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Mining Agreement

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Sectors: Metals and Mining
Governing Law: Honduras
Effective Date: June 24, 1994
Related Agreement Types:
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Exhibit 10.22


- --------------------------------------------------------------------------------


MINING AGREEMENT


- --------------------------------------------------------------------------------


between


COMPANIA MINERA OCOTE, S. de R. L.


AND


KERRY A. McDONALD


TABLE OF CONTENTS
-----------------


RECITALS........................................................... 1
SECTION ONE - Exploration License and Mining Agreement............. 1 1.1 Exploration License......................................... 1 1.2 Work Obligation............................................. 2 1.3 Advance Royalties........................................... 3 1.4 Production Royalties........................................ 3 1.5 Transfer of Title........................................... 4 1.6 Delivery of Data............................................ 5
SECTION TWO - Mining Operations.................................... 5 2.1 Rights to Explore, Develop and Mine......................... 5 2.2 Conduct of Work............................................. 5 2.3 Liability and Insurance..................................... 5 2.4 Liens....................................................... 6 2.5 Installation of Equipment................................... 6 2.6 Acquisition of Permits...................................... 6 2.7 Drill Logs, Assays, and Maps................................ 6


SECTION THREE - Inspection by Minera Ocote......................... 7 3.1 Inspection of Property...................................... 7 3.2 Inspection of Accounts...................................... 7


SECTION FOUR - Taxes............................................... 7


SECTION FIVE - Termination and Default............................. 8 5.1 Termination................................................. 8 5.2 Default..................................................... 8


SECTION SIX - Notices.............................................. 9 6.1 Notices..................................................... 9 6.2 Payments.................................................... 9


SECTION SEVEN - Assignment......................................... 9


SECTION EIGHT - Warranty of Title................................. 10


SECTION NINE - Force Majeure...................................... 10 9.1 Suspension of Obligations.................................. 10 9.2 Definition of Force Majeure................................ 10 9.3 Economic Force Majeure..................................... 11


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SECTION TEN - Miscellaneous Provisions............................ 11 10.1 Binding Effect............................................. 11 10.2 Applicable Law............................................. 11 10.3 Entire Agreement........................................... 11 10.4 Void or Invalid Provisions................................. 11 10.5 Time of the Essence ....................................... 12 10.6 Area of Interest........................................... 12


EXHIBIT A - Property Description................................. 14


EXHIBIT B - Map.................................................. 15


ii


MINING AGREEMENT
----------------


THIS MINING AGREEMENT is made this 24/th/ day of June, 1994 by and between COMPANIA MINERA OCOTE, S. de R. L., a Honduran company ("Minera Ocote"); and KERRY A. MCDONALD, ("McDonald").


RECITALS
--------


A. Minera Ocote has acquired the El Ocote #1 mining exploitation concession affecting 400 hectares, more or less, in the municipality of La Labor, Department of Ocotepeque, Honduras. The concession will be referred to as the "Property." The Property is described on Exhibit A attached hereto and depicted on the map attached as Exhibit B.


B. McDonald wishes to explore, develop, and mine the Property on the terms and conditions set forth below.


THEREFORE, the parties have agreed as follows:


SECTION ONE


Exploration License and Mining Agreement
----------------------------------------


1.1 Exploration License. Minera Ocote hereby grants to McDonald the
------------------- exclusive right and license to explore the Property. The license shall have an initial term of five (5) years, commencing on execution of this Agreement. At the end of the five-year term, provided that McDonald is then engaged in mining operations on the Property, Minera Ocote shall assign the concession to McDonald, together with any other contracts, rights-of-way, permits, or other rights associated with the Property.


1


1.2 Work Obligation. During the term of the exploration license, McDonald
--------------- shall expend the following sums on exploration, development, permitting, testing, and other work on the Property:


a. During the first year of this Agreement, McDonald shall spend a
minimum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) on the
Property. This shall be a firm commitment, and McDonald shall not
be relieved of this requirement if he terminates the Agreement
during the first year. If McDonald spends less than $100,000.00
on exploration of the Property during the first year, he shall
pay the difference between his actual expenditures and
$100,000.00 to Minera Ocote .


b. During the second, third, fourth, and fifth years of the
exploration license, McDonald shall make the following
expenditures on the Property:


Contract Year Expenditures
--------------- ------------

2 $150,000.00
3 $200,000.00
4 $250,000.00
5 $300,000.00


Any expenditures in excess of the yearly minimum obligation may be applied as a credit to the following year's obligation.


The costs of maintaining the concession in good standing shall be included in the work obligation.


2


Within thirty (30) days following the end of each contract year, McDonald shall prepare a detailed report to Minera Ocote describing the work performed during the previous year, the cost of such work, and the general results of the exploration program.


1.3 Advance Royalties. McDonald shall not be obliged to pay any advance
----------------- royalties to Minera Ocote during the first three years of this Agreement. At the beginning of the fourth contract year, McDonald shall pay an advance royalty of FIFTY THOUSAND DOLLARS ($50,000.00) to Minera Ocote. On the fifth anniversary of this Agreement, and on each anniversary thereafter, McDonald shall pay an advance royalty of SEVENTY FIVE THOUSAND DOLLARS ($75,000.00) to Minera Ocote. Each advance royalty payment may be offset against production royalties generated during the ensuing contract year, but the advance royalties shall not accrue from year to year as a credit against production royalties. For example, if McDonald pays $75,000.00 to Minera Ocote on the fifth anniversary of the Agreement, and operations on the Property generate $100,000.00 in production royalties during the 12 months following the fifth anniversary, McDonald shall pay the additional sum of $25,000.00 to Minera Ocote.


1.4 Production Royalties. Upon commencing production of valuable minerals
-------------------- from the Property, McDonald shall pay to Minera Ocote a royalty on production equal to five percent (5%) of net smelter returns. The term "net smelter returns" shall mean the gross value of ores or concentrates shipped to a smelter or other processor (as reported on the smelter settlement sheet) less the following expenses actually incurred and borne by McDonald:


a. Sales, use, gross receipts, severance, and other taxes, if any,
payable with respect to severance, removal, sale on disposition
of the


3


minerals from the Property, but excluding any taxes on production
or net income;
b. Charges and costs, if any, for transportation from the mine or
mill to places where the minerals are smelted, refined and/or
sold; and
c. Charges, costs, including assaying and sampling costs
specifically related to smelting and/or refining, and all
penalties, if any, for smelting and/or refining.


In
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