Exhibit 10.20
LEASE AGREEMENT OF BLOCK B
MINING AREAS
By and between, COMPANIA GENERAL DE MINERIA DE VENEZUELA C.A. "CVG MINERVEN", a
state owned corporation, domiciled in El Callao, Municipality El Callao, Bolivar
State, originally registered before the Commercial Registry of the Judicial
Circuit of the Federal District and Miranda State under No. 20, Book 31-A, dated
February 4, 1970 and thereafter registered before the Commercial Registry of the
Judicial Circuit of the Bolivar State, with principal offices in Puerto ▇▇▇▇▇,
having registered the last amendment to its Articles of Incorporation under No.
10, Book A No. 48, dated August 5, 1999 (hereinafter CVG Minerven), herein
represented by its President Engineer ▇▇▇▇▇▇▇ ▇▇▇▇ Patines, a citizen of
Venezuela, of legal age, married, of this domicile, bearer of Identity Card N.
4.035.048, duly authorized by resolution No. RJD-227-2002 of the Board of
Directors of CVG MINERVEN, approved in the Board meeting No. JDE-001-2002 held
on August 19, 2002and Hecla Mining Company, a corporation incorporated and
existing under the laws of the State of Delaware, U.S.A. domiciled in the city
of Coeur D' Alene, Idaho, represented herein by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, a citizen of
the United States of America, bearer of Identity Card N(0) 82.264.221
(hereinafter the "Company"), duly authorized hereof by power of attorney granted
before the Notary Public of the State of Idaho, United States of America, on
August 7, 2002 and stamped with the corresponding apostille dated August 8, 2002
pursuant to the Hague Convention each of such parties being individually
referred to as the "Party" or jointly, the "Parties", have agreed to enter into
the following lease agreement of "Block B" (defined below), based on the
following:
RECITALS
WHEREAS, CVG Minerven is the sole and exclusive holder of the concessions for
the exploitation of vein gold known as Minerven ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇
▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇ and Minerven No. 9, each comprising 500
hectares, located in the Jurisdiction of El Callao, State of Bolivar; which
Mining Titles were published in the Official Gazette of the Republic of
Venezuela No. 1562 Extraordinary dated January 9, 1973, and renewed by the
Ministry of Energy and Mines in favor of CVG Minerven for a term of 25 years
from the date of publication in the Official Gazette No. 5.217 Extraordinary of
March 4, 1998, copy of which is attached and is part of this Agreement under
Schedule "A".
WHEREAS, on May 19, 2000, CVG Minerven organized a process known as "Promotion
of Block B Mining Areas" for the lease of an area known as "Block B" (defined
below), which was awarded to Hecla Mining Company, a corporation duly
incorporated under the laws of the State of Delaware, United States of America,
by resolution of the Board of Directors of CVG Minerven No. RJD-207-2002 of
March 26, 2002, attached hereto as Schedule "B".
WHEREAS, the Parties have agreed to all terms and conditions of this lease, and
therefore have agreed to enter into this lease agreement of Block B, which shall
be governed by the following provisions:
ARTICLE I
INTERPRETATION
1.1.- DEFINITIONS. In this Agreement, unless otherwise clearly stated, the
following terms and phrases shall have the following meanings.
"AGREEMENT": means this agreement for the lease of Block B including its
schedules and amendments made from time to time in writing by the Parties.
"BLOCK B",: means a mining area consisting of One Thousand Seven Hundred Eighty
Seven hectares (1,787 Has.), which constitutes the purpose of this Agreement and
is limited by the following boundaries expressed in U.T.M coordinates: Boom N 1
of Block B corresponds to vertex B 3 of the concession Minerven No. 1, UTM N
809,500 and E 624,000. Boom N 2 of Block B is located from N 1 southwards for a
distance of 2,5000 m, coinciding also with vertex B2 of the concession Minerven
No. 1, with coordinates UTM N 807,000 and E 624,000. Boom N 3 of Block B is
located from N 2 eastwards for a distance of 6,850 m on the southern boundary of
the Minerven No. 4 plot, known as boom M 4, with coordinates UTM N 807,000 and E
630,860. Boom N 4 of Block B is located from M 4 towards N 22(0) W, for a
distance of 2,454 m, on the boundary of plots Minerven N 03 and Minerven N 04,
known as boom M 4-1, with coordinates UTM N 809.256 and E 630,000. Boom 5 is
located from M 4-1 northwards for a distance of 744 m on the boundary of plots
Minerven N 08 and Minerven N 07, known as M8, with coordinates UTM N 810,000 and
E 630,000. Boom N 6 of Block B is located from M 8 westwards for a distance of
2,000 m, on the boundary of plots Minerven N 09 and Minerven N 08, known as boom
M8-1, with coordinates UTM N 810,000 and E 628,000. Boom N 7 of Block B is
located from M 8-1 southwards for a distance of 250 m, on the boundary of plots
Minerven N 09 and Minerven N 08, known as boom M 8-2, with coordinates UTM N
809,750 and E 628,000. Boom N 8 of Block B, is located from M 8-2 westwards for
a distance of 400 m, on concession Minerven N 09, known as M 9, with coordinates
UTM N 809,750 and E 627,600. Boom N 9 of Block B, is located from M 9 northwards
2
for a distance of 259 m, on concession Minerven N 09, known as M 9-1, with
coordinates UTM N 810,000 and E 627,600. Boom N 10 of Block B is located from M
9-1 westwards for a distance of 1,600 m on the western boundary of plot Minerven
N 09, known as boom M 9-2, with coordinates UTM N 810,000 and E 626,000. Boom N
11 of Block B is located from M 9-2 southwards for a distance of 500 m, on the
northern boundary of concessions Minerven 01, Minerven 02 and Minerven 09, known
as M 9-3, with coordinates UTM N 809,500 and E 626,000. Finally, form this point
westwards for a distance of 2,000 m, Boom N 1 of Block B is reached again,
coinciding with vertex B 3 of concession Minerven N 1, with coordinates UTM N
809,5000 and E 624,000, closing the perimeter which encloses Block B of CVG
Minerven, for a total surface of approximately ONE THOUSAND SEVEN HUNDRED
EIGHTY-SEVEN HECTARES (1,787 Has.) which corresponds to and includes the
Concessions, within its boundaries as follows:
- Minerven Concession No. 1: total occupation according to the
boundaries described in the Concession Titles.
- Minerven Concession No. 2: total occupation according to the
boundaries described in the Concession Titles, except as set forth in
section 2.1
- Minerven Concession No. 3: total occupation, according to the
boundaries described in the Concession Titles.
- Minerven Concession No. 4: partial occupation, described as follows:
to locate the Booms that enclose the plot of land granted under
concession Minerven N(0) 4, made up of one hundred (100) hectares, boom
N(0) 3 is used as a reference point from the northeast vertex of
concession Minerven N(0) 3, from such point southwards a distance of
two hundred fifty-one meters (251 m) is measured to set boom N(0) 1 or
the northeast vertex of the aforementioned plot; from such point
southwards a distance of two thousand two hundred forty-nine meters
(2,249m) is measured to set boom N(0) 2 or the southwest vertex; from
such point eastwards a distance of eight hundred sixty meters (860 m)
is measured to set boom N(0) 3 or the southeast vertex; form such point
northeast 340(0), a distance of two thousand five hundred four meters
(2,504) is measured to reach the point of reference, with which the
triangular perimeter is closed.
- Minerven Concession No. 8 and Minerven Concession N(0) 9: partial
occupation, described as follows: to locate the booms that enclose the
plot of land leased under the concessions Minerven N(0) 8 and Minerven
N(0) 9, made up of one hundred ninety hectares (190 has.) boom N(0) 3
is used as a reference point from the northeast vertex of concession
Minerven N(0) 1, which will also be considered as boom N(0) 1 or the
southwest vertex of this plot; from such point northwards a distance of
3
five hundred meters (500 m) is measured to fix boom N(0) 2 or the
northwest vertex; from such point eastwards, a distance of one thousand
six hundred meters (1,600 m) is measured to fix boom N(0) 3 or the
northwest vertex of the intermediate area neighboring the plot known as
"SONI"; from such point southwards, two hundred fifty meters (250 m)
are measured to fix boom N(0) 4 or the southwest vertex of the
intermediate area neighboring plot "SONI"; from such point eastwards, a
distance of four hundred meters (400 m) is measured to fix boom N(0) 5
or the southeast vertex of the intermediate area neighboring plot
"SONI", from such point northwards, a distance of two hundred fifty
meters (250 m) are measured to fix boom N(0) 6 or the northeast vertex
of the intermediate area neighboring plot "SONI", from such point
eastwards, two thousand meters (2,000 m) are measured to set up boom
N(0) 7 or the northeast vertex; from such point southwards five hundred
meters (500 m) are measured to fix boom N(0) 8 or the southeast vertex;
from such point westwards four thousand meters (4,000 m) are measured
to reach the reference point with which the triangular perimeter is
closed.
Reference maps of Block B are enclosed herein under Schedule "C" and are part of
this Agreement.
Reference maps of Block B are attached hereto as Schedule "C" and form part of
this Agreement.
"COMPANY": means Hecla Mining Company a corporation incorporated and existing
under the laws of the State of Delaware, U.S.A. domiciled in the city of Coeur
D' Alene, Idaho or its successor hereof assuming all rights and obligations
under this Agreement pursuant to section 20.1;
"CONCESSION TITLES": means the concession titles through which the MEM awarded
CVG Minerven the mining rights over the Concessions, which were published in the
Official Gazette No. 1.562 Extraordinary of January 9, 1973, and renewed by the
Ministry of Energy and Mines in favor of CVG Minerven for a term of 25 years
from its publication in the Official Gazette No. 5.217 Extraordinary of March 4,
1998 all registered before the Registry of the Roscio Municipality on the State
of Bolivar, with offices in Guasipati, on May 4, 2001 and filed as follows:
Minerven N(0) 1, under N(0) 13, First Protocol, Volume II, Second Quarter;
Minerven N(0) 2, under N(0) 14, First Protocol Volume II, Second Quarter,
Minerven N(0) 3, under N(0) 15, First Protocol, Volume II, Second Quarter;
Minerven N(0) 4, under N(0) 16, First Protocol, volume II, Second Quarter;
Minerven N(0) 8, under N(0) 20, First Protocol, Volume II, Second Quarter,
Minerven N(0) 9, under N(0) 21, First Protocol, Volume II, Second Quarter.
4
"CONCESSIONS": means the concessions for the exploitation of vein gold known as
Minerven ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇
and Minerven No. 9, of 500 Has. each, located in the jurisdiction of the
Municipality of El Callao of the State of Bolivar and held by CVG Minerven;
"CVG MINERVEN": means "COMPANIA GENERAL DE MINERIA DE VENEZUELA C.A. "CVG
MINERVEN", a State owned company, domiciled in the Municipality of El Callao, of
the State of Bolivar , originally incorporated in the Mercantile Registry of the
Judicial Circuit of the Federal District and State of Miranda, under No. 20,
Volume 31-A, of February 4, 1970, and further incorporated in the Mercantile
Registry of the Judicial Circuit of the State of Bolivar , with branch in Puerto
▇▇▇▇▇, the last modification to its by-laws being registered under Volume 19
A-pro N(0) 48, dated July 1, 2002. ;
"EFFECTIVE DATE": means the date of execution of this Agreement by the Parties
before a Notary Public;
"ENVIRONMENTAL PERMITS" means the "Permiso de Afectacion de Recursos para
Exploracion" (permit for the use of natural resources for exploration) of vein
gold on Block B granted by the Ministry of the Environment and Natural Resources
and any other environmental permit or authorization that from time to time such
Ministry or any other competent authority may request or that is required by law
to perform Exploration or Evaluation of the Deposit in Block B;
"EXPLORATION": means all activities aimed at determining the existence,
quantity, quality or commercial values of mineral deposits that may include gold
reserves, in any area within Block B, including the phases, terms and funding to
be invested in the evaluation of mineral resources discovered in such areas;
"EVALUATION OF THE DEPOSIT": means all activities for purposes of geologically
evaluating mineral resources presumably existing in some areas of Block B,
including but not limited to, the completion of additional perforations required
after the discovery of mineralizations of potential commercial value, general
plans to design and develop budgets including the phases, terms and funding to
be invested in the evaluation of such mineral resources;
"FORCE MAJEURE": means an event beyond the reasonable control of a Party
including, without limitation, acts of God; accidents; fires; floods; slides or
earthquakes; explosions; weather conditions materially preventing or impairing
work; interruption of, or inability to secure basic services, fuel or power; new
laws, decrees, regulations, orders or administrative acts issued by any public
5
authority legally competent; governmental restriction or control on imports,
exports or foreign exchange; delay in acting of any government or governmental
authority or agency, and any confiscation; war (declared or undeclared),
revolution, civil disturbance, sabotage, coup d' etats, terrorism or riot;
and any other event beyond the reasonable control of the Party affected which
may prevent or delay performance of the obligations of the Parties under this
Agreement;
"MATERIAL BREACH": means an act or omission by one Party which causes a material
adverse effect on: (i) the business, results of operations or financial
condition of the other Party; (ii) the ability of the other Party to perform its
obligations under this Agreement in a timely manner pursuant to the terms
herein; (iii) validity and enforceability of the Concession Titles, or; (iv) the
validity or enforceability of this Agreement or the rights or remedies of the
other Party;
"MEM": means the Ministry of Energy and Mines.
"MONTHLY GOLD PRICE": means the monthly average price of gold which will be
calculated by dividing the sum of all the London Buillion Market Association
P.M. bid Gold Fix prices (which fixes the closing price for such metal for that
day per fine ▇▇▇▇ ounce of gold) reported for the monthly period in question by
the number of days for which such prices were reported;
"MINING LAW": means the Law of Mines, published in the Official Gazette No.5.382
of September 28, 1999, including its Regulations, Resolutions, Decrees and any
other applicable laws;
"PARTIES": in plural means both parties entering into this Agreement, that is,
CVG Minerven and the Company, and in singular (Party) each one of them;
"SCHEDULE", means any of the documents that pursuant to Section 1.2 are attached
to this Agreement. "SMALL MINERS AGREEMENTS", means the 18 agreements entered
into between CVG Minerven and certain third parties in some areas of Block B
under the administration and responsibility of CVG Minerven, according to the
list attached hereto as Schedule F;
1.2. SCHEDULES. The following Schedules form part of this Agreement:
Schedule A- Copy of the Concession Titles
Schedule B- Award of Block B to the Company
Schedule C- Maps of Block B
Schedule D- Authorization from the MEM to lease Block B
6
Schedule E- Power of attorney to the Company
Schedule F- Small Miners Agreements and map of their location
Schedule G- Judicial Inspection of the Minerven No. 2 Concession
Schedule H- Draft of Corporate Guarantee by Hecla Mining Company
1.3 SUBTITLES. The subtitles shown at the beginning of each section of this
Agreement are intended to identify the meaning of its contents and shall not be
considered as interpretations of this Agreement.
ARTICLE II
LEASE
2.1 LEASE. CVG Minerven, pursuant to authorization granted by the MEM, No.
VMM/336/02, dated August 28, 2002,, attached hereto as Schedule "D", pursuant to
Article 29 of the Mining Law, hereby leases to the Company and the Company
hereby accepts the lease of Block B in an exclusive manner for purposes of
performing Exploration, Evaluation of the Deposit and exploitation of vein gold,
with the same rights, obligations and duties that CVG Minerven has as holder of
the Concessions and according solely to the conditions set forth in this
Agreement and in the Mining Law and other applicable laws, except for the
concurrence, in percentage terms, of the joint liability in the performance of
the duties and obligations resulting from Minerven Concessions No. 4, 8 and 9,
according to the occupation and exploitation rights that each of the Parties
have on these Concessions, and according to the regime set forth below.
The superficial areas (grounds) occupied by the treatment or mineral processing
plant belonging to CVG Minerven, known as "El Peru Plant", including such plant,
located on the lands of the Minerven N(0) 2 concession are excluded from this
Agreement.
2.2 FIRST OPTION ADDITIONAL AREA. Because the original area of Block B initially
offered to investors as part of the Block B bidding process has suffered certain
modifications in its boundaries after the award, CVG Minerven agrees to grant
the Company the first option to lease an additional thirty (30) hectares located
within the following U.T.M. coordinates:
7
North: 807.002.295 and East: 627.657.574 from this point, three hundred forty
two and four hundred twenty six meters (342.426 m) true East to arrive to Boom
N(0) A-1, located at the following U.T.M. coordinates North: 807.000.000 and
East: 628.000.000; from this point four hundred meters (400.00m) true West to
arrive to boom B-2, located at the following U.T.M. coordinates North:
809.750.000 and East: 627.600.000; from this point seven hundred meters (700.00)
true North, to arrive to boom B-3, locates at the following U.T.M. coordinates
North: 810.500.000 and East: 627.600.000; from this point four hundred meters
(400,00 m) true East, to arrive to boom B-4, located at the following U.T.M.
coordinates North: 810.500.000 and East: 628.000.000; from this point seven
hundred and fifty meters (750,00 m) true south, to arrive to the starting point
boom B-1, with which the polygon is closed.
In this regard, in the event that such additional area becomes available from
any other lease holder, CVG Minerven and the Company shall enter into
negotiations for the lease of such area, in the understanding that CVG Minerven
cannot offer or negotiate such area with third parties (including small miners)
unless CVG Minerven and the Company have not reached an agreement within a term
not exceeding six (6) months after the area is offered to the Company. In such
case, the area will be considered to be free and CVG Minerven may offer it to
third parties.
2.3 EXTENSION OF OBLIGATIONS. The rights and obligations assumed by the Company
under this Agreement are limited only to the obligations as leaseholder of Block
B. Except for the obligations and responsibilities that the Company expressly
undertakes under this Agreement, it is understood that CVG Minerven will assume
any other liability and obligation before third parties resulting from its
capacity as holder of the Concessions, provided that such liability has not
resulted from any act or omission of the Company or had been a direct
consequence of the liabilities and obligations that the Company undertakes under
this Agreement.
2.4 POWER OF ATTORNEY. With the purpose of allowing the exercise of the rights
of Block B and to assure performance of the obligations undertaken by the
Company, in any event, with respect to any third party, individual or legal
entity and especially before the MEM, CVG Minerven hereby shall grant the
Company on the Effective Date a special power of attorney, ample and sufficient
as required by law, so that the Company or any authorized successor or assignee
may represent CVG Minerven before the MEM and/or any other public and/or private
entity, individual or legal, national, state or municipal entity, including the
Decentralized Administration and the Autonomous Institutions, State owned
Companies, Mining Protection by the National Guard and other entities related to
the mining activity or any successors of the same, for all purposes provided in
the Mining Law, the Organic Law of the Environment, the Environmental Criminal
Law as well as the Resolutions, rules, decrees, orders and other laws applicable
to this Agreement and/or to the activities related to the same. Therefore and in
exercise of such power of attorney, the Company may file writs, applications,
8
requests, authorizations, be summoned and receive notices; apply and pursue
expropriations or any other occupation procedures against holders of surface
areas, subject to prior approval by CVG Minerven, which cannot be unreasonably
denied or delayed; review and access any file, registry or archive, study them,
copy them completely or partially, or photocopy them, request certifications or
information verbally or in writing, and to perform any action relating to the
powers granted herein, and generally perform everything necessary to preserve
the rights of CVG Minerven as holder of the mining rights granted by the
Concessions which constitute Block B. The Company may also make the payments of
all respective taxes, fees and contributions, execute receipts, transactions,
and in general perform any action to comply with the special advantages
established in the Concession Titles. In exercise of such power of attorney it
shall specially preserve the enforceability of the Concessions and the
Concession Titles that include Block B and must perform all obligations and
duties related to it, explore and exploit Block B under the terms of the law and
without any limitation, since the above enumeration is a mere description and is
not limiting. Such power is granted in performance of the obligations assumed by
CVG Minerven in favor of the Company pursuant to this lease Agreement and
pursuant to Article 1705 of the Civil Code. The Company shall exercise this
power of attorney through its President or through a corporate or legal
representative, and such exercise shall be notified to CVG Minerven prior to its
performance. Likewise, the Company may substitute this power, completely or
partially only to such successor authorized pursuant to this Agreement.
In the event that, notwithstanding the power of attorney granted herein, the
Company requires the agreement and/or the individual consent of CVG Minerven for
any action before the MEM or any other entity as indicated above, CVG Minerven
agrees to execute all documents and perform all actions that the Company
requests, in the understanding that the costs and expenses resulting from any
such action shall be exclusively borne by the Company.
All the documents that the Company has received or filed before any of the
entities or persons mentioned above pursuant to this Agreement or to the power
of attorney granted under this provision, shall be communicated to CVG Minerven
within ten (10) working days from its receipt or delivery.
CVG Minerven hereby agrees to grant a separate irrevocable power of attorney in
favor of the Company in the same terms stated in this Article, and according to
the draft attached hereto as Schedule "E".
2.5 INSPECTION. CVG Minerven shall have the same powers granted by the law to
the MEM to visit and inspect Block B. Preferably, but without prejudice to its
power to inspect, CVG Minerven shall give sufficient prior notice to the Company
of its intent to practice any such visit or inspection so the Company may have
in site the competent personnel for its attention, if necessary, and provide the
necessary facilities for the correct performance of the inspection.
9
ARTICLE III
TERM
3.1 TERM. This Agreement shall be valid from the Effective Date and shall remain
to in effect throughout the same term or duration of the Concession Titles in
favor of CVG Minerven described in the beginning of this Agreement, that is,
until March 4, 2023.
3.2 EXTENSION OF TERM. In the event that due to any changes in the Venezuelan
mining legal regime, in the Mining Law, or due to any other reason, the
Concession Titles are renewed, extended or reissued in favor of CVG Minerven; or
the MEM grants any other mining rights on the same Concessions in favor of CVG
Minerven, this Agreement shall continue and remain in full force and effect
during the duration of such mining rights. If the granting of the new mining
rights to CVG Minerven at the expiration of the term of the Concessions requires
an amendment in the nature or other aspects of this Agreement, both Parties will
renegotiate this Agreement pursuant to the new legal regulations in order to
assure its continuity.
ARTICLE IV
CONSIDERATION PAYABLE TO MINERVEN
4.1 CONSIDERATION. As consideration for the lease of Block B to the Company ,
the Company agrees to pay CVG Minerven the following amounts:
4.1.1 RIGHT OF CONTRACT. An aggregate of Two Million Seven Hundred
and Fifty Thousand Dollars (US$2,750,000.oo), payable in
Dollars of the United States or in Bolivares at the applicable
purchase exchange rate fixed by the Venezuelan Central Bank
two (2) days prior to the date of payment, divided into three
(3) portions payable as follows:
(i) Five Hundred Thousand Dollars (US$500,000.oo) payable
on the Effective Date;
10
(ii) One Million Two Hundred Fifty Thousand Dollars
(US$1,250,000.oo) payable 180 days from the Effective
Date;
(iii) One Million Dollars (US$1,000,000.oo) payable one (1)
year from the Effective Date.
4.1.2 LEASE PAYMENTS. Five Thousand Dollars (US$5,000.oo) quarterly,
payable during the first five (5) working days at the end of
each quarter until the Company begins commercial production in
any of the Block B mining areas. When commercial production
begins, this payment will cease. This payment shall increase
every following year in fifty percent (50%) in comparison to
the previous year, to a maximum of five (5) years, from the
date on which the Environmental Permits are granted and until
commercial production begins. In the event that the Company
does not commence commercial production in five (5) years, the
Company shall continue paying a fixed lease amount for each
quarter equal to the last quarterly lease payment, that is,
the amount of One Hundred and One Thousand Two Hundred Fifty
Dollars (US$101,250.00) annually. Such payments shall be made
in Dollars of the United States or in Bolivares at the
applicable purchase exchange rate fixed by the Venezuelan
Central Bank two (2) days prior to the date of payment.
4.1.3 ROYALTIES. A royalty calculated on the commercial value in
Caracas for refined gold extracted from the areas to be
exploited by the Company in Block B payable monthly, within
the first fifteen (15) days after the end of each month in
Dollars of the United States or in Bolivares, at the
applicable purchase exchange rate fixed by the Venezuelan
Central Bank two (2) days prior to the date of payment
according to the following scale:
(i) Two percent (2%) if the Monthly Gold Price is below
$290 per ▇▇▇▇ ounce of refined gold during the month
preceding payment;
(ii) Two and a half percent (2.5%) if the Monthly Gold
Price is equal or greater than $290 and equal or
below $310 per ▇▇▇▇ ounce of refined gold during the
month preceding payment;
(iii) Three percent (3%) if the Monthly Gold Price is
greater than $310 per ▇▇▇▇ ounce of refined gold
during the month preceding payment.
11
4.2. ELIMINATION OR SUBSTITUTION OF SPECIAL ADVANTAGE FOURTH. CVG Minerven will
use its best efforts in the most diligent manner through negotiations with the
MEM, to eliminate, reduce or substitute the Special Advantage number four of the
Concession Titles, which establishes an additional payment to the exploitation
tax of three percent (3%) of the commercial price of refined gold in Caracas for
the gold extracted from Block B. In case such special advantage is eliminated,
reduced or substituted; or its payment is exonerated, the Company shall not be
obliged to pay the additional three percent (3%). In the event that CVG Minerven
despite using its best efforts cannot achieve the elimination, reduction or
substitution of such special advantage, the aforesaid will not be considered a
Material Breach of this Agreement by CVG Minerven.
4.3 FORM OF PAYMENT. All payments under this section will be made to the name of
CVG Minerven by check or bank deposit to the account designated in writing by
CVG Minerven. For such purpose, before the Company makes any payment, CVG
Minerven shall provide information in writing to the Company regarding the
currency and form of payment.
4.4. DELAY IN PAYMENTS. If the Company fails to make payments on time on any of
the amounts established in this section, it shall pay a penalty interest at the
"London Interbank Offering Rate" (LIBOR) plus two percent (2%).
ARTICLE V
WORK PROGRAM
5.1 TERM FOR INITIAL EVALUATION. The Company shall have a term of two (2) years
starting from the granting of the Environmental Permits to carry out an
Evaluation of the Deposit in certain zones of Block B where some prior studies
have determined the presence of gold ore ("INITIAL EVALUATION TERM"). During the
Initial Evaluation Term the Company may also perform Exploration in any area of
Block B that the Company considers may have some potential for development and
exploitation.
5.2 PRE-FEASIBILITY STUDY. On the date of expiration of the Initial Evaluation
Term the Company must submit for review of CVG Minerven a prefeasibility study
("PRE-FEASIBILITY STUDY"). Such Pre-Feasibility Study shall be prepared by the
technical personnel of the Company for the purpose of determining the economic
12
and technical conditions set forth below, upon which the Initial Evaluation Term
may be extended, or to prepare the technical economic and environmental
feasibility study, which will serve as a basis to begin commercial production in
Block B. CVG Minerven shall have a term of thirty (30) calendar days following
receipt of the Pre-Feasibility Study to make any observations regarding the
conditions stated below, which cannot be unreasonably denied or delayed. In the
event that the Pre-Feasibility study is not approved, CVG Minerven must explain
in writing, the reasons and motives supporting such decision, in which case the
Parties will resolve any dispute according to the procedure set forth in section
18 hereof. While the Parties negotiate such dispute, this Agreement shall be
suspended until the dispute is finally resolved. However, if the 30-day term
elapses without CVG Minerven responding, such study shall be deemed approved.
If the Pre-Feasibility Study meets the follwing conditions:
(a) The identification of a contiguous ore block containing a minimum
of 350,000 oz of gold at an average plant feed grade of greater than 14,00 grams
per ton of ore, and;
(b) An internal rate of return on total investment of all sources
greater than 20%, then;
the Company must prepare within the following six (6) months a technical,
financial and environmental feasibility study ("Feasibility Study"). CVG
Minerven may extend such term for six (6) additional months, provided that the
Company requests such extension with an anticipation of thirty (30) calendar
days prior to the expiration of the 6-month term. Once the extension is filed,
CVG Minerven must respond within fifteen (15) days. The extension cannot be
unreasonably delayed or denied. The Company must submit to CVG Minerven a copy
of the Feasibility Study once it is completed. In such case, the Company shall
have a term of two (2) years starting from the granting of the construction
permits, for the design, development and construction of the necessary works to
initiate commercial production. The Company commits to making its best efforts
and to take all the necessary steps before the competent authorities to obtain
the required legal permits in order for such authorities to provide an answer in
the shortest possible time.
5.3 EXTENSIONS OF THE INITIAL EVALUATION TERM. In the event that upon expiration
of the Initial Evaluation Term the conditions set forth in section 5.2 are not
met concurrently, CVG Minerven agrees to concede to the Company annual
13
extensions of the Initial Evaluation Term up to a maximum of ten (10) annual
extensions, in order to allow the Company to continue performing the Evaluation
of the Deposit or Exploration in other areas of Block B in order to identify
mineral deposits which could comply with the conditions set forth in section 5.2
above. CVG Minerven must grant the annual extensions of the Initial Evaluation
Term within thirty (30) days after the request by the Company at the end of each
annual term, provided that:
(a) The Company has submitted a Pre-Feasibility Study during the
prior year in the terms provided by section 5.2;
(b) Such Pre-Feasibility Study demonstrates that neither one of
the conditions under section 5.2 have been met;
(c) The Company has invested in the past year and commits to
expend at least Two Hundred Thousand Dollars (US$200,000.00)
in Exploration and/or Evaluation of the Deposit in Block B for
the subsequent year;
Once the conditions established in section 5.2 are met, the Company must prepare
the Feasibility Study and shall begin commercial production in the terms
provided in section 5.2.
5.4 FINANCING FOR EXPLOITATION. In the event that after concluding the
Feasibility Study the Company has not obtained adequate financing for the
construction, development and production of gold, the Company shall not be
required to begin production in Block B within the term set forth in section
5.2, until adequate financing from a financial institution is arranged, provided
that the reasons for the lack of financing are not attributable to the Company.
In the event that the Company has obtained financing to begin commercial
production in Block B, but as a result of the terms offered for such financing
the internal rate of return established in the Feasibility Study is reduced to a
percentage of less than 20%, then the Company shall not be bound to start
commercial production in Block B until the Company has renegotiated the terms of
such financing or obtained other financing to the extent of the internal rate of
return set forth above.
The suspension of the obligation to begin commercial production due to lack of
financing (for reasons not attributable to the Company) or due to the high
financial costs shall amount to more than three (3) years from the filing of the
Feasibility Study. During the suspension term, the Company shall comply with the
payment of the lease established in section 4.1.2 until commercial production
begins.
14
5.5 REPORTING REQUIREMENTS. During the month of November of each year, the
Company shall submit to CVG Minerven an investment schedule and an estimated
budget corresponding to the following year. During the Initial Exploration Term
the Company must submit to CVG Minerven quarterly progress reports in connection
with the Exploration or Evaluation of the Deposit activities (as the case may
be) performed by the Company.
ARTICLE VI
ENVIRONMENTAL
6.1 ENVIRONMENTAL CONDITION OF BLOCK B. Due to the fact that (i) CVG Minerven
has entered into several Small Miners Agreements in Block B since the granting
of the Concessions to CVG Minerven; (ii) the Parties recognize that other
unauthorized small miners are currently working in Block B, and; (iii) to date
CVG Minerven lacks a detailed assessment of the environmental damage caused by
such small miners or other persons in Block B, CVG Minerven hereby authorizes
the Company to conduct at its sole cost any technical and environmental studies
in Block B in order to determine the past and present environmental conditions
prior to conducting any Exploration or exploitation works in any of the targets
selected for Exploration or exploitation by the Company. CVG Minerven shall
participate with the Company in all such technical and environmental studies and
such studies shall become part of this Agreement. Such studies will only serve
for the purposes of determining the environmental condition of the areas to be
explored by the Company, and it shall not be understood that the Company is
undertaking any obligation or liability in connection with any environmental
damage caused by third parties in Block B. To such effect, a Judicial Inspection
of the Minerven No. 2 concession is attached hereto as Schedule "G", in which
area the Company shall begin the Exploration and Evaluation of the Deposit.
Before commencing the Exploration the Company and CVG Minerven shall carry out a
base line environmental study as evidence of the condition of such concession,
which will also form part of this Agreement.
The Company will only be liable for any environmental damage caused by the
Company from its activities during the Exploration, Evaluation of the Deposit or
exploitation and in the areas selected by the Company once it begins activities.
In no event shall the Company be liable for any activities of any kind made in
the past by CVG Minerven, by persons working under Small Miners Agreements or by
third parties, which have caused environmental damage to Block B prior to the
Effective Date. CVG Minerven agrees to indemnify and save the Company harmless
15
from any debt, claim, obligation, payment, judicial or administrative actions of
any kind (including attorneys fees) against the Company as the result of any
past environmental damage caused by CVG Minerven, any person working under a
Small Miners Agreement or third parties in Block B and for any environmental
damage caused after the Effective Date by CVG Minerven or by persons working
under Small Miners Agreements.
6.2 ENVIRONMENTAL PERMITS. The Company shall carry on, with the cooperation of
CVG Minerven, if necessary, or acting with the authority granted by the power of
attorney set forth in section 2.4, all matters directed towards obtaining the
necessary Environmental Permits for the targets selected for Exploration,
Evaluation of the Deposit and exploitation by the Company within Block B at its
sole cost and expense, including those reasonably incurred by CVG Minerven in
such cooperation, provided that such expenses have been agreed prior to the
cooperation actions taken by CVG Minerven.
6.3 ENVIRONMENTAL BOND. Prior to beginning commercial production, the Company
shall give credit before CVG Minerven and the MEM, by means of a certified copy,
of the compliance of the environmental bond that guarantees the mitigation and
correction of any environmental damages that may result from the performance of
the mining activities that are the subject matter of this Agreement, pursuant to
the directions of the Ministry of the Environment and Natural Resources and the
MEM.
ARTICLE VII
SPECIAL ADVANTAGES
7.1 COMPLIANCE WITH SPECIAL ADVANTAGES. Except as provided in the special
advantage seventh of the Concession Titles which obliges CVG Minerven to destine
1,000 Has. to small miners, the Company agrees to comply with the rest of the
special advantages, which may be required from the Effective Date, set forth in
the Concession Titles using the following mechanism:
(a) The Company shall comply with all special advantages
established in the Concession Titles that are leased in their
entirety, that is, Minerven 1, 2 and 3;
(b) CVG Minerven shall comply with all special advantages
established in the Concession Titles that are partially
leased, that is Minerven 4, 8 and 9. Once such advantages have
16
been complied with, CVG Minerven shall calculate the pro-rata
quota corresponding to the Company according to the area
leased, so that the Company shall reimburse CVG Minerven the
corresponding amounts.
It is understood that the Company shall comply with the payment of special
advantage fourth of the Concession Titles while it is in force and only for the
exploitation activities carried on by the Company.
7.2 LIABILITY. The Company shall not be liable for compliance with any of the
special advantages which CVG Minerven has failed to comply with in a timely
fashion as holder of the Concessions. In the event that after having reviewed
the compliance with the special advantages before the MEM, the Company concludes
that CVG Minerven has not complied with some of these obligations which became
due in the past, CVG Minerven will immediately proceed to give compliance
thereof. However, if CVG Minerven fails to give full or partial compliance (as
the case may be) of the applicable special advantages in a timely manner, then
the Company may directly comply with such special advantages on behalf of CVG
Minerven using the power of attorney granted pursuant to section 2.4. CVG
Minerven shall reimburse any costs and expenses reasonably and justifiable
incurred by the Company in connection hereof.
7.3 ADMINISTRATIVE OFFICE. The Company agrees to implement from the Effective
Date, the installation of an administrative office in the jurisdiction of El
Callao in the most convenient place for its operations, in addition to the
facilities that will have to be installed within Block B once commercial
production begins.
7.4 SOCIAL PROGRAMS. With the purpose of contributing to the social development
of the local community, the Company shall permanently and actively, in
coordination with CVG Minerven, become part of any social program during the
term of this Agreement, be it assistance to the elderly or to children, or
economic support to any local school, or in the form of assistance, which shall
begin in a term not exceeding five (5) years from the date commercial production
begins. In any event, such program shall be chosen by the Parties, pursuant to
the results of a specific social evaluation or diagnosis made to that effect.
The implementation of the selected program shall be carried out under the
direction of the Company in coordination with CVG Minerven, and cannot exceed
Twelve Thousand Dollars (US$12,000.oo) per calendar year.
17
7.5 VENEZUELAN PERSONNEL. During the Exploration and Evaluation of the Deposit
and exploitation phases, the Company shall give preference to the hiring of
qualified workers and employees of the El Callao and neighboring areas,
preferably Venezuelan and, it may consider the qualified personnel recommended
by CVG Minerven in a number which matches the needs of the project and that
meets the required profiles for each case. Additionally, for the implementation
of Exploration and Evaluation of the Deposit and environmental studies, the
Company shall give preference to the hiring of services from qualified
Venezuelan companies, provided that such companies prove to be qualified for the
work requested and that the offered terms are competitive with respect to
quality, opportunity and cost.
ARTICLE XIII
DISCLOSURE OF INFORMATION
8.1 DISCLOSURE BY THE COMPANY. CVG Minerven authorizes the Company to disclose,
in the manner and times the Company deems convenient, information related to the
mining project to be developed in Block B.
ARTICLE IX
WARRANTIES AND REPRESENTATIONS
9.1 REPRESENTATIONS AND WARRANTIES OF CVG MINERVEN. CVG Minerven represents and
warrants that, as of the date hereof:
(a) ORGANIZATION. CVG Minerven is a State owned corporation
duly organized, validly existing and in good standing under the laws of
Venezuela and is registered with all relevant registration bodies in
Venezuela and has full corporate power and authority to carry out its
business as presently conducted.
(b) CORPORATE AUTHORIZATIONS AND VALIDITY. The board of
directors of CVG Minerven, at duly convened and validly held meetings,
has duly taken all actions required by law, and by the articles of
incorporation and by-laws (or equivalent thereof) of CVG Minerven, to
approve and authorize the execution and delivery of this Agreement and
the consummation of the transactions herein contemplated, and has taken
no action to revoke, rescind or otherwise terminate such approval and
18
authorization. This Agreement and the documents and instruments
executed by CVG Minerven pursuant hereto have been duly and validly
executed by CVG Minerven constitute valid and legally binding
obligations of CVG Minerven and are enforceable in accordance with the
terms thereof.
(c) CONSENTS AND APPROVALS. All authorizations, approvals and
consents from governmental authorities with jurisdiction over CVG
Minerven that are necessary for (i) the execution and delivery of this
Agreement, (ii) the performance of CVG Minerven obligations hereunder
and (iii) all mining activities and all activities incidental thereto
contemplated by this Agreement, have been obtained and are in full
force and effect.
(d) NO CONFLICTS. The execution and delivery of this Agreement
by CVG Minerven and the performance by CVG Minerven of the transactions
contemplated herein are not in conflict with any resolution in force
adopted by meetings of CVG Minerven shareholders or its board of
directors and , will not constitute a default under, be a breach of, or
conflict with any provision of CVG Minerven articles of incorporation
or by-laws or any provision of, or result in the automatic acceleration
of, any obligation under, or give any other party thereto the right to
accelerate any obligation under, any mortgage, lien, lease, agreement,
judgment, decree or instrument to which CVG Minerven is a party or by
which it is bound, or violate any provision of law or governmental
regulation or any court or regulating order, judgment or decree.
(e) LITIGATION. There is no litigation of any kind or nature,
nor any judicial or administrative proceeding or investigation pending
or threatened against CVG Minerven that may affect or impede the
purpose of this Agreement, nor are there any outstanding decrees,
judgments, sentences, injunctions or orders by any court, governmental
department or agency arising from any judicial or administrative action
with respect to CVG Minerven that may affect or impede the purpose of
this Agreement.
(f) NO MATERIAL MISSTATEMENT. All documents, reports or other
written information pertaining to this Agreement that have been
furnished to the Company by or on behalf of CVG Minerven are true and
correct in all material respects.
(g) THE CONCESSIONS.
19
(g.1) The Concessions were duly and legally awarded
to CVG Minerven and any right, title and interest
thereto, is fully and unconditionally vested in CVG
Minerven. No objection or petition to rescind, avoid
or terminate or other complaint of any nature, public
or private, has been made, filed or threatened with
respect to the Concessions.
(g.2) The Concessions or its rights are not currently
optioned, and have not been previously sold,
transferred, alienated, leased or encumbered in any
other manner (except for the Small Miners
Agreements), and the right to use and enjoy ownership
and possession of CVG Minerven has not been
transferred or surrendered since the initial award
thereof to CVG Minerven,
(g.3) The Concession Titles are free and clear of any
liens, mortgages, and pledges and are free of any
judicial measures of any kind, such as attachments.
The Concession Titles have been duly registered at
the Roscio Municipality, State of Bolivar, Real
Estate Registry Office.
(g.4) All fees, taxes and other applicable
contributions under the Mining Law have been duly
paid, and all other obligations and requirements of
law or set forth in the Titles to the Concessions
(including compliance with the special advantages)
have been substantially complied with in every
respect and CVG Minerven is not in breach thereof.
(g.5) CVG Minerven has not been served with notice or
any other form of communication from the MEM stating
that it has failed to perform any duties,
obligations, charges or requirements, whether legal,
contractual or administrative, in connection with the
Concessions.
(g.6) CVG Minerven has delivered within the
respective legal term all documents, information,
reports and any and all data which is required by law
or under the Concession Titles.
20
(g.7) CVG Minerven has possession of and absolute and
unrestricted right to the Concessions and for such
purpose is the holder of the Concession Titles and
occupation environmental permits.,.
(g.8) CVG Minerven has granted 18 Small Miners
Agreements in the areas set forth in Schedule "F"
which are in full force and effect and CVG Minerven
has not granted, optioned, leased, offered or granted
any other mining right of any nature to third parties
in Block B.
9.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants that, as of the date hereof:
(a) ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, United States of America.,.
(b) CORPORATE AUTHORIZATIONS AND VALIDITY. The board of
directors of the Company, at duly convened and validly held meetings,
has duly taken all actions required by law, and by the articles of
incorporation and by-laws (or equivalent thereof) of the Company, to
approve and authorize the execution and delivery of this Agreement and
the consummation of the transactions herein contemplated, and has taken
no action to revoke, rescind or otherwise terminate such approval and
authorization. This Agreement and the documents and instruments
executed by the Company pursuant hereto have been duly and validly
executed by the Company, constitute valid and legally binding
obligations of the Company and are enforceable in accordance with the
terms thereof.
(c) CONSENTS AND APPROVALS. All authorizations, approvals and
consents from governmental authorities with jurisdiction over the
Company that are necessary for (i) the execution and delivery of this
Agreement, (ii) the performance of the Company obligations hereunder
and (iii) all mining activities and all activities incidental thereto
contemplated by this Agreement, have been obtained and are in full
force and effect.
(d) NO CONFLICTS. The execution and delivery of this Agreement
by the Company and the performance by the Company of the transactions
contemplated herein are not in conflict with any resolution in force
adopted by meetings of the Company's shareholders or board of
21
directors, will not constitute a default under, be a breach of, or
conflict with any provision of the Company articles of incorporation or
by-laws or any provision of, or result in the automatic acceleration
of, any obligation under, or give any other party thereto the right to
accelerate any obligation under, any mortgage, lien, lease, agreement,
judgment, decree or instrument to which the Company is a party or by
which it is bound, or violate any provision of law or governmental
regulation or any court or regulating order, judgment or decree.
(e) LITIGATION. There is no litigation of any kind or nature,
nor any judicial or administrative proceeding or investigation pending
or threatened against the Company that may affect or impede the purpose
of this Agreement, nor are there any outstanding decrees, judgments,
sentences, injunctions or orders by any court, governmental department
or agency arising from any judicial or administrative action with
respect to the Company that may affect or impede the purpose of this
Agreement.
(f) NO MATERIAL MISSTATEMENT. All documents, reports or other
written information pertaining to this Agreement that have been
furnished to the Company by or on behalf of CVG Minerven are true and
correct in all material respects.
ARTICLE X
ADDITIONAL OBLIGATIONS
10.1 MAINTENANCE OF CONCESSIONS IN FORCE. CVG Minerven agrees to perform all
activities necessary to keep the Concessions in full force and effect during the
term of this Agreement. CVG Minerven agrees not to address MEM in writing to
terminate or waive in advance the Concessions and agrees not to perform any
other act or omission that may threaten the validity of the Concessions. Each
Party shall give immediate notice to the other of any written or verbal
communication received by MEM or of any authority or person related to the
Concessions.
10.2 TAX OBLIGATIONS. Each of the Parties shall comply with all tax obligations
set forth in the Venezuelan laws resulting from the execution and performance of
this Agreement from the Effective Date. The Company shall be liable for the
payment of the exploitation tax for its own production in Block B according to
the provisions set forth in article 90 of the Mining Law, but shall not be
responsible for any exploitation taxes corresponding to the persons operating
22
under the Small Miners Agreements. The Company shall not be liable for the
payment of past surface taxes in any of the Concessions or Block B, due to the
fact that CVG Minerven has timely paid the Exploitation Taxes in Mina Colombia
which are compensated with any surface tax due in the Concession.
10.3 GOOD FAITH. The Parties will use their best efforts to facilitate the
correct development of this Agreement in the most convenient manner, avoiding
any act or activity that could cause frictions between the Parties or in any
other way be an obstacle for completion of their obligations under this
Agreement. In the case unforeseen circumstances should arise that would affect
the objectives of the Parties, the Parties agree to use their best efforts to
find the most convenient solution.
10.4 FURTHER ASSURANCES. Each of the Parties shall execute or cause to be
executed all such other documents and instruments and do or cause to be done all
such other acts and things that are necessary or desirable to give effect to the
provisions of this Agreement.
10.5 ACCESS TO BLOCK B. CVG Minerven guarantees the Company full access to Block
B in order to carry out the activities established in this Agreement. In case
the Company is prevented or impeded to access Block B as a result of third
parties occupying such area (apart from the persons working under Small Miners
Agreements), among other obligations CVG Minerven shall instruct its personnel
and representatives to fully collaborate with the personnel of the Company to
avoid any interference with the activities performed by the Company in Block B.
Regardless of the obligations assumed above, in order to arrive at the best
possible solution, the Company may participate along with CVG Minerven in any
negotiation or agreement with any person interfering with access to Block B.
CVG Minerven shall not be liable for any occupations or invasions by third
parties in Block B not authorized by CVG Minerven after the Effective Date.
Notwithstanding the above, CVG Minerven, as holder of the Concession Titles,
shall use its best efforts and diligence to evict any person occupying or
invading Block B unlawfully.
10.6 ELECTRICAL INFRASTRUCTURE. In the event that an electrical infrastructure
project is carried out by a State owned company in Block B, the Company agrees
not to collect any amounts as rights of way, indemnities or other payments.
However, CVG Minerven authorizes the Company to negotiate with such electrical
companies the areas where such project could be installed so that it does not
interfere with the activities performed by the Company. CVG Minerven shall use
its best efforts to assist the Company in such negotiations in order to preserve
the intent of this Agreement.
23
10.7 SURFACE HOLDERS. Any legal surface holders or legitimate possessionaires as
well as any legitimate and legal improvements built by third parties on Block B
are excluded from this Agreement. However, if the Company requires the use of
the surface or needs to demolish any improvements for the exploration or
exploitation works, CVG Minerven and the Company shall make their best efforts
to reach the most adequate solution, maintaining the stability of the mining
rights granted to the Company by this Agreement. In any event, it is expressly
agreed that CVG Minerven shall not be liable for the payment of any kind of
indemnities or of any amounts whatsoever under any circumstances for these
matters. In the event that the Company needs to commence legal proceedings for
the expropriation or occupation of the surface, the power of attorney granted
pursuant to section 2.4 authorizes the Company to represent CVG Minerven for
such purposes. However, the Company shall request authorization of CVG Minerven
if required to commence any of such legal proceedings, the authorization cannot
be unreasonably denied or withheld. In any event, CVG Minerven agrees to grant
any other document or provide the information needed for these purposes.
ARTICLE XI
SMALL MINERS
11.1 SMALL MINERS AGREEMENTS. The Company hereby recognizes and accepts the
terms of the Small Miners Agreements until the expiration of each of their terms
or until the Company begins Exploration, Evaluation of the Deposit, development
or exploitation in any of the areas selected for such purposes. In case that
such areas are located within the boundaries under the Small Miners Agreements,
CVG Minerven will act according to the mechanism set forth in section 11.2 . In
the event that any person working under the Small Miners Agreements fails to
comply with any of the terms of its respective agreement, especially if they
operate below 100 mts from surface; or if their activities exceed the boundaries
of their respective agreements, CVG must seek strict compliance of the terms of
the Small Miners Agreements or alternatively must initiate termination
procedures and the corresponding legal actions seeking termination thereof, in a
speedy manner and at CVG Minerven's sole cost and expense and liability in
order to leave the area free from holders of rights and persons.
24
11.2 ACCESS/NO INTERFERENCE. CVG Minerven in its capacity as administrator and
party to the Small Miners Agreements hereby guarantees the Company access of its
personnel and equipment to all areas under the Small Miners Agreements for
purposes of carrying out the activities under this Agreement, so that the
persons working under such agreements do not interfere or prevent the activities
of the Company. CVG Minerven guarantees and shall be liable to the Company in
the event that any leaseholder working under a Small Miners Agreement interferes
with or prevents any of the activities performed by the Company in any of the
targets selected for Exploration, Evaluation of the Deposit or exploitation.
For purposes of this section, if the Company intends to access any of the areas
under the Small Miners Agreements for any Exploration and Evaluation of the
Deposit, it will notify CVG Minerven in order to take any immediate actions to
allow the Company to work in such area without interference .In addition, before
the Company begins exploitation and as a condition thereof, CVG Minerven must
have suspended any mining works in the areas which the Feasibility Study
determines are necessary to operate the mine , and must have evicted any persons
located there at its own expense.
In the event that access to such areas is impossible and it prevents the Company
from performing the Exploration or Evaluation of the Deposit; or the eviction of
the persons working under the Small Miners Agreements is not possible on a
friendly basis, so that the Company is prevented from beginning exploitation,
then the Parties shall jointly undertake the corresponding negotiations or legal
actions for the eviction of such persons in the most effective manner to
guarantee access of the Company to such areas. Any cost, expense or any other
amount necessary for such purposes shall be borne by both Parties.
It is understood that before any definite solution is reached for the access of
the Company to such areas, all terms and payments under this Agreement shall be
suspended.
11.3 NEW AGREEMENTS. CVG Minerven agrees not to enter into any agreement of any
kind with any person in Block B unless the Company has previously approved in
writing the terms and location of such agreements and only for purposes of
relocating the persons working under the Small Miners Agreements within Block
B.. Any cost, expense, action or fee related with termination of; or relocation
of persons or parties working under Small Miners Agreements will be exclusively
borne by CVG Minerven.
11.4 TECHNICAL ASSISTANCE. From the Effective Date, the Company shall provide
technical assistance to the persons working under valid and enforceable Small
Miners Agreements to make such activities safer and more efficient . Such
technical assistance shall be rendered according to a plan which will be
mutually agreed between the Parties.
25
ARTICLE XII
INTERNSHIPS
12.1 INTERNSHIP PROGRAM. With the purpose of contributing to the development and
improvement of its technical and professional personnel, CVG Minerven and the
Company agree to implement the following program of industrial internships.
(a) During the term of this Agreement, CVG Minerven may send to
Block B a maximum of two (2) Venezuelan professionals in the
earth sciences area and/or engineering as interns to be
trained in the exploration, development, exploitation and
processing techniques for gold mineral under the exclusive
supervision and control of the Company.
(b) Each internship, which shall be PRO ▇▇▇▇, at no cost for the
Company, except as set forth herein and shall last three (3)
consecutive calendar weeks per year. CVG Minerven shall bear
at its expense all labor benefits, accidents, disabilities,
legal actions and other costs related to such industrial
internships, notwithstanding the above, the Company shall
provide or pay transportation for the interns to and from El
Callao and within the Block B area. It is expressly understood
that there will not be a labor relationship between the
interns and the Company. The interns shall comply with the
rules set forth by the Company, subject to termination of such
internship. CVG Minerven and the Company may agree to modify
the scope, number of interns and duration of the industrial
internships.
12.2 TECHNICAL ASSISTANCE. As an alternative option, the Company may provide
technical assistance to Minerven by sending some of its personnel to CVG
Minerven, in case CVG Minerven requests such assistance. The technical
assistance program of the Company to be implemented in CVG Minerven shall be
governed by the procedures set forth in section 12.1; consequently, the Company
shall fulfill its obligations, in the same conditions in which CVG Minerven
fulfills such obligations when its interns are sent to Block B.
26
ARTICLE XIII
GUARANTEES FOR THE FINANCING OF EXPLOITATION
13.1 ASSIGNMENT IN GUARANTEE. For the financing of the project to be developed
in Block B, CVG Minerven authorizes the Company to assign in guarantee the
Agreement, its results and any other accessory rights in favor of the
participant financial entity or entities granting the necessary loans for the
development of the exploitation project of Block B. If required, CVG Minerven
shall provide its consent in writing of any security interest that the Company
may be required to grant by the lenders in connection with the financing of the
project, as long as such security interests are in agreement with the terms set
forth herein and do not include the Concession Titles.
ARTICLE XIV
AMENDMENT OF BY-LAWS
14.1 NOTICE. In the event of amendments to the by-laws of the Company, for sale
of its social assets, merger with another company, assignment of its shares or
any other reform provided in the Venezuelan Commercial Code, which modifies its
original share representation and results in other individuals or legal entities
appearing as holders of its capital; the Company shall inform CVG Minerven prior
to the performance of any such actions, so that CVG Minerven may be informed of
the new legal representation or by-laws of the Company.
14.2 BREACH. The breach of the obligation set forth in section 14.1 by the
Company may give rise to a sanction consisting in the payment of One Hundred
Thousand US Dollars ($US100,000.00), or its Bolivar equivalent according to
Article 117 of the Law of the Central Bank of Venezuela, which shall be paid to
CVG Minerven as soon as CVG Minerven knows of such breach and gives notice in
the manner set forth herein.
ARTICLE XV
TERMINATION
15.1 BY MUTUAL AGREEMENT. This Agreement may be terminated by the Company and
CVG Minerven through mutual agreement in writing.
15.2 UNILATERAL TERMINATION.
27
(a) If during the term of this Agreement the Company determines in
any moment that the conditions set forth in section 5.2 are
not met, the Company may terminate this Agreement, in which
case the advanced termination shall not give rise to any
indemnification whatsoever for any of the Parties. In such
event, this Agreement shall be terminated and CVG Minerven
shall be free to negotiate Block B with any other interested
party. The Company shall leave Block B free from any
environmental liabilities caused by the Company. All
geological studies, technical studies of exploration, plans,
diagrams, data sheets, geological cores, samples and any other
elements resulting from the programs shall become the property
of CVG Minerven without any indemnization whatsoever.
(b) If the Company interrupts the exploitation works that are the
subject matter of this Agreement for a term exceeding nine (9)
months without a justified reason, as determined by CVG
Minerven or a Force Majeure Event (in which case section 16.1
will be applicable), upon expiration of such term, CVG
Minerven will grant the Company an additional term of ten (10)
days allowing the Company to file an activity reinitiation
plan, which shall be implemented in a term not exceeding sixty
(60) days from the expiration of the additional term of ten
(10) days. If the reinitiation of the exploitation is not
implemented upon expiration of the sixty-day (60) term, CVG
Minerven may terminate this Agreement.
15.3 TERMINATION BY BREACH. In the event of a Material Breach of this Agreement
by a Party (the "Defaulting Party"), and if the dispute resolution mechanism
stated in section 18 has been followed without success, the other Party (the
"Non-Defaulting Party") will have the right to give written notice (the "Default
Notice") to the Defaulting Party specifying the breach in reasonable detail and
requiring the Defaulting Party to remedy the breach within a reasonable period
of time and in any event no later than ninety (90) days following receipt of the
Default Notice. The Defaulting Party will make diligent and commercially
reasonable efforts to rectify the breach to the reasonable satisfaction of the
Non-Defaulting Party at the earliest practicable time and in any event no later
than ninety (90) days following receipt of the Default Notice. If the Defaulting
Party fails to remedy the breach specified in the Default Notice to the
reasonable satisfaction of the Non-Defaulting Party within ninety (90) days
after the date of receipt of the Default Notice, then the Non-Defaulting Party
will have the right to terminate this Agreement and the matter shall be subject
to the arbitration procedure set forth in section 19.1. If to the reasonable
satisfaction of the Non-Defaulting Party the Defaulting Party has remedied the
breach specified in the Default Notice within the ninety (90) day notice period,
or is diligently pursuing the remedy of such breach, the notice of termination
will be void.
28
15.4 CONTINUED PERFORMANCE. In the event that any of the Parties initiates the
termination procedure due to an alleged Material Breach, both CVG Minerven and
the Company will continue the performance of their respective obligations while
any dispute or disagreement is being resolved, including during any period of
arbitration unless and until this Agreement is terminated or expires in
accordance with its terms.
ARTICLE XVI
FORCE MAJEURE
16.1 FORCE MAJEURE. Neither Party to this Agreement shall be liable for any
delay, interruption or failure in the performance of its obligations hereunder
if caused by an event of Force Majeure. If an event of Force Majeure occurs or
is likely to occur, the Party directly affected shall promptly notify the other,
giving particulars of the event. The Party so affected shall use best efforts to
eliminate, mitigate or remedy the event. If a Force Majeure event occurs and its
effects continue for longer than one hundred eighty (180) days notwithstanding
the efforts of the Party affected to eliminate or remedy the Force Majeure
event, and those effects frustrate the business intention of this Agreement, the
Parties may, upon request, enter into good faith negotiations to amend this
Agreement or to re-structure their relationship as may be appropriate.
ARTICLE XVII
NOTICES
17.1 NOTICES. Any notice, declaration, demand, request or other communications
to be made according to this Agreement shall be made in writing and delivered by
hand, facsimile or air courier return receipt requested at or to the following
addresses:
CVG Minerven:
-------------
Attention: President
Address: Zona Industrial Caratal, Edificio Administrativo de CVG Minerven
El Callao
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇
Telephone:(▇▇▇▇) ▇▇▇-▇▇▇▇/▇▇▇-▇▇▇▇
Fax: (▇▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO:
Ing. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Zona Industrial Caratal, Edificio Administrativo de CVG Minerven
El Callao
Municipio El Callao
Estado Bolivar
Telephone:(▇▇▇▇) ▇▇▇-▇▇▇▇/▇▇▇-▇▇▇▇
Fax: (▇▇▇▇) ▇▇▇-▇▇▇▇
The Company:
------------
General Counsel
Hecla Mining Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇' ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇.
Telephone : ▇▇▇-▇▇▇-▇▇▇▇
Fax:▇▇▇-▇▇▇-▇▇▇▇
WITH COPIES TO:
▇▇▇▇▇ von ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Diquez
Centro Gerencial Mohedano, Piso 8, Oficina 8-D,
Avenida Mohedano, Urbanizacion La Castellana
Municipio Chacao, Estado Miranda
Caracas, Venezuela
Telf: (▇▇▇▇) ▇▇▇-▇▇▇▇
---------------------
Fax (▇▇▇▇) ▇▇▇-▇▇▇▇.
Att: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
Any of the Parties may appoint another officer as addressee of the notices by
written notice, as well as a new address for the delivery of notices,
declarations, demands, requests or other communications.
30
ARTICLE XVIII
DISPUTE RESOLUTION PROCESS
18.1 DISPUTE RESOLUTION PROCESS. If a dispute touching upon the validity,
construction, meaning, performance or effect of this Agreement, the rights and
liabilities of the parties, any matter to be agreed upon after the date of this
Agreement arises out of or in connection with this Agreement, including a
dispute as to what constitutes a Material Breach of this Agreement or any
related agreement or in respect of any defined legal relationship associated
with or derived from this Agreement, the parties will follow the step-by-step
correction and resolution procedure set out below (the "DISPUTE RESOLUTION
PROCESS"):
STEP 1 The party initiating the process (the "COMPLAINING PARTY")
will advise the other party (the "OTHER PARTY") in writing of
the alleged breach or other basis for dispute.
STEP 2 If the dispute involves an alleged breach of this Agreement,
the Other Party will investigate the allegation and provide a
written report to the Complaining Party within five (5)
working days of receiving the notice given under Step 1 to the
effect that
(a) the investigation reveals that an alleged breach was not
committed,
(b) the breach or matter in dispute has been resolved, or
(c) the breach remains unresolved.
STEP 3 If the Complaining Party wishes to pursue the alleged breach
or dispute, then the Complaining Party will immediately notify
the Other Party in writing in order to hold a meeting between
the Presidents of each of the Parties within the next five (5)
working days from the date of the reception of the notice, so
that both Parties can resolve the alleged breach. Minutes will
be drafted after each meeting and signed by all persons
attending the meeting.
31
STEP 4 If the Parties referred to in Step 3 cannot resolve the
dispute through negotiation within fifteen (15) working days,
the dispute shall be referred to the termination procedure set
forth in section 15.3.
ARTICLE XIX
APPLICABLE FORUM AND LAW
19.1 ARBITRATION. Any dispute, claim, controversy and/or differences that may
arise from this Agreement shall be resolved in a final manner by means of an
institutional arbitration, according to the proceedings, terms and other rules
provided for arbitration in the General Regulation of the Arbitration Center of
the Caracas Chamber of Commerce that may be applicable as of the date of the
controversy. The arbitration shall be made by three (3) arbitrators of law who
appear on the list of arbitrators of the Arbitration Center of the Caracas
Chamber of Commerce ("CACCC"), two (2) of which shall be appointed by each of
the Parties separately. The third arbitrator, who shall assume the presidency of
the Arbitration panel, may be appointed by mutual agreement of the parties or in
the absence thereof, by the Executive Committee of the CACCC within the term and
manner provided in the General Rules of the CACCC.
The arbitrators shall act as arbitrators in law and shall always consider the
provisions hereof, the rules, uses and commercial customs of the Republic of
Venezuela. The award shall be final and except for the nullity motion provided
in Article 43 of the Commercial Arbitration Law, no additional recourse shall be
admitted against it. The arbitration shall take place in the Arbitration Center
of the CACCC and the language to be used in the arbitration acts shall be
Spanish.
Pursuant to this arbitration agreement, the Parties waive their right to appear
before a court; therefore, the submission to arbitration herein provided shall
be interpreted as exclusive and therefore, excludes ordinary jurisdiction. The
parties also waive their right to argue their differences before any foreign
court or before arbitrators different from those provided for in this section.
19.2 APPLICABLE LAW. The Parties hereto expressly declare that this Agreement
and its Schedules shall be governed by the laws of the Bolivarian Republic of
Venezuela.
32
19.3 SPECIAL DOMICILE. The Parties hereby choose the city of Caracas as the
only, exclusive and special domicile for all effects of this Agreement.
ARTICLE XX
MISCELLANEOUS
20.1 INUREMENT/ASSIGMENT. The rights and obligations of the Parties hereto shall
be binding and inure to the benefit of and be binding upon its respective
successors and assigns universally. No Party to this Agreement may assign
directly or indirectly its rights and/or assign its obligations resulting from
this Agreement without the previous written authorization of the other Party,
except that (i) such assignment is made under section 13.1, or ; (ii) such
assignment is made to any subsidiary of the Company, in which case the
assignment must be notified to CVG Minerven within fifteen (15) working days
following execution of the assignment. In this case, the Company shall deliver
to CVG Minerven the corporate guarantee attached to this Agreement under
Schedule "H" to guarantee the obligations such subsidiary undertakes pursuant to
this Agreement. In any case where CVG Minerven must authorize an assignment
under this Agreement such authorization cannot be unreasonably denied. Any Party
authorizing the assignment must respond within twenty (20) days following
request. If at expiration of such term the Party has not responded, the
authorization shall be deemed granted. Any assignment made in violation hereof
shall be null and shall have no legal effects whatsoever. In any event, the
authorization of any act of disposition of the Agreement shall be made in
accordance with Article 29 of the Mining Law as may be applicable.
20.2 ECONOMIC EQUILIBRIUM. In case that during the term of this Agreement any
external economic factor or event arises which could prevent or hinder the
development of this Agreement by the Company, the Company shall promptly notify
CVG Minerven attaching a detailed description of such alleged factors. If
pursuant to the Parties criteria such factor or event causes a negative economic
imbalance, the Parties agree to restructure their relations in order to
reestablish the economic equilibrium of this Agreement.
20.3 NON WAIVER. If any of the Parties stops insisting on one or several
instances in the strict performance of any of the provisions hereof or does not
make use of any of its rights herein set forth, it shall not be deemed to be a
waiver of any such provisions or a waiver to the future exercise of any such
33
rights, which shall remain in full force and effect. If any of the provisions
herein set forth is declared null, unenforceable or in conflict with the Law,
the remaining provisions of this agreement shall not be affected and will remain
valid and enforceable in the extent permitted by the law, provided however, that
in the event that such nullity or unenforceability substantially ▇▇▇▇▇ the
rights and interests of any of the Parties, they shall renegotiate this
Agreement in good faith to try to preserve its stability.
20.4 COMPLIANCE WITH LAWS. Unless otherwise stated in this Agreement, it is
expressly understood and it is so accepted by the Company that the Exploration,
Evaluation of the Deposit and exploitation works referred to in this section
shall be performed in compliance to the applicable laws.
20.5 DELIVERY OF AGREEMENT. CVG Minerven agrees that upon execution of this
Agreement before a Notary Public, it shall deliver a copy of the same to the
MEM, for the corresponding legal and administrative purposes.
20.6 PROPER PERFORMANCE. CVG Minerven agrees to take all the necessary steps
before the MEM, without incurring in any costs, to allow the proper performance
of the Exploration and eventual exploitation of Block B in the same conditions
set forth in the Concession Titles and under this Agreement.
20.7 LANGUAGE. All negotiations and writings related to this Agreement shall be
made and expressed in Spanish, which is the official language in Venezuela,
pursuant to the Constitution.
Two (2) counterparts to the same effect are made in the city of Puerto ▇▇▇▇▇ on
September 5, 2002.
34
