EXHIBIT 4.12
Letter Agreement, dated March 17, 2005, among
Baradero Resources Limited, the
shareholders of 0724000 BC Ltd.
(formerly Magellan Gold Corp. and Centrasia Mining Corp.),
and 0724000 BC Ltd.
BARADERO RESOURCES LTD.
0000 - 0000 XXXX XXXXXXX XX.
XXXXXXXXX, XX X0X 0X0
March 17, 2005
TO: Magellan Gold Corp.
880 - 000 Xxxxxxxxx Xx.
P.O. Box 10321 Pacific Centre
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxxxx,
President
AND TO: The Shareholders of Magellan Gold Corp.
Dear Sirs:
RE: ACQUISITION OF MAGELLAN GOLD CORP. ("MAGELLAN") BY BARADERO RESOURCES
LTD. ("PUBCO")
We are advised that Magellan is a private Nevada company that, pursuant to an
agreement with Marsa Gold Corp., a Kyrgyz limited liability company, and
Bulakashu Mining Company LLC ("BMC"), a Kyrgyz limited liability company, dated
September 24, 2004 as amended by an amending agreement dated January 18, 2005
(the "BMC Agreement"), has an option to acquire from Marsa Gold Corp. all of the
issued shares of BMC. BMC is the registered owner of a certain exploration
license in respect of lands located in the Kyrgyz Republic, as more particularly
described in Schedule "A" hereto (the "Bulakashu Property"). In order to
exercise the option, the following payments of shares, cash and property
expenditures must be made:
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BY BY BY BY BY
JAN 2/05 JULY 1/05 JAN 2/06 JAN 2/07 JAN 2/08
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CASH US$40,000 US$40,000 US$40,000 - -
(total: (paid)
US$120,000)
SHARES 200,000(1) - 200,000 250,000 375,000
(total:
1,025,000
shares)
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CALENDAR YEAR 2004(2) 2005 2006 2007 2008
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MINIMUM US$110,000 US$350,000 US$500,000 US$650,000 US$750,000
EXPLORATION (completed)
EXPENDITURES
(total:
US$2,360,000)
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1 These shares have not yet been issued at the request of the corporate
vendor pending the completion of a re-organization of BMC.
2 The 2004 work program was funded by way of a loan to BMC from Magellan,
which will be repaid by the issuance of shares of BMC in due course.
-2-
There are issued and outstanding in Magellan 3,700,100 common shares which were
issued for US$0.005 each (the "Magellan Shares") and a list of the shareholders
of Magellan is attached hereto as Schedule "B". Apart from the 1,025,000 common
shares to be issued to acquire the BMC Property, there are no other securities
issued or issuable in Magellan. Magellan currently has loans outstanding to
borrow an aggregate Cdn$200,992.50 and US$145,000.00 (approximately Cdn$382,000
altogether), which bear interest at 10% per annum from the respective date of
advance. In addition, Magellan has current trade liabilities of Cdn$50,000
approximately. Xxxx Xxxxxxxx represents that he has the authority of the other
Magellan shareholders to bind them to this letter agreement.
The only securities issued and outstanding in Pubco are 1,986,521 common shares
and incentive stock options to purchase up to 115,000 common shares at $0.19
each on or before November 26, 2007 (the "Old Stock Options").
It is agreed that Pubco shall acquire from the shareholders of Magellan all of
the issued shares of Magellan on and subject to the following terms and
conditions:
Acquiring Entity: Pubco, a company continued under the laws of British
Columbia, a reporting issuer in the Provinces of
British Columbia and Alberta and registered with the
U.S. Securities and Exchange Commission as a foreign
private issuer under the Securities Act of 1934,
whose common shares are listed and posted for
trading on the TSX Venture Exchange in Canada and
trade on the OTCBB in the United States;
Acquired Entity: Magellan, a company incorporated under the laws of
Nevada. It is intended to reorganize Magellan prior
to entering into the formal agreement below, such
that it or its assets will be subject to a
jurisdiction outside of the United States;
Transaction Structure: The transaction will be effected by way of an
acquisition by Pubco of all of the outstanding
shares of Magellan (the "Transaction");
Consideration: Pubco shall issue in exchange for each issued
Magellan Share one common share of Pubco as
presently constituted. It is acknowledged that these
shares shall be subject to a Surplus Security Escrow
Agreement under the policies of the TSX Venture
Exchange and resale rules imposed by the TSX Venture
Exchange and securities commissions;
-3-
Due Diligence Period: Each of Magellan and Pubco will have an unfettered
right to conduct and complete legal, audit and tax
due diligence investigations regarding the other
company within 30 days of the acceptance of this
letter agreement. On or before such date, either
Pubco or Magellan may elect not to close if the
results of its due diligence investigation of the
other company are not satisfactory to it, acting
reasonably.
Bridge Financing: Pubco acknowledges that certain investors have
provided financing to Magellan in order to finance
the operations of Magellan, and will continue to
provide additional financing between the date hereof
and the closing of the transactions contemplated
hereby (the "Closing"). These funds were advanced to
Magellan by way of loan and the aggregate amounts
advanced as of the date hereof is approximately
Cdn$382,000. These loans bear interest at 10% per
annum from the respective date of advance Pubco and
Magellan agree that at Closing, all principal
amounts advanced will be automatically converted
into securities of Pubco having the same terms as
the securities issued by Pubco under the Private
Placement referred to below, which will result in
the issuance of 2,000,000 units approximately.
Interest on the amounts advanced will be paid in
cash at Closing.
Financing: Pubco will use commercially reasonable efforts to
complete a non-brokered private placement (the
"Private Placement") of 4,000,000 units at a price
of not less than C$0.20 per unit, each unit
consisting of one common share of Pubco and one
warrant to buy one common share for $0.40 for two
years from Closing. The number of units to be issued
pursuant to the Private Placement shall be increased
only if agreed upon by both companies. Subject to
the right of the existing management of Pubco to
place 500,000 of the units, the approval of the
placees and the allocation of units to the placees
shall be as determined by the New Board (as defined
below). The estimated use of proceeds of the Private
Placement is as follows:
-4-
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Gross Proceeds of Private Placement $800,000
----------------------------------------------------
TO BE USED AS FOLLOWS:
----------------------------------------------------
Minimum required work program for 2005 $200,000
G&A for 12 months $120,000
Property Payments Due
in next 12 months (US$80,000) $100,000
Payment of interest on bridge financing $20,000
Cost of RTO $150,000
Unallocated working capital $210,000
----------------------------------------------------
Total: $800,000
----------------------------------------------------
Conditions to
Closing of Transaction: (i) Pubco shall have completed the Private
Placement;
(ii) The Board of directors of Pubco at Closing
shall be made up of the following persons
(the "New Board"): Xxxx XxXxxx, Xxxx
Xxxxxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxxxxx, Xxxx
Xxxxxxxxx, Xxxx Xxx (subject to his
acceptance of the position);
(iii) On or prior to Closing, Pubco shall change
its name to "Magellan Gold Corp.", "Magellan
Resources Corp.", or such other name as may
be acceptable to all regulatory authorities
and approved by the new Board and the
shareholders of Pubco;
(iv) The BMC Agreement shall be amended to provide
that:
a. all shares to be issued thereunder shall
be issued by Pubco (including the first
200,000 shares, which will now be issued
at the Closing of the Transaction) and
not Magellan; and
b. the minimum exploration expenditures
required to be incurred in 2005 shall be
reduced to Cdn$200,000, and the minimum
exploration expenditures required to be
incurred in 2006 will be increased to
US$690,000;
(v) No material adverse change shall have
occurred in the business, operations,
capital, financial condition or prospects of
either Magellan or Pubco;
(vi) Prior to Closing, the parties will have
entered into a formal agreement to replace
this letter agreement that provides the
mutual representations, warranties, covenants
and closing deliveries, including, without
limitation, appropriate corporate and
securities opinions from counsel for each
party, in a form that is reasonable and
customary for a transaction such as is
contemplated herein;
-5-
(vii) Magellan will deliver to Pubco a title
opinion and a 43-101 report on the BMC
Property, and audited financial statements of
both Magellan and BMC, in form and substance
satisfactory to Pubco acting reasonably. The
43-101 report, title opinion and audited
financial statements shall be delivered by
April 15, 2005;
(viii) Chase Management Ltd. will be engaged to
continue to provide accounting,
administration and management services to
Pubco subsequent to Closing;
(ix) Receipt of the approval of the shareholders
of Pubco and of the TSX Venture Exchange to
the Transaction and all related matters; and
(x) Closing of the Transaction and Private
Placement occurring by June 6, 2005 or
earlier.
Stock Options: It is intended that Pubco will adopt a new stock
option plan allowing incentive stock options to be
granted up to 20% of the issued share capital of the
Company at Closing (subject to adjustment in
accordance with the policies of the TSX Venture
Exchange), and that under the new plan stock options
will be granted by Pubco in conjunction with the
Transaction. The New Board will determine the
allotment of such stock options. The Old Stock
Options will expire in the ordinary course 90 days
after Closing in accordance with the provisions of
Pubco's current Stock Option Plan;
Finder's Fee: The parties acknowledge that a finder's fee will be
payable at Closing in respect of the Transaction to
Xx. Xxxxxx Xxxxx of Vancouver, BC equal to 233,338
Pubco shares;
Timing: The parties hereto agree that they are prepared to
make every reasonable effort to complete the
Transaction and Private Placement as planned. The
parties will work in good faith seeking all
necessary shareholder and regulatory approvals that
may be required to complete the Transaction.
Magellan has initiated an audit of BMC and of itself
(the "Audits") and estimates that the Audits will be
completed no later than April 15, 2005. Magellan has
also initiated the preparation of the Report on the
Bulakashu Property (the "Report") and estimates that
the Report shall be ready by April 15, 2005;
-6-
Expenses: If the Transaction does not close for any reason,
each party will be responsible for the payment of
its own expenses in connection with the Transaction
(including, but not limited to legal and accounting
fees, any fees payable to brokers or agents, or any
finder's or other advisory fees);
General: This letter agreement will be governed by the laws
of British Columbia and the federal laws of Canada
applicable therein;
This letter agreement shall be binding upon the
parties.
This letter agreement and the information contained in this letter agreement
shall be confidential and shall not be disclosed by either Magellan or Pubco to
third parties without the written consent of the other party. The parties will
co-operate in the making and dissemination of any public announcements relating
to the subject matter of this letter agreement, including a news release to be
issued following execution hereof specifying the identities of the parties and
the principal terms of the Transaction.
If the foregoing is acceptable to you, please sign and return this letter
agreement to us. Facsimile transmissions of our respective signatures of this
letter agreement shall evidence our acceptance of its terms.
Yours truly,
BARADERO RESOURCES LTD.
Per: /s/ Xxxx XxXxxx
-----------------------
Xxxx XxXxxx, President
Accepted and agreed to as of the date set out above:
FOR AND ON BEHALF FOR HIMSELF AND AS ATTORNEY IN FACT FOR
MAGELLAN GOLD CORP. THE REMAINING SHAREHOLDERES OF MAGELLAN
GOLD CORP.
Per: /s/ Xxxx Xxxxxxxx /s/ Xxxx Xxxxxxxx
------------------------ ------------------------
Xxxx Xxxxxxxx, President Xxxx Xxxxxxxx
SCHEDULE "A"
DESCRIPTION OF THE BULAKASHU PROPERTY
Bulakashu Mining Company ("BMC") holds License Au-138-02, dated November 13,
2002 (the "License"). The License is an exploration license that permits BMC to
explore for gold in the Bulakashu Area of the Kyrgyz Republic, excluding the
following alluvial gold placer licenses: Upper Karabulak, Lower Karabulak, Upper
Tokailu and Lower Tokailu.
SCHEDULE "B"
LIST OF MAGELLAN SHAREHOLDERS
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SHAREHOLDER NAME NO. OF SHARES PRICE PAID DATE PAID
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Xxxx Xxxxxxxx 1,600,100 US$0.005 100 on incorporation
and 2,000,000
acquired in 12
monthly installments
beginning in April
2004 pursuant to his
employment agreement
with Magellan
(400,000 transferred
to Xxxx Xxxxxxxxx in
February 2005)
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Xxxx Xxxxxxxxx 1,000,000 US$0.005 February 25, 2005
(500,000 acquired by
transfers from
existing shareholders)
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Xxxx Xxxxxx 400,000 US$0.005 June 25, 2004
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Xxxx Xxxxx 175,000 US$0.005 July 9, 2004
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Xxxxxxx Xxxxxxxx 175,000 US$0.005 July 9, 2004
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Xxxxx Xxxxxx 175,000 US$0.005 June 25, 2004
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Xxxxx Xxxxxxxxxx 175,000 US$0.005 Nov. 9, 2004
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SUB-TOTAL: 3,700,100
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