable to the
Manager or the non-Manager, the Participants shall meet and in good
faith endeavor to agree upon changes deemed necessary to correct the
unfairness or inequity. In the event of a conflict between the
provisions of these Accounting Procedures and those of the Agreement,
the provisions of the Agreement shall control.
<PAGE>
ARTICLE 1
GENERAL PROVISIONS
------------------
1.1 DEFINITIONS. The definitions set forth in the Agreement shall
apply to these Accounting Procedures and shall have the same
meanings as used herein. Additional terms used in these
Accounting Procedures are set forth below shall have the
following meanings:
(a) "MATERIAL" shall mean personal property, including but not
limited to supplies and non-depreciable equipment,
acquired and held for use in Operations.
(b) "OUTSIDER" shall mean participants other than
"Participant" to the Agreement and their affiliates.
(c) "PERSONAL EXPENSES" shall mean travel and other reasonable
reimbursable expenses of employees of the Manager or its
Affiliates.
(d) "TECHNICAL EMPLOYEES" shall mean those employees having
special and specific engineering, geological, legal, or
other professional skills, and whose primary function in
Operations is the handling of specific matters for the
benefit of Operations.
1.2 ACCOUNTING RECORDS.
(a) The Manager shall maintain accounting records for the
Joint Account in accordance with generally accepted
accounting principles consistently applied and used in the
mining industry.
(b) The Manager shall take advantage of and credit the Venture
with all cash and trade discounts, freight allowances and
equalizations, annual volume or other allowances, credits,
salvages, commissions, insurance discount dividends and
retroactive premium adjustments, and any other benefits
which accrue to the Manager wholly or in part because of
Operations.
1.3 STATEMENTS, BILLINGS AND ADJUSTMENTS.
(a) The Manager shall promptly submit to the Management
Committee monthly statements of account reflecting in
reasonable detail the charges and credits to the Joint
Account during the preceding month.
(b) On the basis of the adopted Program and Budget, the
Manager shall submit to each Participant prior to the last
day of each month, a billing for estimated cash
requirements for the next month. Within ten (10) days
after receipt of each billing, each Participant shall
<PAGE>
advance to the Manager its proportionate share of the
estimated amount. Time is of the essence of payment of
such billings. The Manager shall at all times maintain a
cash balance approximately equal to the rate of
disbursement for up to forty-five (45) days.
(c) A Participant that fails to meet cash calls in the amount
and at the times specified in Section 1.3(b) shall be in
default, and the amount of the defaulted cash call shall
bear interest from the date due at an annual rate equal to
two (2) percentage points over the Prime Rate, but in no
event shall said rate of interest exceed the maximum
permitted by law. The non-defaulting Participant shall
have those rights, remedies and elections specified in
Section 6.4 of the Agreement.
(d) Payment of bills shall not prejudice the right of the non-
Manager to protest or question the correctness thereof;
however, all bills and statements rendered during any
calendar year shall be presumed conclusively to be true
and correct after twelve (12) months following the end of
any such calendar year unless, within the said
twelve-month period, the non-Manager takes written
exception thereto and makes claim on the Manager for
adjustment. No adjustment favorable to the Manager shall
be made unless it is made within the same prescribed
period or in connection with an adjustment in favor of the
non-Manager. The provisions of this paragraph shall not
prevent adjustments resulting from a physical inventory of
the Assets.
1.4 ADVANCES AND PAYMENTS.
(a) As provided for in this Exhibit "B", the non-Manager shall
advance its share of the estimated cash outlay for the
succeeding month's operation. If the non-Manager's
advances exceed its share of actual expenditures,
subsequent cash calls will be adjusted downward or the
Manager will refund to the non-Manager excess funds that
are not necessary for subsequent Operations.
(b) The Manager shall base its estimates of cash advance
requirements on the latest information available and shall
take into account cash on hand which may be applied to
satisfy such requirements in order to reduce the amounts
to be advanced. It is the intent of the Participants to
provide adequate funds for the Operations and to maintain
bank balances at minimum levels.
(c) If the Manager does not request the non-Manager to advance
its share of estimated cash requirements, the non-Manager
shall pay its share of expenditures within thirty (30)
days following receipt of the Manager's billing.
<PAGE>
(d) Except as provided in Section 6.4 of the Agreement, all
payments shall be made on or before the due date by wire
transfer in immediately available funds to bank accounts
designated by the Manager. If not so paid, the unpaid
balance shall bear interest after the due date at the rate
of Prime Rate plus two percent (2%) for each thirty (30)
day period or portion thereof until such amount is paid,
plus attorneys' fees, court costs, and other costs related
to the collection of the unpaid amounts.
(e) Funds received by the Manager from the non-Manager
Participant shall be segregated or maintained by the
Manager as a separate fund, and may not be commingled with
the Manager's own funds, except with the consent of the
non-Manager Participant.
1.5 AUDITS. Upon notice in writing to the Manager, the non-
Manager shall have the right to audit the accounts and records
relating to the accounting made under this Agreement for any
calendar year within the twelve (12) month period following the
end of such calendar year; provided, however, the making of an
audit shall not extend the time for the taking of written
exception to and the adjustments of accounts pursuant to
Section 1.3 (d). The non-Manager may arrange for audits by its
own staff or outside professional and qualified independent
auditors. Audits shall be conducted in a manner so as to cause
the minimum inconvenience to the Manager. The Manager shall
bear no portion of non-Manager's audit costs unless agreed to
by the Manager in advance of such audit. Notwithstanding the
above, in the event the non-Manager does not audit the accounts
and records relating to the accounting made under this
Agreement the Manager shall have conducted annually an audit of
the accounts and records relating to the accounting made under
this Agreement. Such audit shall be for the account of the
Venture. If the non-Manager does have an audit performed as
provided herein, the Manager shall not be required to perform
an additional audit.
<PAGE>
ARTICLE 2
CHARGEABLE COSTS
----------------
Subject to the provisions of the Agreement, the Manager shall charge
the Joint Account with all costs incurred by it as necessary and
proper for the conduct of Operations or maintenance of the Assets.
Such costs shall be reasonable and comparable with similar projects in
the area. Except as otherwise provided in the Agreement, the Manager
shall charge the Joint Account with: (1) exploration expenditures
made for the exploration activities within the Property,
(2) expenditures made for engineering, environmental, planning,
Development and construction related to the Property and for the
equipment and facilities necessary for Operations, including all
working capital and sustaining capital for ongoing Operations and for
the expansion and updating of Operations, and (3) costs and expenses
of mining, processing, reclamation, restoration, worker's compensation
and other claims upon closing of the mines, and any other costs
following the mine closing. Such costs include, but are not limited
to the following:
2.1 PROPERTY PAYMENTS. Property payments, rentals, royalties and
other payments out of production (unless such royalties or
other payments shall burden the ownership interests of only one
Participant) and fees, paid by the Manager for Operations
including permits, fees, and other charges which are assessed
by various governmental agencies. Such costs also include
acquisition of easements, rights of way, and surface rights.
2.2 LABOR.
(a) Salaries and wages of the Manager's employees directly
engaged in and the conduct of and for the benefit of
Operations, whether temporarily or permanently assigned.
The proportion of salaries and wages charged will be
prorated proportionate to the time spent by employees for
the benefit of Operations. Salaries and wages shall
include everything constituting gross pay to employees as
reflected on the Manager's payroll, including travel time
and overtime.
(b) The Manager's cost of holidays, rest days, vacations,
disability benefits, sickness, and other customary
allowances and reasonable expenses which are paid or
reimbursed under the Manager's usual practice. Such
amounts may be charged either on a "percentage assessment"
of salaries and wages, or on a cash basis.
(c) Costs of expenditures or contributions made pursuant to
assessments imposed by governmental authority which are
applicable to the Manager's cost of salaries and wages.
<PAGE>
(d) Personal Expenses of employees whose salaries and wages
are chargeable to the Joint Account under Section 2.2 (a),
but only to the extent that such Personal Expenses are
incurred in connection with their efforts while directly
engaged in the conduct of and for the benefit of
Operations.
(e) The Manager's actual costs of established plans for
employees' group life insurance, hospitalization, medical,
dental, pension, retirement, stock purchase, profit
sharing, thrift, bonus, and other benefit plans of a
similar nature applicable to the Manager's labor cost
chargeable to the Joint Account.
(f) If a percentage assignment is used for Section 2.2 (b) and
(e), the rate shall be based on actual cost experience for
the previous year. Such rate shall be determined during
the first quarter of each year and shall be applied in
current year operations.
(g) Relocation costs of employees permanently or temporarily
assigned and directly engaged in the conduct of
Operations. Such costs shall include transportation of
employees' families and their personal and household
effects and all other relocation costs in accordance with
the Manager's usual practice.
2.3 MATERIAL. Material purchased or furnished by the Manager for
use in Operations as provided under Article 3. So far as is
reasonably practical, and consistent with efficient and
economical operations, only such Material shall be purchased or
transferred for use in Operations as may be required for
immediate use.
2.4 TRANSPORTATION.
(a) Transportation of material and other related costs such as
expediting, crating, freight, and unloading at
destination.
(b) Transportation of employees as required in the conduct of
Operations.
2.5 SERVICES.
(a) The cost of consultants, contract labor, services,
equipment, and utilities procured from Outsiders.
(b) Technical or research services, such as, but not limited
to, laboratory analysis, drafting, geophysical and
geological interpretation, engineering, reserve studies
and related computer services, and data processing, which
may be delegated to and performed by the specialized
staffs of one of the Participants or their Affiliate.
Such professional services shall be on a cost of service
<PAGE>
basis and charges shall not exceed the cost of comparable
quality services by qualified Outsiders. Charges to the
Joint Account for services directly benefitting Operations
shall be in addition to any charges allowed under Sections
2.11 and 2.12.
(c) In the event the Manager from time to time utilizes
skilled personnel of the Participants or their Affiliates
for performance of services either within the Property or
elsewhere for the benefit of Operations, whose time in
full or in part is not otherwise charged hereunder, a
proper proportion of the direct and indirect salary,
employee benefits, and travel expenses of such personnel
shall be charged to the Joint Account, provided such work
is pursuant to written authorization by the Manager. Such
professional services shall be on a cost of service basis
and charges shall not exceed the cost of comparable
quality services by qualified Outsiders.
(d) Use of the Manager's and the non-Manager's separately
owned equipment and facilities for benefit of Operations.
Such use shall be charged to the Joint Account at rates
commensurate with the Manager's actual and full costs of
ownership and operation and such rates shall include cost
of maintenance, repairs, other operating expense,
insurance, taxes (other than income taxes), depreciation,
and other overhead. These charges shall not exceed the
prevailing commercial rates in the area.
(e) Data processing and computer services acquired for the
benefit of Operations may be contracted through Outsiders,
or by arrangement for computer services from one of the
Participants, or their Affiliates, even though such
facilities are not physically located within the Property.
Charges to the Joint Account under this provision for
services directly benefiting Operations shall be in
addition to any charges allowed under Section 2.11 and
2.12. Such professional services shall be on a cost of
service basis and charges shall not exceed the cost of
comparable quality services by qualified Outsiders.
(f) Any technical services, skilled personnel, equipment,
facilities or data processing services provided to
Operations by the non-Manager, at the request of the
Manager, shall be charged on the same basis as provided in
Sections 2.5 (b), (c) (d) and (e) above. The non-Manager
shall bill the Manager in accordance with Section 1.4 (c)
of the Accounting Procedures. The Manager may audit the
records of the non-Manager with regard to such services in
accordance with the procedure set forth in Section 1.5.
<PAGE>
2.6 REPAIR AND REPLACEMENT OF PROPERTY. All costs or expenses (net
of the recoveries from insurance for which the premiums have
been charged to the Joint Account, if any) necessary for the
repair or replacement of property resulting from damages or
losses incurred by fire, flood, storm, theft, accident, or any
other cause, excepting the Manager's gross negligence or
willful misconduct. The Manager shall furnish to the non-
Manager written notice of damages or losses in excess of
Fifteen Thousand Dollars ($15,000) as soon as practicable.
Such costs and expenses include the costs to combat and control
the actions of the hazard.
2.7 INSURANCE.
(a) Premiums paid for Workers' Compensation or Employer's
Liability Insurance required to be carried for Operations.
In the event Operations are conducted in a state or
province in which the Manager may act as self-insurer for
Workers' Compensation or Employer's Liability under the
applicable state's or province's law, the Manager may, at
its election, provided that it is allowed by the laws of
the Province, include the risk under its self-insurance
program and in that event, the Manager shall include a
charge at the Manager's cost equal to the Standard
Workers' Compensation rate during any one contract year.
Premiums paid for an insurance program covering such
property, business interruption, casualty, and fidelity
risks as are deemed prudent by the Manager based on sound
business judgment, which judgment shall be subject to
review and revision by the Management Committee. Premiums
paid for other insurance as requested by the Management
Committee. Each Participant may procure and maintain, at
its own cost and expense, such other insurance as it may
determine to be necessary to protect its interests, and
any such insurance so procured and maintained shall inure
solely to the benefit of the Participant procuring the
same.
(b) Actual expenditures incurred in the investigation,
defense, and settlement of all losses, claims, damages,
judgments, and other expenses for the benefit of
Operations, excepting those resulting from the Manager's
gross negligence or willful misconduct.
2.8 LITIGATION AND CLAIMS. All costs or expenses of handling,
investigation and settling litigation or claims arising by
reason of Operations or necessary to protect or recover
property, including, but not limited to, attorneys' fees, court
costs, cost of investigation or procuring evidence and amounts
paid in settlement or satisfaction of any such litigation or
claims. In the event actions or claims affecting Operations
shall be handled by the legal staff of one of the Participants,
a charge commensurate with the cost of providing such service
is chargeable to the Joint Account.
<PAGE>
2.9 TAXES. All taxes (except taxes based on or determined with
reference to income), fees, and governmental assessments of
every kind and nature. If the Manager is required hereunder to
pay ad valorem taxes based in whole or in part upon separate
valuations of each Participant's Interest, then notwithstanding
anything to the contrary herein, charges to the Joint Account
shall be made and paid by the Participants hereto in accordance
with the percentage of tax value generated by each
Participant's Interest.
2.10 FINES. All fines resulting from non-compliance with applicable
laws, rules, and regulations, except to the extent that such
fines were due to the gross negligence or willful misconduct of
the Manager.
2.11 DIRECT ADMINISTRATIVE COSTS. The net cost of maintaining and
operating any offices (excepting the corporate headquarters
office), suboffices, camps, warehouses, housing, and other
facilities directly serving Operations shall be charged to the
Joint Account. If such facilities serve operations in addition
to Operations, the net costs shall be allocated to all
operations served on an equitable basis mutually agreed to by
the Participants.
2.12 MANAGER'S MANAGEMENT FEE. A charge to reimburse the Manager
for overhead and other general and administrative services of
the Manager's corporate headquarters office equal to the
following percentages applied to costs and expenses determined
on a monthly basis under the provisions of Paragraphs 2 through
7, 11 and 13 through 15 of this Article 2:
(a) Ten percent (10%) of all cash expenditures incurred prior
to Development, but only five percent (5%) on contracts
greater than One Hundred Thousand Dollars ($100,000).
(b) Five percent (5%) of all cash expenditures incurred
following commencement of Development.
Notwithstanding the above, such Manager's fees shall not be
charged on the overhead of any contractors or agents. The
overhead rates set out above shall be reviewed annually at the
request of either party. If a detailed analysis of the
Manager's actual cost experiences establishes that higher or
lower overhead expenses were incurred or are likely to be
incurred, and if higher, are reasonable in the circumstances,
then the rates shall be amended by the Management Committee.
Such amendment shall be on the basis that the Manager neither
profits nor loses as a result thereof.
2.13 STORAGE OF PRODUCTION INVENTORIES. Each Participant will bear
the cost incurred for handling and storage of merchantable ore
or concentrates as follows:
(a) Personal property taxes on ore or concentrates in storage
for a Participant within the Property shall be charged to
such Participant.
<PAGE>
(b) The cost of loading out such ore in storage for a
Participant from the Property shall be charged to such
Participant.
(c) Cost associated with providing storage of ore or
concentrates within the Property will be charged on a pro
rata basis determined by the Participants.
(c) Other costs arising out of storage or handling of ore or
concentrates shall be charged to the Participant owning
such Materials.
2.14 PROJECT ASSETS. The cost of all capital expenses of the Assets
which are normally depreciable, depletable, or amortizable,
including but not limited to land acquisition, exploration,
development, pre-mine development and stripping, machinery,
equipment, plant, buildings, rail facilities and equipment,
improvements, camp and port facilities, townsites and other
infrastructure, whether incurred or acquired prior to or after
Commencement of Commercial Production.
2.15 OTHER NECESSARY EXPENSES. Any other chargeable expenditures
not covered or dealt with in the foregoing provisions which are
necessary and proper for the conduct of Operations.
<PAGE>
ARTICLE 3
PRICING OF JOINT ACCOUNT MATERIAL PURCHASES,
TRANSFERS, AND DISPOSITION
--------------------------------------------
The Manager is responsible for Joint Account Material and shall make
proper and timely charges and credits for all Material movements
affecting the Property. The Manager shall provide all Material for
use within the Property, however, at the Manager's option, such
Material may be supplied by the non-Manager.
3.1 PURCHASES. Material purchased shall be charged at the price
paid by the Manager after deduction of all discount received.
In case of Material found to be defective or returned to vendor
for any other reason, credit shall be passed to the Joint
Account when adjustment has been received by the Manager.
3.2 TRANSFER AND DISPOSITIONS. Material furnished to the Property
and Material transferred from the Property or disposed of by
the Manager, unless otherwise agreed to by the Participants,
shall be priced at its current fair market value.
3.3 PREMIUM PRICES. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies,
strikes, or other unusual causes over which the Manager has no
control, the Manager may charge the Joint Account for the
required Material at the Manager's actual cost incurred in
providing such Material, in making it suitable for use, and in
moving it to the Property.
3.4 WARRANTY OF MATERIAL. The Manager shall not be held
responsible for defects in Material furnished for Operations.
In the event Material is defective, credit shall not be passed
to the Joint Account until the adjustment has been received by
the Manager from the manufacturer or its agents.
<PAGE>
ARTICLE 4
DISPOSAL OF SURPLUS MATERIAL
----------------------------
4.1 DISTRIBUTION GENERALLY. The disposition of major items of
surplus Material shall be decided upon by the Manager. The
Manager may purchase, but shall be under no obligation to
purchase, the interests of the non-Manager in surplus Material.
4.2 PURCHASE BY PARTICIPANTS. Surplus Material purchased by either
the Manager or the non-Manager shall be credited by the Manager
to the Joint Account at its fair market value.
4.3 DISTRIBUTION TO PARTICIPANTS. Division of Material in kind, if
made between the Manager and the non-Manager, shall be in
proportion to their respective interests in such Material.
Each Participant will thereupon be charged individually with
the value of the Material received or receivable by each
Participant, and corresponding credits will be made by the
Manager to the Joint Account. Such credits shall appear in the
monthly statement of operations.
4.4 SALES. Sales to Outsiders of Material from the Property shall
be credited by the Manager to the Joint Account at the net
amount collected by the Manager from vendee, which shall be
priced on the basis of the best available market price. Any
claim by vendee for defective Materials or otherwise shall be
charged back to the Joint Account if and when paid by the
Manager.
<PAGE>
ARTICLE 5
INVENTORIES
-----------
5.1 PERIODIC INVENTORIES. The Manager shall take physical
inventory of Joint Account Material at reasonable intervals in
accordance with generally accepted accounting principles but
not less than once a year. The non-Manager may be represented
when any inventory shall bind the non-Manager to accept the
inventory taken by the Manager.
5.2 RECONCILIATION. Reconciliation of inventories with the Joint
Account shall be made by the Manager, and a list of overages
and shortages shall be furnished to the non-Manager within
ninety (90) days following the taking of inventory. Inventory
adjustments shall be made by the Manager to the Joint Account
for overages and shortages, but the Manager shall be held
accountable to the non-Manager only for shortages due to the
lack of reasonable diligence.
5.3 SPECIAL INVENTORIES. Whenever there is a sale or change of
Interest in the Mineral Rights, the Property or the Assets, a
special inventory may be taken by the Manager, provided the
seller or purchaser or such Interest requests such inventory
and agrees to bear all of the expense thereof. In such cases,
both the seller and the purchaser shall be entitled to be
represented. A special inventory shall be required when there
is a change in the Manager. The cost of the latter inventory
will be charged to the Joint Account when the change in the
Manager does not come about as the result of a sale of the
former Manager's Interest.
5.4 EXPENSES. The expense incurred by the Manager in conducting
periodic inventories shall be charged to the Joint Account.
<PAGE>
EXHIBIT "C"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation
and Cyprus Gold Exploration Corporation.
NET PROCEEDS OF PRODUCTION ROYALTY
----------------------------------
1 OBLIGATION.
1.01 If any party becomes entitled to an interest in Net Proceeds
pursuant to the Agreement (an Owner ), the Manager shall
separately calculate, as at the end of each calendar quarter
subsequent to commencement of commercial operations, Net
Proceeds.
1.02 INTEREST IN NET PROCEEDS. Each Participant shall within sixty
(60) days of the end of each calendar quarter, as and when any
Net Proceeds are available for distribution:
(a) severally pay or cause to be paid to each Owner that
percentage of the Net Proceeds to which that Owner is
entitled under the Agreement;
(b) deliver to each Owner a statement indicating:
(i) the Gross Receipts during the calendar quarter;
(ii) the deductions therefrom made in the order itemized
in subsection 3.01 of this Exhibit C;
(iii) the amount of Net Proceeds remaining; and
(iv) the amount of the Net Proceeds to which that Owner
is entitled;
provided, however, that until such time as there are Net
Proceeds available, the Manager shall deliver to each
Owner within sixty (60) days of the end of each calendar
quarter commencing with the first calendar quarter
following the commencement of commercial operations, a
statement indicating the Gross Receipts during the
calendar quarter less the deductions therefrom made in the
order itemized in subsection 3.01 of this Exhibit C.
1.03 Nothing contained in the Agreement or this Exhibit C shall be
construed as:
(a) imposing on a Participant any obligation with respect to
the payments of amounts due hereunder to an Owner from any
other Participant; or
(b) conferring on any Owner any right to or interest in any
Property or Assets except the right to receive payments
pursuant to the Net Proceeds Interest Royalty from each
Participant to the Agreement as and when due.
<PAGE>
2 DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings given thereto in the Agreement.
2.01 "COSTS" means, all items of outlay and expense whatsoever,
direct or indirect, with respect to Operations including loans
made by one Participant for the benefit of another Participant,
recorded by the Manager in accordance with the Agreement;
without limiting generality, the following categories of Costs
shall have the following meanings:
(a) "CONSTRUCTION COSTS" means those Costs recorded by the
Manager during the period of Development, including,
without limiting generality, the Manager's fee
contemplated in Section 2.12 of Exhibit B;
(b) "DISTRIBUTION COSTS" means all costs of:
(i) transporting ore or concentrates from a mine or a
concentrating plant to a smelter, refinery or other
place of delivery designated by the purchase and,
in the case of concentrates tolled, of transporting
the metal from a smelter to the place of delivery
designated by the purchaser;
(ii) handling, warehousing and insuring the concentrates
and metal; and
(iii) in the case of concentrates tolled, of smelting and
refining, including any penalties thereon or in
connection therewith.
(iv) "EXPLORATION COSTS" means those Costs, including
Exploration Expenditures, pertaining to all
activities directed toward ascertaining the
existence, location, quantity, quality or
commercial value of deposits of Products, and
specifically includes the preparation of a
Feasibility Study.
(c) "INTEREST COSTS" means interest computed quarterly and not
in advance calculated as follows:
(i) If financing for Development of the Property has
been obtained from a third party lender, at the
interest rates provided for therein.
(ii) If such third party financing is not in effect, as
follows:
(1) the average of the opening and closing monthly
outstanding balances for each month during the
quarter of the net unrecovered amounts of all costs
in the classes enumerated paragraphs 2.01 (a),
(b), (c), (d), (e) (f) and (g) of this Exhibit C;
<PAGE>
MULTIPLIED BY:
(2) Prime Rate plus two percent;
MULTIPLIED BY:
(3) the number of days in the quarter;
DIVIDED BY:
(4) the number of days in the year;
(e) "MARKETING COSTS" means such reasonable charge actually
incurred for marketing of ores and concentrates sold or of
concentrates tolled as is consistent with generally
accepted industry marketing practices; and
(f) "OPERATING COSTS" means those Costs recorded by the
Manager subsequent to the commencement of commercial
production, including, without limiting generality, the
Manager's fee contemplated in Section 2.12 of Exhibit B
and additional costs of capital; and
(g) "TAXES AND ROYALTIES" means all taxes (other than income
taxes), royalties or other charges or imposts provided for
pursuant to any law or legal obligation imposed by any
government if paid by the Participant and any other
royalties payable to third parties.
2.02 Wherever used in this Exhibit C, "Gross Receipts" means the
aggregate of all receipts, recoveries or amounts received by or
credited to a Participant in connection with its participation
under the Agreement including, without limiting the generality
of the foregoing:
(a) the receipts from the sale of that Participant's
proportionate share of the ores, concentrates or other
materials derived from Products produced from the
Property;
(b) all proceeds received from the sale of the Property or
Assets subsequent to the effective date of the Agreement;
(c) all insurance recoveries (including amounts received to
settle claims) in respect of loss of, or damage to any
portion of the Property or Assets subsequent to the
effective date of the Agreement;
(d) all amounts received as compensation for the expropriation
or forcible taking of any portion of the Property or
Assets subsequent to the effective date of the Agreement;
(e) the fair market value, at the Property, of those Assets,
if any, purchased for the Joint Account, that are
transferred from the Property for use by a Participant
elsewhere subsequent to the effective date of the
Agreement; and
(f) the amount of any negative balance remaining after the
reallocation of negative balances pursuant to subsection
3.03 of this Exhibit C;
<PAGE>
to the extent that those receipts, recoveries or amounts have
not been applied by the Participant as a recovery of any of the
classes of Costs itemized in subsection 3.01 of this Exhibit C.
3 NET PROCEEDS CALCULATION.
3.01 "NET PROCEEDS" means the Gross Receipts minus deductions
therefrom of the then net unrecovered amounts of the following
classes of Costs made in the following itemized order:
(a) Marketing Costs;
(b) Distribution Costs;
(c) Operating Costs;
(d) Taxes and Royalties;
(e) Interest Costs;
(f) Construction Costs; and
(g) Exploration Costs;
it being understood that the deductions in respect of the Costs
referred to in paragraphs 3.01(a), (b), (d) and (e) of this
Exhibit C shall be based on those Costs as recorded by that
Participant and the deductions in respect of the Costs referred
to in paragraphs 3.01(c), (f) and (g) of this Exhibit C shall
be based on that Participant's proportionate share of those
Costs as recorded by the Manager.
3.02 For greater certainty in calculating Net Proceeds at any time,
each of the classes of Costs shall constitute a separate pool
from which all Costs deducted on any previous quarterly
calculation shall be removed and to which, in the case of all
classes of Costs, Costs of those classes recorded since the
commencement of commercial production (in the case of the first
quarterly calculation) or since the date of the last quarterly
calculation (in the case of any calculation subsequent to the
first quarterly calculation) shall be added.
3.03 If the application of credits to a pool of Costs results in a
negative balance in that pool of Costs, the amount of any
negative balance from a Cost pool shall be applied to reduce
the balance then remaining in pools itemized in subsection 3.01
of this Exhibit C in the order itemized.
4 ADJUSTMENTS AND VERIFICATION.
4.01 Payment of any Net Proceeds of Production Royalty by a
Participant in the Agreement shall not prejudice the right of
that Participant to protest the correctness of the statement
supporting the payment; provided, however, that all statements
presented to the Owner by that Participant for any quarter
<PAGE>
shall conclusively be presumed to be true and correct upon the
expiration of twelve (12) months following the end of the
quarter to which the statement relates, unless within that
twelve (12) month period that Participant gives notice to the
Owner making claim on the Owner for an adjustment to the
statement which will be reflected in subsequent payment of the
Net Proceeds of Production Royalty.
4.02 The Participant shall not adjust any statement in favor of
itself after the expiration of twelve (12) months following the
end of the quarter to which the statement relates.
4.03 The Owner shall be entitled upon notice to any Participant to
have an auditor selected by the Owner review all appropriate
records and perform an audit and provide the Owner with an
opinion that any statement delivered pursuant to subsection
1.01 of this Exhibit C in respect of any quarterly period
falling within the twelve (12) month period immediately
preceding the date of the Owner notice has been prepared in
accordance with this Agreement.
4.04 The time for giving the audit opinion contemplated in
subsection 4.03 of this Exhibit C shall not extend the time for
the taking of exception to and making claim on the Owner for
adjustment as provided in subsection 4.01 of this Exhibit C.
4.05 The cost of the auditor's opinion referred to in subsection
4.03 of this Exhibit C shall be solely for the account of the
Owner requesting the auditor's opinion unless the auditors
opinion confirms that the Owner received less than ninety-seven
percent (97%) of the Net Proceeds of Production Royalty due to
it during the year in question, in which event the Participant
shall reimburse the Owner for the reasonable costs of the
audit.
<PAGE>
EXHIBIT "D"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
INSURANCE
---------
The Manager shall, at all times while conducting Operations, comply
fully with the applicable worker's compensation laws and purchase, or
with the unanimous consent of the Management Committee provide through
self-insurance, protection for the Participants comparable to that
provided under standard form insurance policies for (i) comprehensive
public liability and property damage with combined limits of Two
Million Dollars for bodily injury and property damage; (ii) automobile
insurance with combined limits of Two Million Dollars; and (iii)
adequate and reasonable insurance against risk of fire and other risks
ordinarily insured against in similar operations. If the Manager
elects to self-insure, it shall charge to the Joint Account an amount
equal to the premium it would have paid had it secured and maintained
a policy or policies of insurance on a competitive bid basis in the
amount of such coverage. Each Participant may self-insure or purchase
for its own account such additional insurance as it deems necessary.
<PAGE>
EXHIBIT E
Area of Interest of the Petsite Venture
Idaho County, Idaho
Includes:
Sections 1, 2, 3, 4, 11, 12, 13, 14, 23, 24, 25, 26, Township 27
North, Range 7 East
Sections 6, 7, 18, 19, 30, Township 27 North, Range 8 East
Sections 25, 26, 27, 28, 33, 34, 35, 36, Township 28 North, Range 7
East
Sections 30, 31, Township 28 North, Range 8 East, Boise Meridian
<PAGE>
EXHIBIT "F"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
--------------- ----------- --------------- ----------
Eagle #30 423 Eagle #115 44043
Eagle #30 175127 Eagle #116 44044
Eagle #34 11164 Eagle #117 44045
Eagle #34 175129 Eagle #122 44051
Eagle #39 9325 Golden Eagle 175119
Eagle #39 175130 Golden Eagle #3 175121
Eagle #40 9326 Golden Eagle #4 175122
Eagle #40 175131 Golden Eagle #5 11113
Eagle #41 11169 Golden Eagle #6 11114
Eagle #41 175132 Golden Eagle #7 175123
Eagle #42 11170 Golden Eagle #12 11120
Eagle #42 175133 Golden Eagle #15 11123
Eagle #43 11171 Golden Eagle #16 11124
Eagle #50 11178 Golden Eagle #18 425
Eagle #54 420 Golden Eagle #18 175124
Eagle #54 175134 Golden Eagle #22F 11128
Eagle #98 9350 Golden Eagle #22F 175126
Eagle #99 9351 Golden Eagle #25 11131
Eagle #109 44037 Golden Eagle #26 11132
Eagle #110 44038 Golden Eagle #27 11133
<PAGE>
AGREEMENT TO ASSIGN INTEREST - BUFFALO GULCH CLAIMS
This agreement is dated as of the 11th day of December, 1995
and is made between:
IDAHO GOLD CORPORATION
OF THE FIRST PART AND:
IDAHO CONSOLIDATED METALS CORP.
OF THE SECOND PART
Whereas:
A. Idaho Gold Corporation ("Idaho Gold") has the right to acquire
certain mining interests known as the Buffalo Gulch Claims as more
particularly described in Schedule "A" hereto (the "Mining
Properties");
B. Idaho Consolidated Metals Corp. ("ICMC") wishes to acquire Idaho
Gold's interest in the Mining Properties together with all
geological information (including core or drill cutting),
metallurgical lab and field test results, mine design and reserve
calculations and pre-feasibility and feasibility studies relating
to the Mining Interests and in the possession or under the control
of Idaho Gold (the "Data");
NOW THEREFORE this Agreement witnesses that in consideration of the
mutual covenants and agreements herein contained and subject to the
terms and conditions hereafter set out, the parties hereto agree as
follows:
1. "CLOSING DATE" and "CLOSING" - The term "Closing Date" as used
throughout this Agreement shall mean July 19, 1996 or such other
date as is agreed to by the parties. The term "Closing" as used
throughout this Agreement shall mean the completion of the
transactions herein contemplated which shall occur at 10:00 a.m.
Vancouver time on the Closing Date or such other time on the
Closing Date as agreed to by the parties.
2. PURCHASE AND SALE OF ASSIGNED INTERESTS - Upon the subject to the
terms and conditions set forth in this Agreement, Idaho Gold
agrees to sell, assign and transfer to ICMC, and ICMC agrees to
purchase from Idaho Gold, on the Closing Date all interest of
Idaho Gold in and to the Mining Properties and the Data
(collectively, the "Assigned Interests"), subject to the
reservation by Idaho Gold of a net smelter return royalty (the
"Royalty") on the Mining Properties on the terms specified in
Schedule "B" hereto.
<PAGE>
3. CONSIDERATION FOR ASSIGNED INTERESTS - As consideration for the
transfer of the Assigned Interests, ICMC:
a) will issue to Idaho Gold 120,000 common shares in the capital
of ICMC, 60,000 of which shares will be issued to Idaho Gold
on the Closing Date and the balance of which will be issued to
Idaho Gold one year after the Closing Date.
b) will incur expenditures (as defined in clause 3(f)(ii) below)
of not less than US$310,000 in the aggregate on or before the
fifth anniversary of the Closing Date of the exploration and
development of the Mining Properties, with the following
amounts being incurred by the dates indicated below:
i) US$30,000 on or before the first anniversary of the
Closing Date;
ii) an aggregate of US$70,000 on or before the second
anniversary of the Closing Date;
iii) an aggregate of US$150,000 on or before the third
anniversary of the Closing Date; and
iv) an aggregate of US$230,000 on or before the fourth
anniversary of the Closing Date;
c) will replace all bonds relating to the Mining Properties
currently lodged by or on behalf of Idaho Gold with any
regulatory authorities;
d) will be solely responsible for all costs of environmental
compliance associated with its exploration and mining
operations on the Mining Properties or with the termination
thereof, and all costs incurred in connection with
environmental compliance, reclamation and long-term care and
monitoring of the Mining Properties arising out of activities
at any time by any person and its predecessors in ownership of
the Mining Properties;
e) will consent to the reservation by Idaho Gold of the Royalty;
and
f) subject to paragraph 4, will grant to Idaho Gold an option
(the "Option") to acquire a 49% working interest in the Mining
Properties upon the following terms:
i) the term of the Option will be five years from the
Closing Date;
<PAGE>
ii) Idaho Gold may exercise the Option by delivering a
notice (the "Option Notice") to ICMC to that effect
and, within 30 days after delivery of the Option
Notice, a payment to ICMC equal to 115% of ICMC's
expenditures on the Mining Properties from January 1,
1996 to the date of delivery of such payment.
"Expenditures" shall mean all cash, expenses,
obligations and liabilities, other than for personal
injury or property damage, of whatever kind or nature
spent or incurred directly or indirectly in connection
with the exploration, development or equipping of the
Mining Properties for commercial production including
an overhead fee not to exceed 8% of all expenditures
(other than the overhead fees);
iii) if Idaho Gold exercises the Option, ICMC and Idaho Gold
will enter into a joint venture agreement which will
provide that (A) each party will fund its proportionate
share of ongoing expenditures on the Mining Properties
or have its interest diluted; (B) a management
committee will approve all operations and activities of
the joint venture and will consist of two members from
each of ICMC and Idaho Gold, with ICMC to hold the
casting vote so long as it retains not less than a 51%
interest in the joint venture; (C) ICMC will have the
right to be operator of the joint venture so long as it
retains not less than a 51% interest in the joint
venture;
iv) during the term of the Option, ICMC shall keep the
Mining Properties free and clear of all liens and
encumbrances arising from its operations and in good
standing by the doing and filing, or payment in lieu
thereof, of all necessary assessment work and payment
of all taxes and other charges required to be paid and
by the doing of all other acts and things and the
making of all other payments required to be made;
v) ICMC will, as of January 1, 1996 and during the term of
the Option, assume, observe and perform each and every
covenant and agreement made or given by Idaho Gold or
its predecessor in title to be observed and performed
under those contracts and agreements listed in Schedule
"C" hereto, including the making of all cash and share
payments and the performance of all work commitments on
the Mining Properties. ICMC may re-negotiate any of
the contracts and agreements listed in Schedule "C" to
decrease or eliminate the payment obligations
thereunder;
<PAGE>
vi) if, during the term of the Option, ICMC elects to
relinquish one or more of the Mining Properties, it
will so notify Idaho Gold and, if, within 60 days of
receipt of such notice, Idaho Gold provides a notice to
ICMC to the effect that Idaho Gold wants the particular
Mining Property re-transferred to it, ICMC will assign
that Mining Property, in good standing, to Idaho Gold
upon receipt from Idaho Gold of US$1.00. Notwith-
standing the foregoing ICMC may not elect to relinquish
any part of the Mining Properties during the first year
of the term of the Option;
vii) if ICMC should fail to make any of the payments or
carry out any of the obligations referred to in clauses
(iv) or (v) above, it shall be deemed to have made an
election to relinquish the Mining Property(ies)
involved;
viii) an election or deemed election to relinquish one or
more of the Mining Properties will not relieve ICMC of
its obligations pursuant to paragraph 3(d); and
ix) if Idaho Gold exercises the Option, the Royalty will be
terminated.
4. RIGHT TO ACQUIRE OPTION - ICMC will have the right to acquire
Idaho Gold's right to the Option by payment to Idaho Gold of Cdn.
$300,000 at any time up to 21 days after receipt by ICMC of the
Option Notice from Idaho Gold.
5. ASSIGNMENTS BY ICMC - ICMC agrees that it will not transfer or
assign any part of its interest in the Assigned Interests without
the prior written consent of Idaho Gold. It shall be a condition
precedent to any assignment that the assignee of the interest
being transferred agrees in writing to be bound by the terms of
this Agreement, the Option and the Royalty.
6. CLOSING - On the Closing Date, the parties will table the
following documents and instruments and take the following steps:
a) ICMC will table for delivery to Idaho Gold a share certificate
for 60,000 common shares in the capital of ICMC registered in
the name of Idaho Gold;
b) ICMC will table for delivery to Idaho Gold evidence
satisfactory to Idaho Gold that the bonds referred to in
paragraph 3 (c) have been replaced by ICMC;
<PAGE>
c) Idaho Gold will table for delivery to ICMC duly executed
transfers, as prepared by ICMC's solicitors, sufficient to
convey to ICMC the Assigned Interests to ICMC;
d) each party will execute and table for delivery to the other
Option agreement;
e) ICMC will execute and table for delivery to Idaho Gold an
agreement reserving the Royalty to Idaho Gold; and
f) each party will execute and table for delivery to the other
party all such other documents and instruments reasonably
required to effectively consummate the transactions
contemplated herein.
"Closing" will occur upon all documents set out above being
tabled as required and the closing conditions being satisfied
or waived by the parties.
7. JOINT CONDITION PRECEDENT TO CLOSING - The respective obligations
of each of the parties hereto to complete the Closing shall be
subject to receipt of all governmental and third party approvals
and consents required for the completion of the purchase and sale
transaction. This condition may be waived by ICMC and Idaho Gold
acting together. ICMC hereby acknowledges that Arctic Fox Ltd.
and Gray Estates Company have not consented to the transfer
contemplated herein and that such consent may not be received by
Closing, if at all. Idaho Gold and ICMC hereby waive the receipt
of the consent by Arctic Fox Ltd. and Gray Estates Company as a
condition precedent to the completion of the purchase and sale
transaction contemplated herein.
8. TIME OF ESSENCE - Time is and will be of the essence of each and
every provision of this Agreement.
9. ENTIRE AGREEMENT - This Agreement contains the whole agreement
between Idaho Gold and ICMC in respect of the subject matter
hereof and supersedes and replaces the letter of understanding
dated December 11, 1995 and all prior negotiations, communications
and correspondence. There are no warranties, representations,
terms, conditions or collateral agreements, express or implied,
statutory or otherwise, other than as expressly set out in this
Agreement.
10. ENUREMENT - This Agreement will enure to the benefit of and be
binding upon Idaho Gold and ICMC and their respective successors,
liquidators and permitted assigns.
11. GOVERNING LAW - This Agreement shall be construed and interpreted
in accordance with the laws of Idaho.
<PAGE>
12. NOTICES - All notices, payments and other required communications
("Notices") to the parties shall be in writing and shall be
addressed respectively as follows:
If to Idaho Gold:
c/o Bema Gold Corporation
1400 - 510 Burrard Street
Vancouver, B.C. V6C 3A8
Fax No.: 604-681-6209
Attention: Mr. Roger Richer
If to ICMC:
ICMC
P.O. Box 1124
Lewiston, Idaho 83501
Fax No.: 208-746-6678
Attention: Mr. Wilf Struck
All Notices shall be given:
i) by personal delivery to the party by leaving a copy at the
place specified for notice with a receptionist or an
apparently responsible individual, or
ii) by electronic facsimile communication.
All Notices shall be effective and shall be deemed delivered:
iii) if by personal delivery on the date of delivery if
delivered during normal business hours, and if not
delivered during normal business hours, on the next
business day following delivery, and
iv) if by electronic communication, on the next business day
following receipt of the electronic communication,
provided that a positive transmission report is generated
by the sender's facsimile machine.
13. REGULATORY APPROVAL - The obligations of the parties hereto is
subject to the acceptance for filing of this Agreement by the
Vancouver Stock Exchange.
<PAGE>
14. COUNTERPARTS - This Agreement may be executed in counterparts with
the same effect as if both parties had signed the same document,
and both such counterparts will be construed together and will
constitute one and the same instruments. The execution of this
Agreement will not become effective until counterparts hereof have
been executed by both parties hereto and executed copy delivered
to each party hereto. Such delivery may be made by facsimile
transmission of the execution page or pages hereof to the other
party by the party signing the particular counterpart, provided
that forthwith after such facsimile transmission, an originally
executed execution page or pages is forwarded by prepaid express
courier to the other party by the party signing the particular
counterpart.
IN WITNESS WHEREOF the parties have executed and delivered this
Agreement as of the day and year first above written.
IDAHO GOLD CORPORATION
Per: /s/ Roger Richer
-------------------------
IDAHO CONSOLIDATED METALS CORP.
Per: /s/ Wilf Struck
-------------------------
Vice President
<PAGE>
SCHEDULE "A"
BUFFALO GULCH CLAIMS
Claim Name BLM# IMC#
---------- ---- -----
A 46 95056
A 48 95058
A 49 95059
A 50 95060
A 53 95063
A 54 95064
A 55 95065
A 56 95066
A 58 95068
A 65 95075
A 66 95076
A 67 95077
A 68 95078
A 69 95079
A 70 95080
A 71 95081
A 72 95082
A 73 95083
A 74 95084
A 75 95085
A 80 95090
A 81 95091
A 82 95092
A 83 95093
A 84 95094
A 85 95095
A 86 95096
A 87 95097
A 88 95098
A 89 95099
A 90 95100
A 91 95101
A 92 95102
A 93 95103
A 94 95104
A 95 95105
A 96 95106
A 97 95107
A 98 95108
A 99 95109
<PAGE>
Claim Name BLM# IMC#
---------- ---- -----
Black Bear 1 72588 297158
Black Bear 2 72589 297159
Black Bear 3 72590 297160
Black Bear 4 72591 297161
Black Bear 5 72592 297162
Black Bear 6 72593 297163
EC 1 85868
EC 2 85869
EC 3 85870
EC 4 85871
EC 5 85872
EC 6 85873
EC 7 85874
EC 8 85875
EC 9 85876
EC 10 85877
EC 12 85879
EC 14 85881
EC 16 85883
EC 18 85885
EC 20 85887
EC 22 85889
EC 24 85891
EC 57 85892
EC 58 85893
EC 120 85894
EC 121 85895
EC 125 85897
EC 126 85898
Whiskey Jack 1 121621
Whiskey Jack 2 121622
Whiskey Jack 3 121623
Whiskey Jack 4 121624
<PAGE>
SCHEDULE "B" - BUFFALO GULCH CLAIMS
NET SMELTER RETURNS
1. The royalty which may be payable to Idaho Gold Corporation
(hereinafter called the "Payee") pursuant to paragraph 3(d) of the
Assignment of Interests Agreement by Idaho Consolidated Metals
Corp. (hereinafter called the "Payor") will be 3% of 100% of the
Net Smelter Revenue (as hereinafter defined) and will be
calculated and paid to the Payee in accordance with the terms of
this Schedule "B". Terms having defined meanings in the Agreement
and used herein will have the same meaning in this Schedule as
assigned to them in the Assignment of Interests Agreement unless
otherwise specified or the context otherwise requires.
2. The Net Smelter Revenue will be calculated on a calendar quarterly
basis and will, subject to paragraph 7 of this Schedule "B", be
equal to Gross Revenue less Permissible Deductions for such
quarter.
3. The following words will have the following meanings:
(a) "Gross Revenue" means the aggregate of the following amounts
received in each quarterly period following the commencement
of commercial production from the Mining Properties:
(i) the revenue received by the Payor from arm's length
purchasers of all Product;
(ii) the fair market value of all Products sold by the Payor
in such period to persons not dealing at arm's length
with the Payor; and
(iii) any proceeds of insurance on Product;
(b) "ORE" means all materials from the Mining Properties, the
nature and composition of which justifies either:
(i) mining or removing from place and shipping and selling
such material, or delivering such material to a
processing plant for physical or chemical treatment; or
(ii) leaching such material in place;
(c) "PERMISSIBLE DEDUCTIONS" means the aggregate of the following
charges (to the extent that they are not deducted by any
purchaser in computing payment) that are paid in each
quarterly period:
<PAGE>
(i) sales charges levied by any sales agent on the sale of
Product;
(ii) transportation costs for Product from the Mining
Properties to the place of beneficiation, processing or
treatment and thence to the place of delivery of
Product to a purchaser thereof, including shipping,
freight, handling and forwarding expenses;
(iii) all costs, expenses and charges of any nature
whatsoever which are either paid or incurred by the
Payor in connection with refinement or beneficiation of
Product after leaving the Property, including all
weighing, sampling, assaying and representation costs,
metal losses, any umpire charges and any penalties
charged by the processor, refinery or smelter; and
(iv) all insurance costs on Product, and any government
royalties, production taxes, severance taxes and sales
and other taxes levied on Ore, Product or on the
production or value thereof (other than any Federal or
Provincial taxes levied on the income or profit of the
Payor);
(d) "Product" means:
(i) all Ore shipped and sold prior to treatment; and
(ii) all concentrates, precipitates and products produced
from Ore.
4. The payment on account of the royalty for each calendar quarter
will be calculated and paid within 60 days after the end of each
calendar quarter. Smelter settlement sheets, if any, and a
statement setting forth calculations in sufficient detail to show
the payment's derivation (the "Statement") must be submitted with
the payment.
5. In the event that final amounts required for the calculation of
the payment on account of the royalty are not available within the
time period referred to in section 4 of the Schedule "B", then
provisional amounts will be estimated and such payment will be
paid on the basis of this provisional calculation. Positive or
negative adjustments will be made to the payment on account of the
royalty for the succeeding quarter.
6. All payments on account of the royalty will be considered final
and in full satisfaction of all obligations of the Payor with
respect thereto, unless the Payee delivers to the Payor a written
<PAGE>
notice (the "Objection Notice") describing and setting forth a
specific objection to the calculation thereof within 60 days after
receipt by the Payee of the Statement. If the Payee objects to a
particular Statement as herein provided, the Payee will, for a
period of 60 days after the Payor's receipt of such Objection
Notice, have the right, upon reasonable notice and at reasonable
times, to have the Payor's accounts and records relating to the
calculation of the payment in question audited by the auditors of
the Payee. If such audit determines that there has been a
deficiency or an excess in the payment made to the Payee, such
deficiency or excess will be resolved by adjusting the next
quarterly payment due hereunder. The payee will pay all the costs
and expenses of such audit unless a deficiency of 5% or more of
the amount due is determined to exist. The Payor will pay the
costs and expenses of such audit if a deficiency of 5% or more of
the amount due is determined to exist. Failure on the part of the
Payee to make a claim against the Payor for adjustment in such 60
day period by delivery of an Objection Notice will conclusively
establish the correctness and sufficiency of the Statement and
payment on account of the royalty for such quarter.
7. All profits and losses resulting from the Payor engaging in any
commodity futures trading, option trading, metals trading, gold
loans or any combination thereof, and any other hedging
transactions with respect to Product which is a precious metal
(collectively, "Hedging Transactions") are specifically excluded
from calculations of the payments on account of the royalty
pursuant to this Schedule "B" (it being the intent of the parties
that the Payor will have the unrestricted right to market and sell
Product to third parties in any manner it chooses and that the
Payee will not have any right to participate in such marketing
activities or to share in any profits or losses therefrom. All
Hedging Transactions by the Payor and all profits or losses
associated therewith, if any, will be solely for the Payor's
account. The amount of Net Smelter Revenue derived from all
Product subject to Hedging Transactions by the Payor will be
determined pursuant to the provision of this paragraph 7 and not
paragraph 2. As to precious metals subject to Hedging
Transactions by the Payor, Net Smelter Revenue will be determined
without reference to Hedging Transactions and will be determined
by using, for gold, the quarterly average price of gold, which
will be calculated by dividing the sum of all London Bullion
Market Association P.M. Gold Fix prices reported for the calendar
quarter in question by the number of days for which such prices
were quoted. Any Product subject to Hedging Transactions will be
deemed to be sold, and revenues received therefrom, only on the
date of the final settlement of the amount of refined Product
allocated to the account of the Payor by a third party refinery in
respect of such transactions. Furthermore, the Payor will have no
obligation to fulfill any futures contracts, forward sales, gold
loans or other Hedging Transactions which the Payor may hold with
Product.
<PAGE>
8. If the royalty becomes payable to two or more parties, those
parties will appoint, and will deliver to the Payor a document
executed by all of those parties appointing, a single agent or
trustee of all such parties to whom the Payor will make all
payments on accounts of the royalty. The Payor will have no
responsibility as to the division of the royalty payments amount
such parties, and if the Payor makes a payment or payments on
account of the royalty in accordance with the provisions of this
paragraph 8, it will be conclusively deemed that such payment or
payments have been received by the Payee. All charges of the
agent or trustee will be borne solely by the parties received
payments on account of the royalty.
9. Notwithstanding the foregoing, the royalty payable shall be
limited to US$3,000,000.
<PAGE>
AGREEMENT TO ASSIGN INTEREST - DEADWOOD CLAIMS
This agreement is dated as of the 11th day of December, 1995
and is made between:
IDAHO GOLD CORPORATION
OF THE FIRST PART AND:
IDAHO CONSOLIDATED METALS CORP.
OF THE SECOND PART
Whereas:
A. Idaho Gold Corporation ("Idaho Gold") owns or has the right to
acquire certain mining interests known as the Deadwood Claims as
more particularly described in Schedule "A" hereto (the "Mining
Properties");
B. Idaho Consolidated Metals Corp. ("ICMC") wishes to acquire Idaho
Gold's interest in the Mining Properties together with all
geological information (including core or drill cutting),
metallurgical lab and field test results, mine design and reserve
calculations and pre-feasibility and feasibility studies relating
to the Mining Interests and in the possession or under the control
of Idaho Gold (the "Data");
NOW THEREFORE this Agreement witnesses that in consideration of the
mutual covenants and agreements herein contained and subject to the
terms and conditions hereafter set out, the parties hereto agree as
follows:
1. "CLOSING DATE" and "CLOSING" - The term "Closing Date" as used
throughout this Agreement shall mean July 19, 1996 or such other
date as is agreed to by the parties. The term "Closing" as used
throughout this Agreement shall mean the completion of the
transactions herein contemplated which shall occur at 10:00 a.m.
Vancouver time on the Closing Date or such other time on the
Closing Date as agreed to by the parties.
2. PURCHASE AND SALE OF ASSIGNED INTERESTS - Upon and subject to the
terms and conditions set forth in this Agreement, Idaho Gold
agrees to sell, assign and transfer to ICMC, and ICMC agrees to
purchase from Idaho Gold, on the Closing Date all interest of
Idaho Gold in and to the Mining Properties and the Data
(collectively, the "Assigned Interests"), subject to the
reservation by Idaho Gold of a net smelter return royalty (the
"Royalty") on the Mining Properties on the terms specified in
Schedule "B" hereto.
<PAGE>
3. CONSIDERATION FOR ASSIGNED INTERESTS - As consideration for the
transfer of the Assigned Interests, ICMC:
a) will issue to Idaho Gold 70,000 common shares in the capital
of ICMC, 35,000 of which shares will be issued to Idaho Gold
on the Closing Date and the balance of which will be issued to
Idaho Gold one year after the Closing Date.
b) will incur expenditures (as defined in clause 3(f)(ii) below)
of not less than US$135,000 in the aggregate on or before the
fifth anniversary of the Closing Date of the exploration and
development of the Mining Properties, with the following
amounts being incurred by the dates indicated below:
i) US$15,000 on or before the first anniversary of the
Closing Date;
ii) an aggregate of US$30,000 on or before the second
anniversary of the Closing Date;
iii) an aggregate of US$65,000 on or before the third
anniversary of the Closing Date; and
iv) an aggregate of US$100,000 on or before the fourth
anniversary of the Closing Date;
c) will replace all bonds relating to the Mining Properties
currently lodged by or on behalf of Idaho Gold with any
regulatory authorities;
d) will be solely responsible for all costs of environmental
compliance associated with its exploration and mining
operations on the Mining Properties or with the termination
thereof, and all costs incurred in connection with
environmental compliance, reclamation and long-term care and
monitoring of the Mining Properties arising out of activities
at any time by any person and its predecessors in ownership of
the Mining Properties;
e) will consent to the reservation by Idaho Gold of the Royalty;
and
f) subject to paragraph 4, will grant to Idaho Gold an option
(the "Option") to acquire a 49% working interest in the Mining
Properties upon the following terms:
i) the term of the Option will be five years from the
Closing Date;
<PAGE>
ii) Idaho Gold may exercise the Option by delivering a
notice (the "Option Notice") to ICMC to that effect
and, within 30 days after delivery of the Option
Notice, a payment to ICMC equal to 115% of ICMC's
expenditures on the Mining Properties from January 1,
1996 to the date of delivery of such payment.
"Expenditures" shall mean all cash, expenses,
obligations and liabilities, other than for personal
injury or property damage, of whatever kind or nature
spent or incurred directly or indirectly in connection
with the exploration, development or equipping of the
Mining Properties for commercial production including
an overhead fee not to exceed 8% of all expenditures
(other than the overhead fees);
iii) if Idaho Gold exercises the Option, ICMC and Idaho Gold
will enter into a joint venture agreement which will
provide that (A) each party will fund its proportionate
share of ongoing expenditures on the Mining Properties
or have its interest diluted; (B) a management
committee will approve all operations and activities of
the joint venture and will consist of two members from
each of ICMC and Idaho Gold, with ICMC to hold the
casting vote so long as it retains not less than a 51%
interest in the joint venture; (C) ICMC will have the
right to be operator of the joint venture so long as it
retains not less than a 51% interest in the joint
venture;
iv) during the term of the Option, ICMC shall keep the
Mining Properties free and clear of all liens and
encumbrances arising from its operations and in good
standing by the doing and filing, or payment in lieu
thereof, of all necessary assessment work and payment
of all taxes and other charges required to be paid and
by the doing of all other acts and things and the
making of all other payments required to be made;
v) ICMC will, as of January 1, 1996 and during the term of
the Option assume, observe and perform each and every
covenant and agreement made or given by Idaho Gold or
its predecessor in title to be observed and performed
under those contracts and agreements listed in Schedule
"C" hereto, including the making of all cash and share
payments and the performance of all work commitments on
the Mining Properties. ICMC may re-negotiate any of
the contracts and agreements listed in Schedule "C" to
decrease or eliminate the payment obligations
thereunder;
<PAGE>
vi) if, during the term of the Option, ICMC elects to
relinquish one or more of the Mining Properties, it
will so notify Idaho Gold and, if, within 60 days of
receipt of such notice, Idaho Gold provides a notice to
ICMC to the effect that Idaho Gold wants the particular
Mining Property re-transferred to it, ICMC will assign
that Mining Property, in good standing, to Idaho Gold
upon receipt from Idaho Gold of US$1.00. Notwith-
standing the foregoing ICMC may not elect to relinquish
any part of the Mining Properties during the first year
of the term of the Option;
vii) if ICMC should fail to make any of the payments or
carry out any of the obligations referred to in clauses
(iv) or (v) above, it shall be deemed to have made an
election to relinquish the Mining Property(ies)
involved;
viii) an election or deemed election to relinquish one or
more of the Mining Properties will not relieve ICMC of
its obligations pursuant to paragraph 3(d);
ix) if Idaho Gold exercises the Option, the Royalty will be
terminated.
4. RIGHT TO ACQUIRE OPTION - ICMC will have the right to acquire
Idaho Gold's right to the Option by payment to Idaho Gold of Cdn.
$100,000 at any time up to 21 days after receipt by ICMC of the
Option Notice from Idaho Gold.
5. ASSIGNMENTS BY ICMC - ICMC agrees that it will not transfer or
assign any part of its interest in the Assigned Interest without
the prior written consent of Idaho Gold. It shall be a condition
precedent to any assignment that the assignee of the interest
being transferred agrees in writing to be bound by the terms of
this Agreement, the Option and the Royalty.
6. CLOSING - On the Closing Date, the parties will table the
following documents and instruments and take the following steps:
a) ICMC will table for delivery to Idaho Gold a share certificate
for 35,000 common shares in the capital of ICMC registered in
the name of Idaho Gold;
b) ICMC will table for delivery to Idaho Gold evidence
satisfactory to Idaho Gold that the bonds referred to in
paragraph 3 (c) have been replaced by ICMC;
<PAGE>
c) Idaho Gold will table for delivery to ICMC duly executed
transfers, as prepared by ICMC's solicitors, sufficient to
convey to ICMC the Assigned Interests to ICMC;
d) each party will execute and table for delivery to the other
the Option agreement;
e) ICMC will execute and table for delivery to Idaho Gold an
agreement reserving the Royalty to Idaho Gold; and
f) each party will execute and table for delivery to the other
party all such other documents and instruments reasonably
required to effectively consummate the transactions
contemplated herein.
"Closing" will occur upon all documents set out above being
tabled as required and the closing conditions being satisfied
or waived by the parties.
7. JOINT CONDITION PRECEDENT TO CLOSING - The respective obligations
of each of the parties hereto to complete the Closing shall be
subject to receipt of all governmental and third party approvals
and consents required for the completion of the purchase and sale
transaction. This condition may be waived by ICMC and Idaho Gold
acting together.
8. ACKNOWLEDGMENT AND AGREEMENT - ICMC hereby acknowledges receipt of
a copy of the letter dated June 6, 1996 from Woodburn and Wedge,
Attorneys to Idaho Gold, addressed to Arctic Fox Ltd. and Gray
Estates Company discussing the history of the Mining Properties.
ICMC agrees with the analysis set out in that letter and, more
specifically, agrees that neither Arctic Fox Ltd. nor Gray Estates
Company has an operating right of first refusal with respect to
the Mining Properties.
9. TIME OF ESSENCE - Time is and will be of the essence of each and
every provision of this Agreement.
10. ENTIRE AGREEMENT - This Agreement contains the whole agreement
between Idaho Gold and ICMC in respect of the subject matter
hereof and supersedes and replaces the letter of understanding
dated December 11, 1995 and all prior negotiations, communications
and correspondence. There are no warranties, representations,
terms, conditions or collateral agreements, express or implied,
statutory or otherwise, other than as expressly set out in this
Agreement.
11. ENUREMENT - This Agreement will enure to the benefit of and be
binding upon Idaho Gold and ICMC and their respective successors,
liquidators and permitted assigns.
12. GOVERNING LAW - This Agreement shall be construed and interpreted
in accordance with the laws of Idaho.
<PAGE>
13. NOTICES - All notices, payments and other required communications
("Notices") to the parties shall be in writing and shall be
addressed respectively as follows:
If to Idaho Gold:
c/o Bema Gold Corporation
1400 - 510 Burrard Street
Vancouver, B.C. V6C 3A8
Fax No.: 604-681-6209
Attention: Mr. Roger Richer
If to ICMC:
ICMC
P.O. Box 1124
Lewiston, Idaho 83501
Fax No.: 208-746-6678
Attention: Mr. Wilf Struck
All Notices shall be given:
i) by personal delivery to the party by leaving a copy at the
place specified for notice with a receptionist or an
apparently responsible individual, or
ii) by electronic facsimile communication.
All Notices shall be effective and shall be deemed delivered:
iii) if by personal delivery, on the date of delivery if
delivered during normal business hours, and if not
delivered during normal business hours, on the next
business day following delivery, and
iv) if by electronic communication, on the next business day
following receipt of the electronic communication,
provided that a positive transmission report is generated
by the sender's facsimile machine.
14. REGULATORY APPROVAL - The obligations of the parties hereto is
subject to the acceptance for filing of this Agreement by the
Vancouver Stock Exchange.
<PAGE>
15. COUNTERPARTS - This Agreement may be executed in counterparts with
the same effect as if both parties had signed the same document,
and both such counterparts will be construed together and will
constitute one and the same instruments. The execution of this
Agreement will not become effective until counterparts hereof have
been executed by both parties hereto and executed copy delivered
to each party hereto. Such delivery may be made by facsimile
transmission of the execution page or pages hereof to the other
party by the party signing the particular counterpart, provided
that forthwith after such facsimile transmission, an originally
executed execution page or pages is forwarded by prepaid express
courier to the other party by the party signing the particular
counterpart.
IN WITNESS WHEREOF the parties have executed and delivered this
Agreement as of the day and year first above written.
IDAHO GOLD CORPORATION
Per: /s/ Roger Richer
----------------------------
IDAHO CONSOLIDATED METALS CORP.
Per: /s/ Wilf Struck
----------------------------
Vice President
<PAGE>
SCHEDULE "A"
DEADWOOD CLAIMS
Claim Name BLM# IMC#
---------- ---- -----
Black Lady 1 28654
Black Lady 2 28655
Hidden Valley 1 28656
Hidden Valley 2 28657
Hidden Valley 3 28658
Jon 1 28982
Jon 2 28983
Jon 3 28984
Jon 4 28985
Jon 5 28986
Jon 6 28987
Jon 7 28988
Jon 11 28989
Jon 12 28990
Jon 13 18991
Jon 14 28992
Jon 15 28993
Jon 16 28994
Jon 17 28995
Jon 18 28996
Jon 25 28997
Jon 26 28998
RL 9A 105324 321519
RL 10 105325 321432
RL 11 105326 321433
RL 11A 105327 321520
RL 22 105338 321444
RL 24 105340 321446
RL 25 105341 321447
RL 26 105342 321448
RL 27 105343 321449
RL 28 105344 321450
RL 28A 105345 321521
RL 29 105346 321451
RL 30 105347 321452
RL 30A 105348 321522
RL 31 105349 321453
Spec 10 28969
Spec 11 28970
Spec 12 28971
Spec 13 28972
Spec 23 28973
Spec 24 28974
Spec 25 28975
Spec 26 28976
Spec 27 28977
Spec 28 28978
Spec 29 28979
Spec 30 28980
Spec 34 28981
Tip Top 1 28662
Zenith 28661
<PAGE>
SCHEDULE "B" - DEADWOOD CLAIMS
NET SMELTER RETURNS
1. The royalty which may be payable to Idaho Gold Corporation
(hereinafter called the "Payee") pursuant to paragraph 3(d) of the
Assignment of Interests Agreement by Idaho Consolidated Metals
Corp. (hereinafter called the "Payor") will be 3% of 100% of the
Net Smelter Revenue (as hereinafter defined) and will be
calculated and paid to the Payee in accordance with the terms of
this Schedule "B". Terms having defined meanings in the Agreement
and used herein will have the same meaning in this Schedule as
assigned to them in the Assignment of Interests Agreement unless
otherwise specified or the context otherwise requires.
2. The Net Smelter Revenue will be calculated on a calendar quarterly
basis and will, subject to paragraph 7 of this Schedule "B", be
equal to Gross Revenue less Permissible Deductions for such
quarter.
3. The following words will have the following meanings:
(a) "Gross Revenue" means the aggregate of the following amounts
received in each quarterly period following the commencement
of commercial production from the Mining Properties:
(i) the revenue received by the Payor from arm's length
purchasers of all Product;
(ii) the fair market value of all Products sold by the Payor
in such period to persons not dealing at arm's length
with the Payor; and
(iii) any proceeds of insurance on Product;
(b) "ORE" means all materials from the Mining Properties, the
nature and composition of which justifies either:
(i) mining or removing from place and shipping and selling
such material, or delivering such material to a
processing plant for physical or chemical treatment; or
(ii) leaching such material in place;
(c) "PERMISSIBLE DEDUCTIONS" means the aggregate of the following
charges (to the extent that they are not deducted by any
purchaser in computing payment) that are paid in each
quarterly period:
<PAGE>
(i) sales charges levied by any sales agent on the sale of
Product;
(ii) transportation costs for Product from the Mining
Properties to the place of beneficiation, processing or
treatment and thence to the place of delivery of
Product to a purchaser thereof, including shipping,
freight, handling and forwarding expenses;
(iii) all costs, expenses and charges of any nature
whatsoever which are either paid or incurred by the
Payor in connection with refinement or beneficiation of
Product after leaving the Property, including all
weighing, sampling, assaying and representation costs,
metal losses, any umpire charges and any penalties
charged by the processor, refinery or smelter; and
(iv) all insurance costs on Product, and any government
royalties, production taxes, severance taxes and sales
and other taxes levied on Ore, Product or on the
production or value thereof (other than any Federal or
Provincial taxes levied on the income or profit of the
Payor);
(d) "Product" means:
(i) all Ore shipped and sold prior to treatment, and
(ii) all concentrates, precipitates and products produced
from Ore.
4. The payment on account of the royalty for each calendar quarter
will be calculated and paid within 60 days after the end of each
calendar quarter. Smelter settlement sheets, if any, and a
statement setting forth calculations in sufficient detail to show
the payment's derivation (the "Statement") must be submitted with
the payment.
5. In the event that final amounts required for the calculation of
the payment on account of the royalty are not available within the
time period referred to in section 4 of the Schedule "B", then
provisional amounts will be estimated and such payment will be
paid on the basis of this provisional calculation. Positive or
negative adjustments will be made to the payment on account of the
royalty for the succeeding quarter.
6. All payments on account of the royalty will be considered final
and in full satisfaction of all obligations of the Payor with
respect thereto, unless the Payee delivers to the Payor a written
<PAGE>
notice (the "Objection Notice") describing and setting forth a
specific objection to the calculation thereof within 60 days after
receipt by the Payee of the Statement. If the Payee objects to a
particular Statement as herein provided, the Payee will, for a
period of 60 days after the Payor's receipt of such Objection
Notice, have the right, upon reasonable notice and at reasonable
times, to have the Payor's accounts and records relating to the
calculation of the payment in question audited by the auditors of
the Payee. If such audit determines that there has been a
deficiency or an excess in the payment made to the Payee, such
deficiency or excess will be resolved by adjusting the next
quarterly payment due hereunder. The payee will pay all the costs
and expenses of such audit unless a deficiency of 5% or more of
the amount due is determined to exist. The Payor will pay the
costs and expenses of such audit if a deficiency of 5% or more of
the amount due is determined to exist. Failure on the part of the
Payee to make a claim against the Payor for adjustment in such 60
day period by delivery of an Objection Notice will conclusively
establish the correctness and sufficiency of the Statement and
payment on account of the royalty for such quarter.
7. All profits and losses resulting from the Payor engaging in any
commodity futures trading, option trading, metals trading, gold
loans or any combination thereof, and any other hedging
transactions with respect to Product which is a precious metal
(collectively, "Hedging Transactions") are specifically excluded
from calculations of the payments on account of the royalty
pursuant to this Schedule "B" (it being the intent of the parties
that the Payor will have the unrestricted right to market and sell
Product to third parties in any manner it chooses and that the
Payee will not have any right to participate in such marketing
activities or to share in any profits or losses therefrom. All
Hedging Transactions by the Payor and all profits or losses
associated therewith, if any, will be solely for the Payor's
account. The amount of Net Smelter Revenue derived from all
Product subject to Hedging Transactions by the Payor will be
determined pursuant to the provisions of this paragraph 7 and not
paragraph 2. As to precious metals subject to Hedging
Transactions by the Payor, Net Smelter Revenue will be determined
without reference to Hedging Transactions and will be determined
by using, for gold, the quarterly average price of gold, which
will be calculated by dividing the sum of all London Bullion
Market Association P.M. Gold Fix prices reported for the calendar
quarter in question by the number of days for which such prices
were quoted. Any Product subject to Hedging Transactions will be
deemed to be sold, and revenues received therefrom, only on the
date of the final settlement of the amount of refined Product
allocated to the account of the Payor by a third party refinery in
respect of such transactions. Furthermore, the Payor will have no
obligation to fulfill any futures contracts, forward sales, gold
loans or other Hedging Transactions which the Payor may hold with
Product.
<PAGE>
8. If the royalty becomes payable to two or more parties, those
parties will appoint, and will deliver to the Payor a document
executed by all of those parties appointing, a single agent or
trustee of all such parties to whom the Payor will make all
payments on accounts of the royalty. The Payor will have no
responsibility as to the division of the royalty payments amount
such parties, and if the Payor makes a payment or payments on
account of the royalty in accordance with the provisions of this
paragraph 8, it will be conclusively deemed that such payment or
payments have been received by the Payee. All charges of the
agent or trustee will be borne solely by the parties received
payments on account of the royalty.
9. Notwithstanding the foregoing, the royalty payable shall be
limited to US$2,000,000.
<PAGE>
AGREEMENT TO ASSIGN INTEREST - FRIDAY CLAIMS
This agreement is dated as of the 11th day of December, 1995
and is made between:
IDAHO GOLD CORPORATION
OF THE FIRST PART AND:
IDAHO CONSOLIDATED METALS CORP.
OF THE SECOND PART
Whereas:
A. Idaho Gold Corporation ("Idaho Gold") owns certain patented mining
claims known as the "Friday patented claims," as more particularly
described in Schedule "A" hereto (the "Mining Properties");
B. Idaho Consolidated Metals Corp. ("ICMC") wishes to acquire a
leasehold interest in the Mining Properties and in all geological
information (including core or drill cutting), metallurgical lab
and field test results, mine design and reserve calculations and
pre-feasibility and feasibility studies relating to the Mining
Properties and in the possession or under the control of Idaho
Gold (the "Data");
NOW THEREFORE this Agreement witnesses that in consideration of the
mutual covenants and agreements herein contained and subject to the
terms and conditions hereafter set out, the parties hereto agree as
follows:
1. "CLOSING DATE" and "CLOSING" - The term "Closing Date" as used
throughout this Agreement shall mean July 19, 1996 or such other
date as is agreed to by the parties. The term "Closing" as used
throughout this Agreement shall mean the completion of the
transactions herein contemplated which shall occur at 10:00 a.m.
Vancouver time on the Closing Date or such other time on the
Closing Date as agreed to by the parties.
2. LEASE OF MINING PROPERTIES - Upon and subject to the terms and
conditions set forth in this Agreement, Idaho Gold agrees to lease
the Mining Properties and the Data to ICMC for a term of five
years from the Closing Date (the "Lease"). The Lease will be
renewable for subsequent terms of five years each provided ICMC
continues to carry out exploration, development or mining work on
the Mining Properties. The Lease will be subject to the
reservation by Idaho Gold of a net smelter return royalty (the
"Royalty") on the Mining Properties on the terms specified in
Schedule "B" hereto.
<PAGE>
3. CONSIDERATION FOR LEASE OF MINING PROPERTIES - As consideration
for the granting of the Lease, ICMC:
a) will issue to Idaho Gold 60,000 common shares in the capital
of ICMC, 30,000 of which will be issued to Idaho Gold on the
Closing Date and the balance of which will be issued to Idaho
Gold one year after the Closing Date;
b) will incur expenditures (as defined in clause 3(f)(ii) below)
of not less than US$135,000 in the aggregate on or before the
fifth anniversary of the Closing Date of the exploration and
development of the Mining Properties, with the following
amounts being incurred by the dates indicated below:
i) US$15,000 on or before the first anniversary of the
Closing Date;
ii) an aggregate of US$30,000 on or before the second
anniversary of the Closing Date;
iii) an aggregate of US$65,000 on or before the third
anniversary of the Closing Date; and
iv) an aggregate of US$100,000 on or before the fourth
anniversary of the Closing Date;
c) will replace all bonds relating to the Mining Properties
currently lodged by or on behalf of Idaho Gold with any
regulatory authorities;
d) will be solely responsible for all costs of environmental
compliance associated with its exploration and mining
operations on the Mining Properties or with the termination
thereof, and all costs incurred in connection with
environmental compliance, reclamation and long-term care and
monitoring of the Mining Properties arising out of activities
at any time by any person and its predecessors in possession
of the Mining Properties;
e) will consent to the reservation by Idaho Gold of the Royalty;
and
f) subject to paragraph 4, will grant to Idaho Gold an option
(the "Option") to acquire a 49% working interest in the Mining
Properties upon the following terms:
i) the term of the Option will be five years from the
Closing Date;
<PAGE>
ii) Idaho Gold may exercise the Option by delivering a
notice (the "Option Notice") to ICMC to that effect
and, within 45 days after delivery of the Option
Notice, a payment to ICMC equal to 115% of ICMC's
expenditures on the Mining Properties from January 1,
1996 to the date of delivery of such payment.
"Expenditures" shall mean all cash, expenses,
obligations and liabilities, other than for personal
injury or property damage, of whatever kind or nature
spent or incurred directly or indirectly in connection
with the exploration, development or equipping of the
Mining Properties for commercial production including
an overhead fee not to exceed 8% of all expenditures
(other than the overhead fees);
iii) if Idaho Gold exercises the Option, ICMC and Idaho Gold
will enter into a joint venture agreement which will
provide that (A) each party will fund its proportionate
share of ongoing expenditures on the Mining Properties
or have its interest diluted; (B) a management
committee will approve all operations and activities of
the joint venture and will consist of two members from
each of ICMC and Idaho Gold, with ICMC to hold the
casting vote so long as it retains not less than a 51%
interest in the joint venture; (C) ICMC will have the
right to be operator of the joint venture so long as it
retains not less than a 51% interest in the joint
venture;
iv) during the term of the Option, ICMC shall keep the
Mining Properties free and clear of all liens and
encumbrances arising from its operations and in good
standing by the doing and filing, or payment in lieu
thereof, of all necessary assessment work and payment
of all taxes and other charges required to be paid and
by the doing of all other acts and things and the
making of all other payments required to be made;
v) if ICMC should fail to make any of the payments or
carry out any of the obligations referred to in clauses
(iv) above, it shall be deemed to have made an election
to relinquish the Mining Properties involved;
vi) an election or deemed election to relinquish one or
more of the Mining Properties will not in any way
relieve ICMC of its obligations pursuant to paragraph
3(d);
vii) if Idaho Gold exercises the Option, the Royalty will be
terminated.
<PAGE>
4. RIGHT TO ACQUIRE OPTION - ICMC will have the right to acquire
Idaho Gold's right to the Option by payment to Idaho Gold of Cdn.
$300,000 at any time up to 21 days after receipt by ICMC of the
Option Notice from Idaho Gold.
5. ASSIGNMENTS BY ICMC - ICMC agrees that it will not transfer or
assign any part of its interest in the Mining Properties without
the prior written consent of Idaho Gold. It shall be a condition
precedent to any assignment that the assignee of the interest
being transferred agrees in writing to be bound by the terms of
this Agreement, the Option, the Royalty and, if appropriate, the
lease.
6. CLOSING - On the Closing Date, the parties will table the
following documents and instruments and take the following steps:
a) ICMC will table for delivery to Idaho Gold a share certificate
for 30,000 common shares in the capital of ICMC registered in
the name of Idaho Gold;
b) ICMC will table for delivery to Idaho Gold evidence
satisfactory to Idaho Gold that the bonds referred to in
paragraph 3 (c) have been replaced by ICMC;
c) each party will execute and table for delivery to the other
party the Lease;
d) each party will execute and table for delivery to the other
party the Option agreement;
e) ICMC will execute and table for delivery to Idaho Gold an
agreement reserving the Royalty to Idaho Gold; and
f) each party will execute and table for delivery to the other
party all such other documents and instruments reasonably
required to effectively consummate the transactions
contemplated herein.
"Closing" will occur upon all documents set out above being
tabled as required and the closing conditions being satisfied
or waived by the parties.
7. JOINT CONDITION PRECEDENT TO CLOSING - The respective obligations
of each of the parties hereto to complete the Closing shall be
subject to receipt of all governmental and third party approvals
and consents required for the completion of the granting of the
Lease. This condition may be waived by ICMC and Idaho Gold acting
together.
<PAGE>
8. ACKNOWLEDGMENT AND AGREEMENT - ICMC hereby acknowledges receipt of
a copy of the letter dated June 6, 1996 from Woodburn and Wedge,
Attorneys to Idaho Gold, addressed to Arctic Fox Ltd. and Gray
Estates Company discussing the history of the Mining Properties.
ICMC agrees with the analysis set out in that letter and, more
specifically, agrees that neither Arctic Fox Ltd. nor Gray Estates
Company has an operating right of first refusal with respect to
the Mining Properties.
9. TIME OF ESSENCE - Time is and will be of the essence of each and
every provision of this Agreement.
10. ENTIRE AGREEMENT - This Agreement contains the whole agreement
between Idaho Gold and ICMC in respect of the subject matter
hereof and supersedes and replaces the letter of understanding
dated December 11, 1995 and all prior negotiations, communications
and correspondence. There are no warranties, representations,
terms, conditions or collateral agreements, express or implied,
statutory or otherwise, other than as expressly set out in this
Agreement.
11. ENUREMENT - This Agreement will enure to the benefit of and be
binding upon Idaho Gold and ICMC and their respective successors,
liquidators and permitted assigns.
12. GOVERNING LAW - This Agreement shall be construed and interpreted
in accordance with the laws of Idaho.
13. NOTICES - All notices, payments and other required communications
("Notices") to the parties shall be in writing and shall be
addressed respectively as follows:
If to Idaho Gold:
c/o Bema Gold Corporation
1400 - 510 Burrard Street
Vancouver, B.C. V6C 3A8
Fax No.: 604-681-6209
Attention: Mr. Roger Richer
If to ICMC:
ICMC
P.O. Box 1124
Lewiston, Idaho 83501
Fax No.: 208-746-6678
Attention: Mr. Wilf Struck
All Notices shall be given:
i) by personal delivery to the party by leaving a copy at the
place specified for notice with a receptionist or an
apparently responsible individual, or
<PAGE>
ii) by electronic facsimile communication.
All Notices shall be effective and shall be deemed delivered:
iii) if by personal delivery, on the date of delivery if
delivered during normal business hours, and if not
delivered during normal business hours, on the next
business day following delivery, and
iv) if by electronic communication, on the next business day
following receipt of the electronic communication,
provided that a positive transmission report is generated
by the sender's facsimile machine.
14. REGULATORY APPROVAL - The obligations of the parties hereto is
subject to the acceptance for filing of this Agreement by the
Vancouver Stock Exchange.
15. COUNTERPARTS - This Agreement may be executed in counterparts with
the same effect as if both parties had signed the same document,
and both such counterparts will be construed together and will
constitute one and the same instruments. The execution of this
Agreement will not become effective until counterparts hereof have
been executed by both parties hereto and executed copy delivered
to each party hereto. Such delivery may be made by facsimile
transmission of the execution page or pages hereof to the other
party by the party signing the particular counterpart, provided
that forthwith after such facsimile transmission, an originally
executed execution page or pages is forwarded by prepaid express
courier to the other party by the party signing the particular
counterpart.
IN WITNESS WHEREOF the parties have executed and delivered this
Agreement as of the day and year first above written.
IDAHO GOLD CORPORATION
Per: /s/ Roger Richer
-------------------------
IDAHO CONSOLIDATED METALS CORP.
Per: /s/ Wilf Struck
-------------------------
Vice President
<PAGE>
SCHEDULE "A"
FRIDAY PATENT CLAIMS
Patent Survey
Claim Name Number Number Acres
---------- ------ ------ -----
Friday Fraction 41174 1834 20.659
Friday 41174 1834 18.559
Regina 1833 16.595
Alaska 3 41174 1834 20.653
Alaska 4 41174 1834 20.653
<PAGE>
SCHEDULE "B" - FRIDAY CLAIMS
NET SMELTER RETURNS
1. The royalty which may be payable to Idaho Gold Corporation
(hereinafter called the "Payee") pursuant to paragraph 3(d) of the
Assignment of Interests Agreement by Idaho Consolidated Metals
Corp. (hereinafter called the "Payor") will be 3% of 100% of the
Net Smelter Revenue (as hereinafter defined) and will be
calculated and paid to the Payee in accordance with the terms of
this Schedule "B". Terms having defined meanings in the Agreement
and used herein will have the same meaning in this Schedule as
assigned to them in the Assignment of Interests Agreement unless
otherwise specified or the context otherwise requires.
2. The Net Smelter Revenue will be calculated on a calendar quarterly
basis and will, subject to paragraph 7 of this Schedule "B", be
equal to Gross Revenue less Permissible Deductions for such
quarter.
3. The following words will have the following meanings:
(a) "Gross Revenue" means the aggregate of the following amounts
received in each quarterly period following the commencement
of commercial production from the Mining Properties:
(i) the revenue received by the Payor from arm's length
purchasers of all Product;
(ii) the fair market value of all Products sold by the Payor
in such period to persons not dealing at arm's length
with the Payor; and
(iii) any proceeds of insurance on Product;
(b) "ORE" means all materials from the Mining Properties, the
nature and composition of which justifies either:
(i) mining or removing from place and shipping and selling
such material, or delivering such material to a
processing plant for physical or chemical treatment; or
(ii) leaching such material in place;
(c) "PERMISSIBLE DEDUCTIONS" means the aggregate of the following
charges (to the extent that they are not deducted by any
purchaser in computing payment) that are paid in each
quarterly period:
<PAGE>
(i) sales charges levied by any sales agent on the sale of
Product;
(ii) transportation costs for Product from the Mining
Properties to the place of beneficiation, processing or
treatment and thence to the place of delivery of
Product to a purchaser thereof, including shipping,
freight, handling and forwarding expenses;
(iii) all costs, expenses and charges of any nature
whatsoever which are either paid or incurred by the
Payor in connection with refinement or beneficiation of
Product after leaving the Property, including all
weighing, sampling, assaying and representation costs,
metal losses, any umpire charges and any penalties
charged by the processor, refinery or smelter; and
(iv) all insurance costs on Product, and any government
royalties, production taxes, severance taxes and sales
and other taxes levied on Ore, Product or on the
production or value thereof (other than any Federal or
Provincial taxes levied on the income or profit of the
Payor);
(d) "Product" means:
(i) all Ore shipped and sold prior to treatment, and
(ii) all concentrates, precipitates and products produced
from Ore.
4. The payment on account of the royalty for each calendar quarter
will be calculated and paid within 60 days after the end of each
calendar quarter. Smelter settlement sheets, if any, and a
statement setting forth calculations in sufficient detail to show
the payment's derivation (the "Statement") must be submitted with
the payment.
5. In the event that final amounts required for the calculation of
the payment on account of the royalty are not available within the
time period referred to in section 4 of the Schedule "B", then
provisional amounts will be estimated and such payment will be
paid on the basis of this provisional calculation. Positive or
negative adjustments will be made to the payment on account of the
royalty for the succeeding quarter.
6. All payments on account of the royalty will be considered final
and in full satisfaction of all obligations of the Payor with
respect thereto, unless the Payee delivers to the Payor a written
<PAGE>
notice (the "Objection Notice") describing and setting forth a
specific objection to the calculation thereof within 60 days after
receipt by the Payee of the Statement. If the Payee objects to a
particular Statement as herein provided, the Payee will, for a
period of 60 days after the Payor's receipt of such Objection
Notice, have the right, upon reasonable notice and at reasonable
times, to have the Payor's accounts and records relating to the
calculation of the payment in question audited by the auditors of
the Payee. If such audit determines that there has been a
deficiency or an excess in the payment made to the Payee, such
deficiency or excess will be resolved by adjusting the next
quarterly payment due hereunder. The payee will pay all the costs
and expenses of such audit unless a deficiency of 5% or more of
the amount due is determined to exist. The Payor will pay the
costs and expenses of such audit if a deficiency of 5% or more of
the amount due is determined to exist. Failure on the part of the
Payee to make a claim against the Payor for adjustment in such 60
day period by delivery of an Objection Notice will conclusively
establish the correctness and sufficiency of the Statement and
payment on account of the royalty for such quarter.
7. All profits and losses resulting from the Payor engaging in any
commodity futures trading, option trading, metals trading, gold
loans or any combination thereof, and any other hedging
transactions with respect to Product which is a precious metal
(collectively, "Hedging Transactions") are specifically excluded
from calculations of the payments on account of the royalty
pursuant to this Schedule "B" (it being the intent of the parties
that the Payor will have the unrestricted right to market and sell
Product to third parties in any manner it chooses and that the
Payee will not have any right to participate in such marketing
activities or to share in any profits or losses therefrom. All
Hedging Transactions by the Payor and all profits or losses
associated therewith, if any, will be solely for the Payor's
account. The amount of Net Smelter Revenue derived from all
Product subject to Hedging Transactions by the Payor will be
determined pursuant to the provisions of this paragraph 7 and not
paragraph 2. As to precious metals subject to Hedging
Transactions by the Payor, Net Smelter Revenue will be determined
without reference to Hedging Transactions and will be determined
by using, for gold, the quarterly average price of gold, which
will be calculated by dividing the sum of all London Bullion
Market Association P.M. Gold Fix prices reported for the calendar
quarter in question by the number of days for which such prices
were quoted. Any Product subject to Hedging Transactions will be
deemed to be sold, and revenues received therefrom, only on the
date of the final settlement of the amount of refined Product
allocated to the account of the Payor by a third party refinery in
respect of such transactions. Furthermore, the Payor will have no
obligation to fulfill any futures contracts, forward sales, gold
loans or other Hedging Transactions which the Payor may hold with
Product.
<PAGE>
8. If the royalty becomes payable to two or more parties, those
parties will appoint, and will deliver to the Payor a document
executed by all of those parties appointing, a single agent or
trustee of all such parties to whom the Payor will make all
payments on accounts of the royalty. The Payor will have no
responsibility as to the division of the royalty payments amount
such parties, and if the Payor makes a payment or payments on
account of the royalty in accordance with the provisions of this
paragraph 8, it will be conclusively deemed that such payment or
payments have been received by the Payee. All charges of the
agent or trustee will be borne solely by the parties received
payments on account of the royalty.
9. Notwithstanding the foregoing, the royalty payable shall be
limited to US$1,000,000.
<PAGE>
