EXHIBIT 1
PROPERTY OPTION AGREEMENT
THIS made and entered into as of the 30th day of June, 2004.
BETWEEN:
MINQUEST INC., a company having a mailing address at 0000
Xxxxxxx Xxx, Xxxx,Xxxxxx 00000, X.X.X ;
(herein "Optionor ")
OF THE FIRST PART
AND:
AMERICAN GOLDFIELDS INC., a company having an office at
#000 - 0000 Xxxxx Xxxxx Xx, Xxxxxxx, X.X. Xxxxxx, X0X 0X0;
(herein "Optionee ")
OF THE SECOND PART
WHEREAS the Optionor has represented that it is the sole recorded and beneficial
owner in and to the Imperial Property (the "Property") described in Schedule "A"
attached hereto;
AND WHEREAS the Optionor, subject to the Net Smelter Royalty reserved to the
Optionor, now wishes to grant to the Optionee the exclusive right and option to
acquire an undivided 100% right, title and interest in and to the Property on
the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises,
the mutual covenants herein set forth and the sum of One Dollar ($1.00) of
lawful money of U.S. currency now paid by the Optionee to the Optionor (the
receipt whereof is hereby acknowledged), the Parties hereto do hereby mutually
covenant and agree as follows:
1. Definitions
The following words, phrases and expressions shall have the following
meanings:
(a) "After Acquired Properties" means any and all mineral interests staked,
located, granted or acquired by or on behalf of either of the parties
hereto during the currency of this Agreement which are located, in
whole or in part, within one mile of the perimeter of the Property;
(b) "Work Commitment" includes all direct or indirect expenses [net of
government incentives and net of payments to the Optionor pursuant to
paragraph 4 hereof] of or incidental to Mining Operations. The
certificate of the Controller or other financial officer of the
Optionor, together with a statement of expenditures in reasonable
detail shall be prima facie evidence of such expenditures. In the event
the commitment is not met on any year, the balance will be due in cash
and or free trading stock paid to the Optionor. Any and all excess
amounts expended in one year may offset commitments to future
commitments;
(c) "Facilities" means all mines and plants, including without limitation,
all pits, shafts, adits, haulageways, raises and other underground
workings, and all buildings, plants, facilities, and other structures,
fixtures, and improvements, and all other property, whether fixed or
moveable, as the same may exist at any time in, or on the Property and
relating to the operator of the Property as a mine or outside the
Property if for the exclusive benefit of the Property only.
(d) "Force Majeure" means an event beyond the reasonable control of the
Optionee that prevents or delays it from conducting the activities
contemplated by this Agreement other than the making of payments
referred to in Section 4 herein. Such events shall include but not be
limited to acts of God, war, insurrection, and inclement weather
conditions. Any action or inaction of governmental agencies, inability
to obtain any environmental, operating or other permits or approvals,
authorizations or consents within 18 months of application assuming
continual persistance by the Optionee shall also constitute grounds for
Force Majeure;
(e) "Mineral Products" means the commercial end products derived from
operating the Property as a mine;
(f) "Mining Operations" includes:
(i) every kind of work done on or with respect to the Property by
or under the direction of the Optionee during the Option
Period or pursuant to an approved Work Program except
expansion of the property boundaries; and
(ii) without limiting the generality of the foregoing, includes all
work capable of receiving assessment credits pursuant to The
Mines and Minerals Act of Nevada and the work of assessment,
geophysical, geochemical and geological surveys, studies and
mapping, investigating, drilling, designing, examining
equipping, improving, surveying, shaft sinking, raising,
cross-cutting and drifting, searching for, digging, trucking,
sampling, working and procuring minerals, ores and metals, in
surveying and bringing any mineral claims to lease or patent,
in doing all other work usually considered to be prospecting,
exploration, development, a feasibility study, mining work,
milling, concentration, bonification or ores and concentrates,
as well as the separation and extraction of mineral products;
(g) "Net Smelter Royalty" means that Net Smelter Royalty as defined in
Schedule "B" attached hereto ("NSR");
(h) "Option" means the option granted by the Optionor to the Optionee to
acquire, subject to the NSR reserved to the Optionor, an undivided 100%
right, title and interest in and to the Property as more particularly
set forth in Section 4.
(i) "Option Period" means the period from the date hereof to the date at
which the Optionee has performed its obligations to acquire its 100%
interest in the Property as set out in Section 4 hereof, which ever
shall be the lesser period;
(j) "Property" means the mineral claims described in Schedule "A";
(k) "Work Program" means, a program of work reasonably acceptable to both
parties in respect of a particular Property, contained in a written
document setting out in reasonable detail:
(i) an outline of the Mining Operations proposed to be undertaken
and conducted on the Property, specifically stating the period
of time during which the work contemplated by the proposed
program is to be done and performed;
(ii) the estimated cost of such Mining Operations including a
proposed budget providing for estimated monthly cash
requirements in advance and giving reasonable details;
(iii) the total estimated cash costs shall be put in escrow each
month to cover expenses of Optionor, including but not
restricted to cost of initial expansion of claim position by
location and filing at an estimated cost of US$5,000 per year:
and
(iv) the identity and credentials of the person or persons
undertaking the Mining Operations so proposed if not the
Optionor.
reasonably acceptable to both parties hereto.
2. Headings
Any heading, caption or index hereto shall not be used in any way in
construing or interpreting any provision hereof.
3. Singular, Plural
Whenever the singular or masculine or neuter is used in this Agreement,
the same shall be construed as meaning plural or feminine or body politic or
corporate or vice versa, as the context so requires.
4. Option
The Optionor hereby grants to the Optionee the sole exclusive right and
option (the "Option") to earn a 100% interest in the Property exercisable as
follows:
(a) the Optionee paying the sum of $60,000 US to the Optionor by way of
cash upon signing.
(b) on or before July 1, 2005:
(i) the Optionee makes a work commitment of $75,000 on the
Property;
(ii) and the Optionee paying $20,000 to the Optionor;
(c) on or before July 1, 2006:
(i) the Optionee makes a work commitment of $100,000 on the
Property in addition to the expenditure referred to in clauses
(b)(i) hereof;
(ii) and the Optionee paying $20,000 to the Optionor;
(d) on or before July 1, 2007:
(i) the Optionee makes a work commitment of $100,000 on the
Property in addition to the expenditure referred to in clauses
(b)(i) and (c)(i) hereof;
(ii) and the Optionee paying $20,000 to the Optionor;
(e) on or before July 1, 2008
(i) the Optionee makes a work commitment of $100,000 on the
Property in addition to the expenditures referred to in
clauses (b)(i), (c)(i) and (d)(i)
(ii) and the Optionee paying $20,000 to the Optionor;
(f) on or before July 1 ,2009
(i) the Optionee makes a work commitment of $125,000 on the
Property in addition to the expenditures referred to in
clauses (b)(i),(c)(i),(d)(i) and (e)(i).
following which the Optionee shall be deemed to have exercised the Option (the
"Exercise Date") and shall be entitled to an undivided 100% right, title and
interest in and to the Property with the full right and authority to equip the
Property for production and operate the Property as a mine subject to the rights
of the Optionor to receive the NSR.
5. Transfer of Title
Upon completion of all work commitments and property payments by
Optionee the Optionor will deliver or cause to be delivered to the Optionee's
solicitors a duly executed transfer of Property in favour of the Optionee (the
"Optionee Transfer") to be held in trust by said solicitors subject to the terms
and conditions of this Agreement. The Optionee shall be entitled to record the
Optionee Transfer with the appropriate government offices to effect transfer of
legal title of the Property into its own name upon the full and complete
exercise of the Option by the Optionee. In the event the Optionee Transfer is
recorded the Optionor shall be entitled to record notice of its NSR interest.
6. Mining Operations during Option
During the Option Period, the Optionor shall conduct the Mining
Operations on the Property for and on behalf of the Optionee and shall invoice
the Optionee in respect of the expenses of such Mining Operations from time to
time and the prompt payment of such invoices when due shall constitute
Expenditures by the Optionee as contemplated under Section 4 hereof.
7. Assignment
During the Option Term, no party shall sell, transfer, assign,
mortgage, pledge or otherwise encumber its interest in this Agreement or its
right or interest in the Property without the consent of the other parties, such
consent to be not unreasonably withheld, provided that any party shall be
permitted to assign this Agreement to an "affiliate", as that term is defined in
THE COMPANY ACT (Nevada). It will be a condition of any assignment under this
Agreement that such assignee shall agree in writing to be bound by the terms of
this Agreement applicable to the assignor. In the event Optionee completes all
obligations to acquire a 100% interest in the Property the Optionor will have
the right to transfer, assign an or sell the NSR on the open market. 8.
Termination
This Agreement shall forthwith terminate in circumstances where:
(a) the Optionee fails to make the payments for or carry out the
expenditures required in Section 4 of this Agreement on or before the
dates set out herein provided that, in circumstances where the Optionee
is prevented from carrying out any of the expenditures contemplated in
Section 4 prior to the dates set out therein due to Force Majeure, then
the Optionee shall forthwith give the Optionor written notice of the
commencement and termination of the said Force Majeure and thereafter
such dates shall be deemed to have been extended by the period of time
during which the Force Majeure remains in effect; or
(b) the Optionee gives notice of termination to the Optionor which it shall
be at liberty to do at any time after the execution of this Agreement.
If and when the Optionee elects to terminate this agreement, at such
time the property will be returned to the Optionor with at least 1 year
assessment requirement credit.
9. Representations, Warranties and Covenants of the Optionor
The Optionor represents, warrants and covenants to and with the
Optionee as follows:
(a) the Optionor is a company duly organized validly existing and in good
standing under the laws of Nevada;
(b) the Optionor has full power and authority to carry on its business and
to enter into this Agreement and any agreement or instrument referred
to or contemplated by this Agreement;
(c) neither the execution and delivery of this Agreement, nor any of the
agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby contemplated conflict with,
result in the breach of or accelerate the performance required by, any
agreement to which it is a party;
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the
laws of any jurisdiction applicable or pertaining thereto or of its
constating documents;
(e) the Agreement constitutes a legal, valid and binding obligation of the
Optionor;
(f) the Property is accurately described in Schedule "A", is in good
standing under the laws of the jurisdiction in which it is located and
is free and clear of all liens, charges and encumbrances;
(g) the Optionor is the sole recorded and beneficial owner of the Property
and has the exclusive right to enter into this Agreement and all
necessary authority to transfer its interest in the Property in
accordance with the terms of this Agreement;
(h) no person, firm or corporation has any proprietary or possessory
interest in the Property other than the Optionor, and no person, firm
or corporation is entitled to any royalty or other payment in the
nature of rent or royalty on any minerals, ores, metals or concentrates
or any other such products removed from the Property other than the
government of the state of Nevada pursuant to statute;
(i) upon request by the Optionee, the Optionor shall deliver or cause to be
delivered to the Optionee copies of all available maps and other
documents and data in its possession respecting the Property; and
(j) subject to performance by the Optionee of its obligations under Section
4, during the Option Period, the Optionor will keep the Property in
good standing, free and clear of all liens, charges and encumbrances,
will carry out all Mining Operations on the Property in a miner-like
fashion, will obtain all necessary licenses and permits as shall be
necessary and will, file all applicable work up to the legal limits as
assessment work under THE MINES AND MINERALS ACT (Nevada).
10. Representations, Warranties and Covenants of the Optionee
The Optionee represents, warrants and covenants to and with the
Optionor that:
(a) the Optionee is a company duly organized validly existing and in good
standing under the laws of Nevada;
(b) the Optionee has full power and authority to carry on its business and
to enter into this Agreement and any agreement or instrument referred
to or contemplated by this Agreement;
(c) neither the execution and delivery of this Agreement, nor any of the
agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby contemplated conflict with,
result in the breach of or accelerate the performance required by, any
agreement to which it is a party;
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the
laws of any jurisdiction applicable or pertaining thereto or of its
constating documents;
(e) this Agreement constitutes a legal, valid and binding obligation of the
Optionee; and
11. Indemnity and Survival of Representations
The representations and warranties hereinbefore set out are conditions
on which the parties have relied in entering into this Agreement and shall
survive the acquisition of any interest in the Property by the Optionee and each
of the parties will indemnify and save the other harmless from all loss, damage,
costs, actions and suits arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition made by them and
contained in this Agreement.
The Optionor agrees to indemnify and save harmless the Optionee from
any liability to which it may be subject arising from any Mining Operations
carried out by the Optionor or at is direction on the Property. The Optionee
agrees to indemnify and save harmless the Optionor from any liability to which
it may be subject arising from any Mining Operations carried out by the Optionee
or at its direction on the Property.
12. Confidentiality
The parties hereto agree to hold in confidence all information obtained
in confidence in respect of the Property or otherwise in connection with this
Agreement other than in circumstances where a party has an obligation to
disclose such information in accordance with applicable securities legislation,
in which case such disclosure shall only be made after consultation with the
other party.
13. Notice
All notices, consents, demands and requests (in this Section 13 called
the "Communication") required or permitted to be given under this Agreement
shall be in writing and may be delivered personally sent by telegram, by telex
or telecopier or other electronic means or may be forwarded by first class
prepaid registered mail to the parties at their addresses first above written.
Any Communication delivered personally or sent by telegram, telex or telecopier
or other electronic means shall be deemed to have been given and received on the
second business day next following the date of sending. Any Communication mailed
as aforesaid shall be deemed to have been given and received on the fifth
business day following the date it is posted, addressed to the parties at their
addresses first above written or to such other address or addresses as either
party may from time to time specify by notice to the other; provided, however,
that if there shall be a mail strike, slowdown or other labour dispute which
might affect delivery of the Communication by mail, then the Communication shall
be effective only if actually delivered.
14. Further Assurances
Each of the parties to this Agreement shall from time to time and at
all times do all such further acts and execute and deliver all further deeds and
documents as shall be reasonably required in order fully to perform and carry
out the terms of this Agreement.
15. Entire Agreement
The parties hereto acknowledge that they have expressed herein the
entire understanding and obligation of this Agreement and it is expressly
understood and agreed that no implied covenant, condition, term or reservation,
shall be read into this Agreement relating to or concerning any matter or
operation provided for herein.
16. Proper Law and Arbitration
This Agreement will be governed by and construed in accordance with the
laws of the State of Nevada and the laws of the United States of America
applicable therein. The parties hereto hereby irrevocably attorn to the
jurisdiction of the Courts of Nevada. All disputes arising out of or in
connection with this Agreement, or in respect of any defined legal relationship
associated therewith or derived therefrom, shall be referred to and finally
resolved by a sole arbitrator by arbitration under the rules of THE ARBITRATION
ACT of Nevada.
17. Enurement
This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
18. After Acquired Properties
(i) The parties covenant and agree, each with the other, that any and all
After Acquired Properties shall be subject to the terms and conditions
of this Agreement and shall be added to and deemed, for the purposes
hereof, to be included in the Property. Any costs incurred by the
Optionor in staking, locating, recording or otherwise acquiring any
"After Acquired Properties" will be deemed to Mining Operations for
which the Optionor will be entitled to reimbursements as part of the
Expenditures payable by the Optionee hereunder.
(ii) Any additional claims staked within a 1 mile radius (1.6 km.) of the
property boundaries by the Optionor shall form part of this agreement.
As per 1k(iii), the Optionee will escrow $5,000 US for the costs of
staking additional claims undertaken by the Optionor at the request of
the Optionee.
19. Default
Notwithstanding anything in this Agreement to the contrary if any party
(a "Defaulting Party") is in default of any requirement (other than as set forth
in Section 4) herein set forth the party affected by such default shall give
written notice to the Defaulting Party specifying the default and the Defaulting
Party shall not lose any rights under this Agreement, unless thirty (30) days
after the giving of notice of default by the affected party the Defaulting Party
has failed to take reasonable steps to cure the default by the appropriate
performance and if the Defaulting Party fails within such period to take
reasonable steps to cure any such default, the affected party shall be entitled
to seek any remedy it may have on account of such default including, without
limiting, termination of this Agreement.
20. Payment
All references to monies hereunder shall be in U.S. funds. The Optionee
shall escrow projected monthly costs into an account for the Expenditures.
Escrow funds will be used to pay invoices delivered by the Optionor which for
the purposes of this agreement shall constitute prompt and due payment.
21. Option Only
This is an option only and except as herein specifically provided
otherwise, nothing herein contained shall be construed as obligating the
Optionee to do any acts or make any payments hereunder, and any act or acts or
payment or payments as shall be made hereunder shall not be construed as
obligating the Optionee to do any further act or make any further payment or
payments.
22. Revisionary Rights
Optionor retains reversionary rights to all property within the
boundary of the Area of Interest as long as Optionee, its subsidiaries or
assigns holds title. At such time in the future that Optionee, its subsidiaries
or assigns decides any and all property held by Optionee within the referenced
Area of Interest is unnecessary to the pursuit of an ore deposit, Optionee, its
subsidiaries or assigns will offer said Property to Optionor, its subsidiaries
or assigns at least 60 days prior to any fees, taxes, payments or other
assessment being due and payable. Optionee, its subsidiaries or assigns will
make available any and all data to Optionor to evaluate the potential or lack
thereof of the offered property. Optionor will be obligated to accept in
writing, by fax or verbally within 30 days of notification. At such time that
Optionor accepts any part of a Property, Optionee, its subsidiaries or assigns
will transfer any and all drill core, pulps, rejects, digital and other data
available for the above referenced property.
23. Supersedes Previous Agreements
This Agreement supersedes and replaces all previous oral or written
agreements, memoranda, correspondence or other communications between the
parties hereto relating to the subject matter hereof.
IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement
effective as of the 30th day of June, 2004
MINQUEST INC.
Per: /s/ Xxxxxxx Xxxx
Authorized Signatory
AMERICAN GOLDFIELDS INC.
PEr: /s/ Xxxxxx Xxxx
Authorized Signatory
SCHEDULE A
LIST OF IMPERIAL PROPERTY UNPATENTED CLAIMS, SECTIONS 34-36, T4S, R40E,
MDB&M, XXXXXXXXX COUNTY, NEVADA
CLAIM NAME BLM SERIAL NUMBER
------------------ -----------------
Xxxx 1-10 838518-838527
Xxxxx 833046
Xxxxx 1-9 833047-833055
Imperial 20-21 833056-833
SCHEDULE B
"Net Smelter Return" shall mean the aggregate proceeds received by the Optionee
from time to time from any smelter or other purchaser from the sale of any ores,
concentrates, metals or any other material of commercial value produced by and
from the Property after deducting from such proceeds the following charges only
to the extent that they are not deducted by the smelter or other purchaser in
computing the proceeds:
(a) the cost of transportation of the ores, concentrates or metals from the
Property to such smelter or other purchaser, including related
insurance;
(b) smelting and refining charges including penalties; and
The Optionee shall reserve and pay to the Optionor a NSR equal to three (3%)
percent of Net Smelter Return.
Payment of NSR payable to the Optionor hereunder shall be made quarterly within
thirty (30) days after the end of each calendar quarter during which the
Optionee receives Net Smelter Returns. Within thirty (30) days after the end of
each calendar quarter for which the NSR are payable to the Optionor, the records
relating to the calculation of NSR for such year shall be audited by the
Optionee and any adjustments in the payment of NSR to the Optionor shall be made
forthwith after completion of the audit. All payments of NSR to the Optionor for
a calendar year shall be deemed final and in full satisfaction of all
obligations of the Optionee in respect thereof if such payments or the
calculations thereof are not disputed by the Optionor within ninety (90) days
after receipt by the Optionor of the same audited statement. The Optionee shall
maintain accurate records relevant to the determination of NSR and the Optionor,
or its authorized agent, shall be permitted the right to examine such records at
all reasonable times.
