Exhibit 10.1
Mining Contract
Compania Minera Santa Xxxx, S. de X.X. de C.V.
Caborca, Sonora, Mexico
For the
Contract Mining
At
El Chanate Gold Mine
Caborca, Sonora, Mexico
With
Sinergia Obras Civiles y Mineras, S.A. de X.X.
Xxxxxxxxxx, Sonora, Mexico
November 24, 2005
TABLE OF CONTENTS
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1. THE WORK.........................................................2
1.1 Background.................................................2
1.2 Scope of Work..............................................2
1.3 General Information........................................2
1.4 Mining Plan................................................3
1.5 Pre-Production Activities..................................3
1.6 Contractor Responsibilities................................3
1.7 Delays Caused by MSR......................................10
1.8 Owner's Access............................................11
1.9 Cooperation with Other Contractors........................11
1.10 Subcontractors............................................11
1.11 Project Management and Organization.......................11
1.12 MSR's Responsibilities....................................11
1.13 Exclusion from Work.......................................12
1.14 Possible Additional Work..................................12
2. TERM............................................................13
3. REPRESENTATIVES OF THE PARTIES..................................13
3.1 MSR Representative........................................13
3.2 Contractor Representative.................................13
4. MINING CONTRACT AND REPORTING UNITS.............................14
5. PAYMENT.........................................................14
5.1 Progress Payments.........................................14
5.2 Mining Contract Rates.....................................15
5.3 Deviations and Corrections................................15
5.4 Performance of Force Account Work.........................15
5.5 Price Rise/Price Fall Calculation.........................16
5.6 Withholding Payments and Setoff...........................20
5.7 Mobilization and Demobilization Payments..................20
5.8 Advance Payment...........................................20
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TABLE OF CONTENTS
(continued)
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6. CONTRACT VALUE..................................................21
7. CONTRACTOR PERFORMANCE..........................................21
8. ENVIRONMENTAL AND PERMITTING....................................22
8.1 Permitting................................................22
8.2 Site Conditions...........................................22
8.3 Waste Disposal............................................23
8.4 Sewage and Wastewater Disposal............................23
9. SAFETY..........................................................24
9.1 Site Safety...............................................24
9.2 Compliance with Laws......................................24
9.3 Contactor Responsibility..................................24
9.4 Interim Reclamation.......................................25
9.5 Inspection................................................25
9.6 Security..................................................25
10. EQUIPMENT INSPECTION............................................26
11. CONTRACTOR STATUS...............................................26
12. SITE AND EQUIPMENT INSPECTION AND ACCESS........................27
12.1 Inspection................................................27
12.2 Access to Site............................................28
12.3 Problems at the Site......................................28
13. ADDITIONAL CONTRACTOR DUTIES....................................29
13.1 Dust Control..............................................29
13.2 Additional Equipment......................................29
13.3 Survey Control............................................29
13.4 Monuments.................................................29
13.5 Labor Disputes............................................29
13.6 Wages.....................................................30
13.7 Ad Valorem Taxes..........................................30
13.8 Legal Issues..............................................30
13.9 Spare Parts...............................................30
13.10 Maintenance...............................................30
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TABLE OF CONTENTS
(continued)
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13.11 Non-Discrimination........................................31
13.12 Antiquities...............................................31
14. ADDITIONAL DUTIES OF MSR........................................31
14.1 Payment of Taxes..........................................31
14.2 Access....................................................31
14.3 Problems with the Work....................................32
15. INSURANCE.......................................................32
15.1 Coverage..................................................32
15.2 Additional Insured........................................33
15.3 Deductibles...............................................33
15.4 Certificates..............................................33
15.5 Default...................................................33
15.6 Scope of Coverage.........................................34
15.7 Additional Insurance......................................34
15.8 Subcontractor Insurance...................................34
16. LIENS AND ENCUMBRANCES..........................................35
16.1 Prompt Payment............................................35
16.2 No Liens..................................................35
16.3 Repairs...................................................35
16.4 Indemnity.................................................35
17. INDEMNIFICATION AND DISTRIBUTION OF RISK........................35
17.1 Indemnification by Contractor.............................35
17.2 Damage to Contractor's Equipment..........................36
17.3 Indemnification by MSR....................................37
17.4 Joint Liability...........................................37
17.5 Procedure.................................................38
17.6 Materials of Environmental Concern........................39
17.7 Limitation on Damages.....................................39
18. FORCE MAJEURE...................................................39
18.1 Definition................................................39
18.2 Suspension of Obligations.................................40
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TABLE OF CONTENTS
(continued)
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18.3 Duration..................................................40
19. CONTRACT SUSPENSION.............................................41
19.1 Right to Suspend..........................................41
19.2 Consequences of Suspension................................41
19.3 Compensation for Suspension...............................41
19.4 Resumption of Work........................................42
19.5 Duration of Suspension....................................42
19.6 Suspension for Cause......................................43
20. CONTRACT TERMINATION............................................43
20.1 Mutual Agreement..........................................43
20.2 Default by Contractor.....................................43
20.3 Use of Equipment..........................................44
20.4 Default by MSR............................................45
20.5 Termination for Convenience...............................45
20.6 Survival..................................................46
20.7 No Decree Required........................................46
20.8 Release...................................................46
21. CONTRACT AWARD AND EFFECTIVE DATE...............................47
21.1 Notice of Award and Notice to Proceed.....................47
21.2 Change in Rates...........................................47
22. REPRESENTATIONS AND WARRANTIES..................................48
22.1 MSR Representations and Warranties........................48
22.2 Contractor Representations and Warranties.................49
22.3 Performance Warranty......................................49
22.4 No Third-Party Beneficiaries..............................50
22.5 Exclusivity...............................................50
23. LABOR LAW RELATED LIABILITIES...................................50
23.1 Contractor's Obligations..................................50
23.2 Indemnity.................................................51
23.3 No Responsibility.........................................51
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TABLE OF CONTENTS
(continued)
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24. PERFORMANCE BOND................................................51
25. DISPUTE RESOLUTION..............................................52
25.1 Informal Resolution.......................................52
25.2 Memorandum................................................52
25.3 Refusal to Perform........................................52
26. FORMAL DISPUTE RESOLUTION.......................................52
26.1 Arbitration...............................................52
27. JURISDICTION....................................................55
28. TRANSFERABILITY OF CONTRACT.....................................55
29. SUCCESSORS AND ASSIGNEES........................................56
30. RECORDS AND AUDIT...............................................56
31. CONFIDENTIALITY.................................................56
32. MISCELLANEOUS...................................................57
32.1 Amendment; Waivers........................................57
32.2 Entire Agreement..........................................57
32.3 Counterparts..............................................57
32.4 Invalidity................................................58
32.5 No Solicitation...........................................58
32.6 Further Assurances........................................58
32.7 Schedule for Performance..................................58
32.8 Interpretation............................................58
33. NOTICES.........................................................59
33.1 Procedure.................................................59
33.2 Electronic Communications.................................59
34. MINING CONTRACT SIGNATURE PAGE..................................61
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Figures
Figure 1 - Mining Schedule.................................Appendix C, 2
Figure 2 - Dump Schedule...................................Appendix C, 3
Figure 3 - Year 1, Months 1-6 Production Schedule..........Appendix C, 4
Figure 4 - Mine Production Schedule by Quarters............Appendix C, 5
Figure 5 - Annual Mine Production Schedule.................Appendix C, 6
Appendices
A Sinergia Bid
B Responsibility of Parties
C & D Mining Plan & Mining Plan Maps
D1 Haulage Profiles
E Stand-by Rates
F Notification Forms
F-1 Notice of Award
F-2 Acceptance of Notice
F-3 Notice to Proceed
F-4 Force Account Work Authorization
G Summary Table of Contract Value
H Permits Not Yet Obtained by MSR
I Instrument of Authority for Xxxxxxx Xxxxxxxx
J Instrument of Authority for Xxxxxx Xxxxxxxxx Xxxxx
K Baseline Numbers for Purposes of Section 21.2.
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PREAMBLE
It is intended that the terms of this Mining Contract (scope of work,
conditions of work, work practices, production targets, safety requirements
etc.) are to be achievable by both parties, and that both parties can benefit
under the Mining Contract. Minera Santa Xxxx, S. de X.X. de C.V. ("MSR")
acknowledges the need of Sinergia Obras Civiles y Mineras, S.A. de C.V. (the
"Contractor") to profit through performing mining operations, and the Contractor
acknowledges the need of MSR to profit from suitable development of the El
Chanate property. Notwithstanding this provision, neither MSR nor Contractor
represents, warrants, promises or guarantees that the other will make a profit
from its operations hereunder.
Both parties acknowledge that there will be adjustments needed as a result
of changes encountered during the period of the Mining Contract, and that
certain specific provisions have been included where anticipated. Not all
changes encountered can be anticipated and with that in mind a general procedure
has been provided for handling such change conditions in the Mining Contract.
Wherever possible it is intended that two-way communication and mutual agreement
between MSR and the Contractor will be able resolve most, if not all, issues.
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THIS MINING CONTRACT (the "Mining Contract" or the "Agreement") is made
and entered into as of the 24th day of November, 2005, but effective only as of
the Effective Date (as defined in Section 21), by and between Minera Santa Xxxx,
S. de X.X. de C.V., a corporation organized under the federal laws of Mexico,
whose address for purposes hereof is Xxxxx Xxxxxxxx Xxxxxxxxx 00, xxxxxxx con
Xxxxxxx "X", Xxxxxxx, Xxxxxx 00000, Xxxxxx ("MSR") and Sinergia Obras Civiles y
Mineras, S.A., de C.V., a corporation organized under the federal laws of
Mexico, whose address for purposes hereof is Calle del Cobre No. 91, Parque
Industrial, Xxxxxxxxxx, Xxxxxx 00000, Xxxxxx ("Contractor").
RECITALS
A. MSR intends to construct the El Chanate gold mine near Caborca, Sonora,
Mexico (the "Mine"). As part of this operation MSR desires to employ an
independent contractor to perform the mining. MSR solicited bids to perform this
work.
B. Contractor desires to perform such mining (the "Work," as more
particularly described in Article 1 and Appendices A-D attached to this Mining
Contract), and represents that it has the skills and experience necessary to
conduct the Work, and that it is willing to and capable of performing such
operations for MSR.
C. Contractor recognizes the reliance, faith and confidence MSR places in
Contractor (i) to furnish the experience, knowledge, skill and judgment required
to cooperate with and advance the interests of MSR at the Mine through sound
mining methods, careful supervision and efficient administration and (ii) to
pursue and complete the Work in an expeditious, timely and economical manner
consistent with the interests of MSR, all of which Contractor is able and
willing to do for the compensation and in accordance with the terms and
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual conditions and covenants
hereinafter set forth, the parties agree as follows:
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1. The Work
1.1 Background
MSR has retained M3 Engineering and Technology Corp (M3) of Tucson,
Arizona, to complete a feasibility study for the Mine (the "Feasibility Study").
The mining portion of the Feasibility Study will be completed by Independent
Mining Consultants of Tucson, Arizona and the geotechnical portion by Call and
Xxxxxxxx, also of Tucson, Arizona. K D Engineering of Tucson was primarily
responsible for the metallurgical test work. Upon its completion, MSR will
provide Contractor with a copy of the Feasibility Study. To the extent the
completed Feasibility Study requires any material changes to the Mining Plan (as
defined in Section 1.4), those changes, to the extent they required additional
Work on the part of the Contractor, will be treated as Force Account Work (as
defined in Section 5.1.2).
1.2 Scope of Work
Contractor agrees to conduct all of the mining and related services
described in this Article 1, and in Appendices A-D, in accordance with and
subject to the terms set forth in those Appendices and in this Mining Contract,
and to provide all necessary supervision, labor, methods, material, and supplies
necessary to perform all of the Work.
1.3 General Information
The Mine design parameters are:
Slope Angles 46.5 degree inter-ramp on the north wall
45.0 degree inter-ramp on the south, west, and
east walls
Road Width 00 xxxxxx
Xxxx Xxxxx 00 %
Bench Height 5 m working height, triple benched to 15 m
Specific Gravity - In Place Ore - 2.52 tonnes per cubic meter
Waste - 2.46 tonnes per cubic meter
Bond Work Index 11 to 14
Moisture - In Place 3%
Expected Drill Penetration Rate 1.2 meters per minute
Planned Mine Life 6 years
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1.4 Mining Plan
Contractor shall perform and complete all of the Work in accordance with
(a) the mining plan, drawings, maps and profiles set forth in Appendices C, D
and D-1 (collectively, the "Mining Plan"), as the Mining Plan may be modified by
MSR from time to time; (b) the provisions of any concessions covering any
property at the Mine; (c) the provisions of any surface use agreements covering
any property at the Mine; and (d) the provisions of applicable federal, state
and local permits issued or to be issued and applying to activities at the Mine
(collectively, the "Permits").
1.5 Pre-Production Activities
As part of the Work, Contractor agrees to perform all of the
pre-production activities described in Appendix C.
1.6 Contractor Responsibilities
In connection with the performance of the Work, the Contractor must
provide, at its sole expense:
All appropriate equipment to allow for timely and proper
performance of the Work, as set forth in Appendix A
("Contractor's Equipment")
Mobilization and assembly of Contractor's Equipment
Drilling and blasting (the drill must have an automatic sampling
system)
Load, hauling and dumping of material:
Ore to be placed into the primary crusher
Waste to be placed on the designated dumps
Low grade ore to be placed in a low grade stockpile
Construction and maintenance of the:
Internal mine roads and working surfaces
Access roads to the waste dumps
Access roads to the crusher
Waste dump safety berms
Safety berms on roadways
Pit dewatering
Pit lighting
Equipment maintenance (including without limitation lubricants and
repair parts)
Equipment repair shop and appropriate warehouse space
Field supervision
Necessary employees
Transportation for employees to and from the Mine (as required)
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Food for employees (as required)
Housing for employees (as required)
Proper and timely payment of wages and benefits of its employees and
making all payments required by applicable federal, state or
local laws, rules or regulations on account of its labor
relationships with its employees
Office space, phone and fax
In addition to the list of Contractor's responsibilities set forth above,
Contractor has agreed to perform the additional responsibilities set forth as
Contractor's Responsibilities in the attached summary document "Responsibilities
of Parties" in Appendix B. The "Responsibilities of Parties" set forth in
Appendix B are a summary of responsibilities to facilitate reference and, in the
event of any inconsistency between the responsibilities as outlined in Appendix
B and described in the main written text of the Mining Contract, the main
written text of the Mining Contract will control.
1.6.1 Production Rates and Quantities
(a) The Contractor shall meet the production requirements of the Mining
Plan, as described in the mining production schedule (set forth in Appendix C),
and the open-pit development plan (set forth in Appendix D). Contractor agrees
to meet those production requirements on a daily basis, and to notify MSR's
Representative promptly on any day when it does not meet those production
requirements.
(b) MSR shall be entitled to make changes to the open-pit design and
production sequencing described in Appendices C and D in advance of or during
mining operations, and any such changes shall not be deemed to relieve
Contractor from any of its obligations under this Mining Contract, provided that
such changes do not increase the average haul distances by more than five
percent on an annual basis, and at least five calendar days advance notice of
such changes is given to Contractor. Any planned reduction in production rates
in excess of 5% must be consented to by Contractor, such consent not to be
unreasonably withheld or delayed. Any planned increase in required production
rates in excess of 5% must be consented to by Contractor, such consent not to be
unreasonably withheld or delayed. In the event that an increase in production
rates would require additional mining equipment, the Contractor would have first
right of refusal as to whether or not to add to the Contractor's Equipment fleet
in order to achieve the increased production rates. Contractor shall have five
(5) calendar days to communicate to MSR in writing that it has exercised this
right of first refusal. Contractor's failure to give that notice to MSR within
the above five (5) calendar day period shall be taken as a waiver of the right,
and in that event MSR may contract with any third party to conduct the
additional Work required by the increase in production rates. If Contractor
exercises its right of first refusal to provide the additional equipment,
Contractor agrees that the fully operational required additional mining
equipment shall be on-site within thirty (30) days after Contractor's
notification to MSR that it has exercised the right of first refusal in
question. Contractor will be compensated for any additional Work required by the
increase in production rates at the same rate as set forth in Appendix A, and
shall not be entitled to any additional compensation related to costs it incurs
in acquiring any additional equipment.
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1.6.2 Blast Pattern Layout
MSR will provide sufficient data points including without limitation blast
limit points and elevation points so that Contractor can lay out the blast
pattern to the designed pattern and hole depth. Blast patterns will be laid out
in the field by the MSR surveyor and the limits of the blast patterns will be
indicated. Sufficient information will be provided by the MSR surveyor so that
Contractor can calculate the depth of drilling required and the location of each
blast hole.
1.6.3 Geology and Grade Control
(a) Mining will be carried out under the direction of MSR's grade control
engineer. Blasthole samples will be collected by Contractor under the direction
and procedure given by MSR's grade control engineer. These blasthole samples are
required to determine the rock type and will be taken from each drill hole.
MSR's grade control engineer will be responsible for getting the samples to the
laboratory.
(b) MSR's grade control engineer will be responsible for marking and
outlining all blasted material so that the Contractor can haul the material to
the correct destination. Blasted material will be marked using marked stakes,
ribbons or a combination. Blasted material will be marked as either (i) waste,
(ii) low grade ore for stockpile, or (iii) ore for crusher feed.
(c) Contractor shall ensure that the material mined is sent to the correct
destination. The Contractor will be penalized for sending ore to the waste dump
or waste to the crusher. This penalty will be the calculated value of the
recoverable gold in each truckload of ore dumped on the waste pile or the
process cost of waste dumped in the crusher, and the amount of such penalty may
be withheld by MSR from subsequent payments due to Contractor under this Mining
Contract, until it is fully recovered.
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(d) Contractor shall be responsible for not dumping inappropriate material
into the crusher. Should the crusher experience down-time as a result of such
inappropriate material being dumped, the Contractor will be penalized the
calculated cost of the down-time and necessary repairs, and the amount of such
penalty may be withheld by MSR from subsequent payments due to Contractor under
this Mining Contract, until it is fully recovered. Repeated dumping of
inappropriate material into the crusher that causes repeated crusher down-time
or repeated crusher breakdown or damage that denotes gross negligence, gross
lack of care or supervision, deliberate conduct, deficient training of
Contractor's employees, or analogous misconduct shall give MSR the right
terminate this Mining Contract pursuant to Section 20.2 hereof, without any
further liability or obligation on the part of MSR.
1.6.4 Surveyed Volumes and Tonnage Calculations
The following are the bulk densities (defined in tonnes per cubic meter)
that will be generally used for routine calculation of tonnages from surveyed
volumes:
Bulk density (in place) - Ore: 2.52
Bulk density (in place) - Waste: 2.46
In some situations (as designated by MSR in its sole discretion) the following
table of bulk densities may be used to more accurately calculate tonnages from
surveyed volumes:
Bulk Densities Used in Final Model
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Model Rock Description Bulk Bulk Factor Bulk
Code Density Density
----------------------------------------------------------
1 Alluvium 2.00 1.00 2.00
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2 Oxide 2.41 1.00 2.41
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3 Sandstone 2.62 0.97 2.54
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4 Fault 2.62 0.97 2.54
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5 Siltstone 2.67 1.00 2.67
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6 Intrusives 2.53 1.00 2.53
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1.6.5 Excess Haul Distance
Haul distances for ore or waste other than those described in the Mining
Plan and as described in Appendix C and D will be paid for on a cost per
tonne-km. basis. An excess haul distance is a one-way haul distance greater than
1.5 km, as measured from the exit point of the pit. For example, a one-way haul
distance of 1.9 km measured from the exit point of the pit to the dumping point,
would be an excess haul distance of 0.4 km. Excess haul distances will be paid
for on a $0.044/tonne-km basis, and paid in increments of 0.5 km, starting with
the first 0.1 to 0.5 km of excess haul distance. By way of example, if the
excess haul distance was 0.2 km, Contractor would be paid an additional
$0.022/tonne; if the excess haul distance was 0.4 km, Contractor would receive
the same additional $0.022/tonne; if the excess haul distance was 0.6 km,
Contractor would be paid an additional $0.044/tonne.
1.6.6 Reports to Be Provided by the Contractor
Contractor agrees to provide the following reports on a timely basis to
the MSR Representative:
(a) Daily Production Report: indicating the amount of material mined and
its destination on a daily basis and accumulated for the month to date.
(b) Blasting Report: with content as indicated Section 1.6.11.
(c) Daily Maintenance Report: indicating the availability of each piece of
major mining equipment, reasons for down time and status of repair work.
(d) Daily Fuel Usage Report: indicating the fuel used by each piece of
Contractor equipment involved in mining activities.
(e) Safety Report: a report describing accidents, safety incidents or
threat to health issues shall be provided whenever such an event occurs or is
detected (and no later than 24 hours after occurrence or detection). A routine
weekly report shall be provided even if no such event took place during the
week, and may include suggestions to improve safety.
(f) Monthly Report: a monthly report indicating total tonnage blasted,
total explosives used, total tonnage of material mined and its destination,
monthly availability of the major mining equipment and reasons for major
breakdowns.
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(g) Miscellaneous Report: describing other information (on a daily or
monthly basis) as may be requested by the MSR Representative from time to time.
The reports described in Sections 1.6.6(a)-(d) may be combined into one report.
Reports may be in Spanish or English.
1.6.7 Water
MSR has purchased a source of industrial water. This water will be
available for dust control and other industrial uses, at no cost to the
Contractor. The Contractor will be responsible for supplying its own
potable water.
1.6.8 Maintenance Shop, Warehouse and Office Space
The Contractor shall be responsible for providing its own equipment
maintenance shop, warehouse, and office space. All site preparation and
foundation work shall be the responsibility of the Contractor. MSR will provide
water (other than potable water) and electrical services (subject to the
provisions of Section 1.6.9) for the equipment maintenance shop, the warehouse
and the office space. The facilities described in this Section 1.6.8 will be
located on site in an area agreed to by MSR.
1.6.9 Electrical Power
Contractor acknowledges that initially, electrical power will not be
available at the Mine. MSR is currently negotiating with CFE a contract for
construction of a power line to the Mine, which is intended to be constructed
simultaneously with the pre-production stripping, Xxxxx Pad construction and
other infrastructure work. The Contractor must provide its own electrical power,
as necessary for it to perform the Work, until that power line is constructed.
After the power line is constructed, metered electrical power will be provided
by MSR at no additional cost to Contractor.
1.6.10 Fuel
MSR will provide standard quality fuel for the Work to the Contractor. Any
fuel required by the Contractor for transportation of equipment or employees to
or from the Mine, or use off the Mine site will be to the account of the
Contractor. Fuel will be metered into the mine fuel tank. The Contractor will
provide MSR with a daily fuel report indicating the amount of fuel used by each
piece of equipment. The amount of fuel used will be reconciled with the
inventory in the mine fuel tank each month. Fuel inventories will be controlled
by warehouse issue slips. Due to the likelihood of increasing fuel prices,
Contractor agrees to operate Contractor's Equipment in an efficient manner, in
order to achieve fuel usages as outlined in manufacturer's performance handbooks
for the various pieces of Contractor's Equipment. Contractor agrees that idling
of engines and non-productive use of Contractor's Equipment will be minimized.
MSR will monitor fuel consumption using the fuel reports and equipment operating
reports.
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1.6.11 Explosives
(a) MSR shall be responsible for procuring and warehousing of all
explosives, blasting agents and blasting accessories, as well as obtaining all
necessary permits required by federal, state or local government authorities to
allow for the use of such explosives, blasting agents and blasting accessories.
MSR will provide the Contractor with explosives needed for the Work, as
available for purchase in the Mexican authorized market. Inventories will be
controlled by warehouse issue slips. Contractor shall observe all safety
precautions and comply with all applicable federal, state and local laws, rules
and regulations with respect to handling explosives and conducting blasting
operations, and shall indemnify, defend and hold MSR harmless from and against
any and all claims, damages and losses (including reasonable attorney's fees)
incurred by or resulting to MSR from Contractor's failure to so comply.
(b) The usage of explosives will be based on a powder factor agreed to by
the Contractor and MSR. A +5% variance on the agreed powder factor will be
allowed to cover any secondary blasting of oversize or high floor conditions
without cost to the Contractor. Explosives used above the 5% allowance will be
to the account of the Contractor.
(c) MSR realizes that good fragmentation is in the best interest of the
Mine and the Contractor. MSR will work with the Contractor to ensure that
blasting patterns and powder factors are optimized to produce the best possible
fragmentation.
(d) The Contractor will provide a blast report detailing the amount of
explosives and accessories used, a calculation of the powder factor, the amount
of explosives and stemming used per hole and the initiation sequence of each
blast. Other information may be requested by MSR for inclusion in the blast
reports from time to time.
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1.6.12 Sanitary
No on-site sanitary facilities will be available during the majority of
the construction period. The Contractor must supply portable toilets during this
period for its employees and other personnel.
1.6.13 Communications
The Contractor shall be responsible for its own communications systems.
1.6.14 Housing
The Contractor shall be responsible for any required housing requirements
for its employees and consultants.
1.6.15 Transportation
The Contractor shall be responsible for transporting its employees to and
from the Mine site.
1.7 Delays Caused by MSR
1.7.1 Payment to Contractor
Any delays, other than normal operating delays, and in excess of three
hours, caused by MSR that require the Contractor to completely shut down its
operations will be paid for on a stand-by basis. The Contractor's hourly, daily
and weekly stand-by rates for the mining fleet are set forth on Appendix E.
1.7.2 Examples of Delays
Delays caused by MSR shall include delays caused by not having sufficient
fuel or explosives on site, or delays caused by not having required survey
layouts, drill patterns or blasted material marked and ready for the Contractor
to conduct the Work. Normal delays caused by mine operations (such as trucks
being delayed at the crusher) shall not be considered delays caused by MSR for
purposes of this Section 1.7. In the event of any delay caused by Force Majeure
(as defined in Section 18.1), MSR will not be required to make any stand-by
payments.
1.7.3 Calculation of Payment
If a delay caused by MSR occurs, payment to be made to Contractor under
Section 1.7.1 for the affected equipment will be calculated as follows: after
three hours and up to the end of that shift, the hourly rate will be paid;
thereafter, the daily rate will be paid for up to seven days; if the delay is in
excess of seven days, then the weekly rate will be paid; delays in excess of the
first week will be paid at the weekly rate.
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1.8 Owner's Access
Contractor will allow MSR's Representative access and adequate time to
inspect the work installations, equipment, supplies, or any area where any Work
has been, is being or will be performed at any time.
1.9 Cooperation with Other Contractors
Contractor acknowledges that MSR intends to enter into separate contracts
with third parties for construction of the heap xxxxx pads and ponds, access
road, pipeline, power line, and other infrastructure at the Mine. Some of the
construction work will occur simultaneously with the initial phases of the Work
under this Mining Contract. Contractor agrees to coordinate its performance of
the Work and cooperate with other contractors at all times.
1.10 Subcontractors
The Contractor agrees not to hire any subcontractors to perform any of the
Work, except as permitted under Article 28.
1.11 Project Management and Organization
The Contractor shall appoint management and supervision personnel with
adequate experience and capabilities to successfully perform the Work. An
organizational chart has been submitted to MSR which includes the names and
qualifications of the key personnel, and designates an authorized representative
of Contractor (the "Contractor's Representative"). The Contractor will also
designate a Site Superintendent acceptable to MSR, prior to the commencement of
any Work at the Mine. MSR reserves the right to request changes in the
Contractor's on-site staff; any such request shall be promptly honored by
Contractor without any cost to MSR. The Contractor will provide resumes of all
senior personnel to be on site, and their reporting function within the
Contractor's organization.
1.12 MSR's Responsibilities
MSR will provide the following:
Site ambulance
Environmental and operating permits
Blasting permits
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Removal of cactus and other sensitive flora and fauna
Industrial water and on-site water storage (except for potable water
for Contractor's employees and other personnel)
Commercial electrical power which will be delivered to the
maintenance shop, crusher, and administrative offices on a
metered basis, subject to the provisions of Section 1.6.9
Standard quality fuel and on-site fuel storage
Explosives and explosives storage area
Maintenance of site access road
Site surveying and layout
Blast pattern layout
Blasthole sample transportation
Identification of the ore and waste
Final Reclamation of the Mine site
Overall site management
In addition to the list of MSR's responsibilities set forth above, MSR has
agreed to perform the additional responsibilities set forth as MSR's
Responsibilities in the attached summary document "Responsibilities of Parties"
in Appendix B. The "Responsibilities of Parties" set forth in Appendix B are a
summary of responsibilities to facilitate reference and, in the event of any
inconsistency between the responsibilities as outlined in Appendix B and
described in the main written text of the Mining Contract, the main written text
of the Mining Contract will control.
1.13 Exclusion from Work
The Work does not include construction and operation of xxxxx pads, ponds,
the leachate recovery system, or any of the metallurgical recovery plant,
administrative office, laboratory, mine access road, power line, water xxxxx and
pipe line, or crushing and conveying system, the supply and installation of
LLDPE, HDPE geomembrane materials, piping and fittings, and other infrastructure
items. These items will be the subject of separate contracts which MSR intends
to enter into with third parties
1.14 Possible Additional Work
The Mining Plan contemplates the crushing, conveying and stacking of the
ore on the xxxxx pads (without use of trucks). Contractor acknowledges that
during the Term of this Mining Contract MSR may modify the Mining Plan to
provide for ore to be placed on the xxxxx pads by trucks. In that event, the
Contractor shall be required to load crushed ore, haul and dump it on the xxxxx
pads, and to level the pile. MSR shall be responsible for the placement and
operation of the xxxxx solution piping. The parties agree that MSR has the right
to modify the Work as set forth in this Section 1.14 at any time by providing
written notice to the Contractor, and Contractor agrees to perform the Work as
so modified. The additional Work described in this Section 1.14 shall not
constitute Force Account Work. In the event the Work is modified as set forth in
this Section 1.14, the payments to the Contractor shall be modified as reflected
in Contractor's bid for the loading, hauling and dumping (cost per tonne moved
to the pads) as set forth in Appendix A.
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2. Term
This Mining Contract shall be effective as of the date first set forth
above (the "Effective Date"), and the term of this Mining Contract (the "Term")
shall continue in effect until the earlier of (a) December 31, 2012; (b) such
time as the Work is completed; or (c) such other date as this Mining Contract is
terminated as set forth in Article 20. For purposes of this Mining Contract, the
period of time beginning on the Effective Date and ending on the one year
anniversary of the Effective Date, and each subsequent period beginning on any
anniversary of the Effective Date, and ending on the next anniversary of the
Effective Date, shall be referred to as an "Annual Period."
3. Representatives of the Parties
3.1 MSR Representative
MSR hereby designates its Mine Superintendent or his designee as its
representative (the "MSR Representative"). MSR shall have the right to appoint
an additional or replacement MSR Representative by written notice to Contractor.
The MSR Representative shall have the right to be present during all phases of
the Work and any Force Account Work. The MSR Representative shall have the
authority, on behalf of MSR, to enforce the provisions of this Mining Contract,
to take any action necessary to cause or promote the orderly and expeditious
prosecution of the Work and any Force Account Work, and to approve, change or
suspend the Work or any Force Account Work, in whole or in part, in the event
that the MSR Representative deems such action necessary.
3.2 Contractor Representative
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Contractor's Representative shall have the full authority to act on
Contractor's behalf in connection with the Work, any Force Account Work and
other conditions specified in this Mining Contract. Before any limitation placed
by Contractor on the authority of Contractor's Representative may be effective,
such limitation shall first be disclosed to MSR in writing, and if not so
disclosed, shall not have any effect.
4. Mining Contract and Reporting Units
This Mining Contract uses the following units:
Xxxxx xx Xxxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars ($US)
5. Payment
5.1 Progress Payments
The terms of payment for Work performed under this Mining Contract will be
as follows:
5.1.1 Calculation of Payments
The Contractor will be paid twice each month. Payment will be based on
tonnage of waste to dumps, low grade ore to stockpile, and ore to the crusher,
as calculated by survey and reconciled by truck count and approved by MSR. In
the event of a discrepancy between the truck count and survey, the survey
results will be used, but the Contractor will be allowed to audit survey
calculations as needed. The Contractor shall participate in the twice monthly
surveys to avoid any conflict. Pay rates per tonne of material mined will be the
rates agreed to in Appendix A.
5.1.2 Payment for Force Account Work
Any additional Work (other than the additional Work described in Section
1.14) done by the Contractor at the request of MSR ("Force Account Work") will
be paid for on an agreed to hourly rate as provided by the Contractor for
Contractor's Equipment (as provided in Appendix A).
5.1.3 Manner of Payments
Contractor shall send invoices on the fifteenth and the last day of each
month, and invoices for Work performed by the Contractor will be paid fifteen
(15) calendar days after receipt of the invoice, providing there is no dispute
over the quantity of tonnage moved. Ten percent of the amount invoiced will be
withheld from each payment and will be paid once a final inspection is made and
the Work completed has been deemed satisfactory by MSR. The ten percent retained
from each invoice will be paid with the next payment or within thirty (30) days,
although the retained amount will accrue no interest, unless the Work to which
the retained amount pertains is deemed unsatisfactory, in which case MSR will be
obligated to pay the retained amount to Contractor only after Contractor has
corrected the deficiencies in the Work to MSR's satisfaction.
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5.2 Mining Contract Rates
A table of rates by period that will be paid to the Contractor for tonnes
of material moved along with associated assumptions is set forth in Appendix A.
A table of Force Account Work rates that will be paid to the Contractor is also
set forth in Appendix A.
5.3 Deviations and Corrections
5.3.1 Plans
MSR has furnished to Contractor certain drawings, specifications, plans
and schedules, each of which is listed or set forth in Appendix D hereto, which
reflect design criteria for the Mine approved by MSR and comprise part of the
Mining Plan. In addition, MSR may during the Term of this Mining Contract
furnish to Contractor other proprietary information, including without
limitation additional drawings, specifications, plans or schedules which are to
be used for the Mine, all of which shall be deemed part of the Mining Plan.
5.3.2 Deviation from Mining Plan
If the Contractor deviates from the Mining Plan without the written
consent of MSR's Representative and such deviations are deemed by MSR in its
sole discretion to have been avoidable, no payment for such Work will be
required. Should Contractor be required to make a correction as a result of
errors in operation that were not the fault of MSR, then any such correction
will be at Contractor's expense. 5.4 Performance of Force Account Work
5.4.1 Performance
Force Account Work shall be performed at the request and direction of the
MSR's Representative at any time and from time to time via delivery by MSR to
Contractor of a written work order which provides any instructions, drawings,
and specifications which may be required to adequately define the additional
Work to be performed.
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5.4.2 Procedure
Within five (5) calendar days after receipt of a work order for Force
Account Work, Contractor shall submit for MSR's review and approval a proposed
Force Account Work Authorization form in the form attached as Appendix F hereto
which shall include:
(a) a detailed estimate of any increase in the Contractor's compensation
required as a result of the additional Work;
(b) an estimate of the time necessary to complete the additional Work
required by such work order;
(c) advice as to the date after which the information in the proposed
Force Account Work Authorization form is no longer valid; and
(d) a statement, with respect to the additional Work described in the
Force Account Work Authorization form, that the Contractor has made such
inspections and examinations and taken such other actions as are necessary so
that all of the provisions of Section 12.1.1 will apply to the additional Work
described in the proposed Force Account Work Authorization form.
5.4.3 Acceptance
Within five (5) calendar days after receipt of Contractor's written
statement, MSR shall advise Contractor in writing whether:
(a) Contractor is to proceed with the additional Work described in the
Force Account Work Authorization form in conformance therewith;
(b) Contractor is to proceed with the additional Work as outlined in a
revision to the Force Account Work Authorization form; or
(c) MSR does not desire to have Contractor proceed with the additional
Work proposed by the Force Account Work Authorization form.
5.5 Price Rise/Price Fall Calculation
5.5.1 Increase or Decrease
The purpose of this Section 5.5 is to protect both the Contractor and MSR
should prices of supplies increase or decrease. The Contractor has a 4% annual
escalation built into its compensation rates set forth in Appendix A. If costs
of supplies increase beyond 4% on an annual basis, MSR and the Contractor agree
to share in the added expense as set forth in this Section 5.5. If costs of
supplies decrease on an annual basis, Contractor has agreed that its
compensation shall be reduced as set forth in the remainder of this Section 5.5.
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5.5.2 Calculation
Major factors in the Contractor's costs include tires, lubricants,
replacement parts, the interest rate, and labor. These components will be used
to calculate a factor as set forth below. The formula to calculate the annual
percentage escalation or decrease is:
((T2 - T1) x (TRW) + (L2 - L1) x (LRW) + (P2 - P1) x (PRW) + (I2 - I1) x (IRW) + (O2 - O1) x (ORW))
------------------ ----------------- ----------------- ----------------- ------------------
( T1 L1 P1 I1 O1 )
Where:
T1 is the lowest price of a 777 tire at the beginning of year 1
T2 is the lowest price of a 777 tire at the beginning of year 2
(specific tire/quantity and 3 suppliers to be specified)
L1 is the lowest price of lube per liter at the beginning of year 1
L2 is the lowest price of lube per liter at the beginning of year 2
(lube type/quantity and 3 suppliers to be specified)
P1 is the lowest price for the part list at the beginning of year 1
P2 is the lowest price for the part list at the beginning of year 2
(list of parts/quantities and 3 suppliers to be specified)
I1 is the interest rate (TIIE 28 day/specified source) at the beginning of
year 1
I2 is the interest rate (TIIE 28 day/specified source) at the beginning of
year 2
O1 is the general minimum wage established by the Comision Nacional de los
Salarios Minimos in force in the Altar, Sonora, area at the beginning of
year 1, as published in the Diario Oficial de la Fedaracion
O2 is the general minimum wage established by the Comision Nacional de los
Salarios Minimos in force in the Altar, Sonora, area at the beginning of
year 2, as published in the Diario Oficial de la Fedaracion
As indicated on Appendix A, Contractor's typical costs are composed of a number
of items which comprise different percentages of total costs, including:
Off road tires 8.68%
Lubricants 3.45%
Parts 21.05%
Interest (Financing) 9.97%
Labor 18.46%
Total 61.61%
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The relative weighting (RW) of the above items (to their total) is then:
Tires (TRW) 8.68/61.61 = 14.09%
Lubricants (LRW) 3.45/61.61 = 5.60%
Parts (PRW) 21.05/61.61= 34.17%
Interest (IRW) 9.97/61.61 = 16.18%
Labor (ORW) 18.46/61.61 = 29.96%
where for example, TRW is the relative weighting of the tire cost to the total
cost of the five items expressed as a percentage.
The Contractor will be paid 4% annual escalation (as already included in the
contract mining rates set forth in Appendix A) plus 1/2 of any increase over 4%
up to 8% using the above formula on an annualized basis. Above an 8% annualized
rate the following table will be used, which shows to what extent each party
will be responsible for bearing the cost of the escalation:
Price Change Percentage Table
MSR CONTRACTOR
--- ----------
Year 1 50% 50%
Year 2 60% 40%
Year 3 70% 30%
Year 4 80% 20%
Year 5 90% 10%
Year 6 - after 95% 5%
The above calculation will be carried out annually and the results of the
calculation will be applied to the contract mining rates for waste and ore
mining for the following year.
SAMPLE CALCULATION
(a) Calculation done at the start of year 2 (for application to year 2)
o 3 quotes obtained by Contractor for specified tire in a specific
quantity (usual actual purchase quantity).
T1 = $7,850, T2 = $9,400, (T2 - T1) = $1,550, TRW = 14.09%.
o 3 quotes obtained by Contractor for specified lube per liter in a
specific quantity (usual actual purchase quantity).
L1 = $1.37, L2 = $1.60, (L2 - L1) = $0.23, LRW = 5.60%.
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o 3 quotes obtained by Contractor for specified parts list in specific
quantities (usual actual purchase quantities).
P1 = $10,000, P2 = $11,000, (P2 - P1) = $1,000, PRW = 34.17%.
o TIIE 28 day interest rate I1 = 10.0%, I2 = 11.0%, (I2 - I1) = 1.0%,
IRW = 16.18%.
o The general minimum wage in Altar, Sonora, O1 = 100, O2 = 104, (O2 -
O1) = 4, ORW = 29.96%
Formula:
(T2 - T1) x (TRW) + (L2 - L1) x (LRW) + (P2 - P1) x (PRW) + (I2 - I1) x (IRW) + (O2 - O1) x (ORW)
----------------- ----------------- ----------------- ----------------- ------------------
T1 L1 P1 I1 O1
(1550) x (14.09%) + (0.23) x (5.60%) + (1000) x (34.17%) + (1.0) x (16.18%) + (4) x (29.96%)
---------------- ---------------- ----------------- ---------------- --------------
7850 1.37 10000 10.0 100
(0.0280) + 0.0009 + 0.034 + 0.016 + 0.012) = 0.099 or 9.9%
Using the formula above, the annual escalation factor is calculated to be 9.9%.
(b) Application of Rules
Apply previously stated rules to determine applicable annual escalation
factor (9.9%):
First 4.00% - already built into rates = no change.
Next 4.00% - Contractor receives 1/2 of any increase over 4% up to 8% =
2.00%.
Remaining 1.90% - MSR is responsible for bearing 60% of the cost of
escalation in year 2, therefore Contractor is entitled to receive = 1.90% x 60%
= 1.14%.
Additional applicable annual escalation factor = 2.00% + 1.14% = 3.14%.
(c) Application to Mining Contract Rates
From Appendix A Contractor's mining rates for year 2 are:
Waste mining - $0.740 per tonne; Ore mining - $0.794 per tonne.
Waste mining = $0.740 x ( 1 + ( 3.140 / 100 ) ) = $0.7632
Ore mining = $0.794 x ( 1 + ( 3.140 / 100 ) ) = $0.8189
These rates would then be used for Year 2.
(d) If the annual escalation factor is a negative %, then the same
calculations would be made (including the 4% escalation already built into the
rates), except that for decreases from 4% to 8%, MSR would receive the entire
benefit, and for decreases in excess of 8%, the percentages reflected in the
Price Change Percentage Table will reflect the percentage of the decrease by
which MSR will benefit.
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5.6 Withholding Payments and Setoff
MSR may, without limiting any other rights or remedies MSR may have,
withhold from payments due to Contractor under this Mining Contract the
reasonable value of any claim which Contractor has failed to settle pursuant to
any indemnity or warranty obligations contained in this Mining Contract. MSR may
also retain from any payments due to Contractor under this Contract sufficient
funds to discharge any delinquent accounts of Contractor for which liens on
MSR's property have been or can be filed, and MSR may at any time pay therefrom
for Contractor's account such amounts as are due thereon, including any sums due
under any federal or state law. MSR shall not be deemed to be in default under
this Contract for exercising its rights under this Section 5.6 with respect to
any amounts subject to a dispute under Article 25 or 26.
5.7 Mobilization and Demobilization Payments
Within thirty (30) calendar days prior to the date the Work is to commence
under the Notice to Proceed (as defined in Section 21.1), MSR shall pay to
Contractor a mobilization payment of $70,000. Upon termination of this Mining
Contract pursuant to Sections 20.1 or 20.4, MSR shall pay to Contractor a
demobilization payment of $70,000.
5.8 Advance Payment
Upon the date the Work is to commence under the Notice to Proceed, MSR
shall make an advance payment of $520,000 to Contractor (the "Advance Payment").
The Advance Payment shall be made by wire transfer to an account designated by
Contractor pursuant to written instructions delivered by Contractor to MSR at
least five calendar days prior to the date the Advance Payment is due. All other
payments by MSR to Contractor under this Mining Contract may be made by MSR's
check payable to Contractor. The Advance Payment shall serve as an advance for
and a credit against any and all compensation due to Contractor from MSR under
Sections 1.6.5, 1.7, 5.1, 5.2, 5.7 or otherwise under this Mining Contract, and
MSR shall have no obligation to make any payments to Contractor under Sections
1.6.5, 1.7, 5.1, 5.2, 5.7 or otherwise under this Mining Contract until MSR has
fully recouped the entire amount of the Advance Payment. If MSR has not
recovered the full amount of the Advance Payment within 180 days after the
Effective Date, Contractor shall be obligated to repay to MSR any portion of the
Advance Royalty that has not been recouped by MSR. In the event that this Mining
Contact is terminated for any reason prior to the time at which MSR has recouped
the entire amount of the Advance Payment, the amount of the balance of the
Advance Payment not yet recouped shall serve as a credit against the
demobilization payment owed to Contractor under Section 5.7, and any other
amounts owed by MSR to Contractor upon such termination. Within fifteen (15)
calendar days after such termination, Contractor shall repay to MSR any portion
of the Advance Payment not otherwise recouped by MSR. The Advance Payment shall
be secured by a bond in the amount of $520,000, to be posted by Contractor prior
to its receipt of the Advance Payment and periodically maintained thereafter,
such bond to be issued by a Mexican licensed bonding company, and to be in form
and content satisfactory to counsel for MSR, payable to MSR. This clause is not
and will not be interpreted as a liquidated damages clause and will not limit
Contractor's liability hereunder. Contractor shall continue to be responsible
with all of its assets, proceeds, and income (including income due to Contractor
hereunder ) for the payment of any damages or losses incurred by MSR on account
of Contractor's failure to comply with any of its obligations under this Mining
Contract notwithstanding the posting of the bond provided herein.
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6. Contract Value
Based on the Contractor's rates set forth in Appendix A and the schedule
of Work provided by MSR as set forth in the Mine Plan, the anticipated payments
to Contractor under this Mining Contract (without accounting for adjustments
made pursuant to Section 5.5) are as outlined in Appendix G.
7. Contractor Performance
Contractor shall perform all Work and any Force Account Work in a good,
minerlike, workmanlike, and skillful fashion in accordance with good mining
practices and in full compliance with all laws, rules, regulations,
specifications and instructions of all federal, state, and local governmental
and regulatory bodies and agencies which are or may become applicable to any
phase of the Work or any Force Account Work, or any property or person engaged
in or affected by the Work or any Force Account Work, including, but not limited
to, all Permits, applicable wage and hour laws and regulations and all other
laws and regulations dealing with or relating to the employment of persons, and
all laws and regulations pertaining to the protection of the environment and the
health and safety of persons or property, and official standards or Mexican
normas oficiales. Contractor shall obtain, at Contractor's sole expense, all
licenses, permits, and authorizations from all federal, state and local
governmental and regulatory bodies and agencies which an independent contractor
is required to obtain in order to perform the Work and any Force Account Work,
and shall furnish to MSR's Representative copies thereof forthwith upon
obtaining the same. Such licenses, permits, and authorizations include but are
not limited to permits required by the federal government, the State of Sonora,
or the Municipality of Altar, Sonora, or any successor agency, permits
pertaining to contractor's licenses, and waste disposal and storage permits.
Contractor will be responsible for any penalties caused by its failure to
conform to the conditions of any of the Permits or any permit required of
Contractor. Contractor agrees that it will use Contractor's Equipment solely for
the Work and for no other purposes.
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8. Environmental and Permitting
8.1 Permitting
The Mine will be constructed on the authority of the Estudio Tecnico
Justificativo de Cambio de Uso de Suelo, Estudio de Impacto Ambiental y Estudio
de Riesgo. MSR will be responsible for obtaining Permits relating to carrying
out work at the Mine site, except for those permits solely concerning
Contractor's own business, equipment and personnel, which Contractor shall
obtain as described in Article 7. Prior to giving notice to Contractor
requesting commencement of any Work, MSR shall provide the Contractor copies of
all Permits required for performing any Work.
8.2 Site Conditions
Contractor shall keep the Mine site free from all trash resulting from the
Work and any Force Account Work. All trash will be disposed of in such a manner
that it does not remain visible at the Mine site and in compliance with
applicable federal, state and local laws, rules and regulations and applicable
Permit requirements. No used motor oil shall be dumped at the Mine site. Upon
completion of the Work and any Force Account Work, Contractor shall leave the
Mine site clean and free of all equipment, waste materials, and rubbish.
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8.3 Waste Disposal
Contractor shall comply with all applicable federal, state and local laws,
rules and regulations, governing the use, handling, processing, production or
disposal of solid wastes and hazardous or toxic wastes or substances. Contractor
shall take every reasonable precaution to prevent fuel and oil spills or other
spills (whether caused directly or indirectly by its actions or failure to act)
of hazardous materials or substances, and shall be responsible for the clean-up
of all such spills and any and all costs or damages associated therewith. MSR
shall be entitled (but not obligated to) clean, remove, or neutralize any
hazardous or toxic waste or substance brought by Contractor onto the Mine site
without MSR's written permission or without proceeding as required by applicable
environmental laws, regulations, or Mexican official standards, at Contractor's
cost, expense, and risk, which cost and expense MSR shall be entitled to deduct
from any payments due to Contractor hereunder.
8.4 Sewage and Wastewater Disposal
Contractor shall provide, operate and maintain any facilities required for
the disposal of sewage and waste water resulting from the performance of the
Work. Under no circumstances shall Contractor discharge raw sewage or polluted
water into natural watercourses, lakes, ponds or any other area where such
discharge is unauthorized. Contractor shall ensure that all sewage and waste
water disposal installations constructed or installed by Contractor, including
without limitation temporary toilets, comply with all applicable federal, state
and local requirements. The Work shall be performed in such a manner as to
prevent solid matter, contaminants, debris and other pollutants (including
without limitation refuse, garbage, cement, concrete, sewage effluent,
industrial waste, oil and other petroleum products, aggregate processing
tailings, mineral salts and silty water) from entering streams, flowing or dry
watercourses, lakes, ponds or underground water sources.
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9. Safety
9.1 Site Safety
The Contractor will not be required to engage in any work practice or
operate in a working condition that is unsafe. Similarly, the Contractor shall
not engage in any work practice or operate in working condition that is unsafe.
Upon detection of an unsafe working condition by either party, the unsafe
condition will be addressed as a priority using appropriate procedures. MSR is
responsible for insuring that designs for the open-pit, waste dumps, stockpiles,
pads, roads, and other layouts under MSR's control are safe and in accordance
with proper standards. The Contractor shall maintain operating equipment in a
safe condition at all times, and ensure equipment operators have received
adequate prior training and that operators of mobile equipment make safety
inspections prior to operating any such equipment.
9.2 Compliance with Laws
Contractor shall comply with all applicable federal, state and local laws,
rules, regulations and standards pertaining to protection of the environment and
health and safety, and shall require all its employees and representatives to
comply with such laws, rules, regulations, and policies in performing the Work
and any Force Account Work and while on MSR's property. Contractor shall
maintain a safe working environment and a high level of safety awareness by its
employees, including an effective safety program. Contractor shall diligently
enforce all safety policies and take appropriate corrective action in the event
of any violations of those policies, which may include discharge from the
premises, against any employee(s) who are found to have violated any of the
above-mentioned laws, rules, regulations, standards, or policies or who are
found to disregard the safety rules of the job site including, without
limitation, those against alcohol or other intoxicants, fighting, or firearms on
MSR's property. MSR is not assuming any safety responsibility for Contractor but
shall require that Contractor manage its personnel to produce the highest level
of safety performance.
9.3 Contactor Responsibility
Contractor shall bear all responsibility under the law for the safety of
its own personnel employed in the Work and any Force Account Work and for
persons entering the Mine site as agents or visitors of Contractor.
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9.4 Interim Reclamation
While the parties acknowledge that Contractor shall have no
responsibilities pertaining to final reclamation of the Mine site, Contractor
agrees that it will properly conduct any interim reclamation required by
applicable federal, state or local laws, rules or regulations or contemplated
under any Permits in connection with the performance of the Work and any Force
Account Work (for example, by segregating required or reasonably recommended
amounts of topsoil), in such a manner as to allow for completion of final
reclamation of the Mine site. The removal of cactus and other sensitive flora
and fauna ahead of construction and mining is the responsibility of MSR.
Contractor shall, however, refrain from removing any cactus or other sensitive
flora and fauna existing on the Mine site and on any adjacent area. Contractor
shall be responsible for any loss or damages sustained by MSR on account of
Contractor's failure to abide by this provision. Contractor shall be paid for
any such interim reclamation work at the hourly rates for Contractor's Equipment
set forth in Appendix A.
9.5 Inspection
On request of MSR, Contractor shall make available to the MSR
Representative, for inspection and copying, all safety records maintained by
Contractor. In addition, within two (2) calendar days after receipt or
submission, Contractor shall furnish MSR's Representative with a copy of:
(a) Any accident report submitted to any governmental agency by
Contractor.
(b) Any federal or state accident investigation report issued in
connection with any accident involving an employee of Contractor at the Mine
site.
(c) Any petition filed by Contractor to modify the application of any
safety standard at the Mine site.
9.6 Security
Contractor shall assume full responsibility for the security of the Work
and for the materials and equipment in all Work areas. If at any time the
security arrangements of Contractor are deemed by MSR or any governmental agency
to be inadequate or incomplete, on the basis of unsatisfactory experience during
the course of the Work, MSR may take whatever action is reasonably necessary to
remedy such inadequacy or incompleteness and any additional cost of such action
shall be for the account of Contractor. The taking of such action shall in no
way relieve Contractor of any responsibility for the complete security of all
Work areas.
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10. Equipment Inspection
MSR reserves the right to inspect the Contractor's Equipment and any other
equipment which the Contractor proposes to utilize in the performance of the
Work. Such inspection shall be for the purposes of determining the condition and
suitability of all such equipment for the Work. Such determination will be at
the discretion of MSR. MSR's inspection of Contractor's Equipment shall not
relieve Contractor of its responsibility to keep Contractor's Equipment in
optimal operating conditions and safe for use on the Mine site. If MSR
determines that any of such equipment is not suitable for the Work, MSR shall
notify Contractor in writing, and Contactor shall be required to provide
replacement equipment within fifteen (15) calendar days after receipt of such
notice.
11. Contractor Status
All Work and any Force Account Work shall be performed by Contractor as an
independent contractor, and Contractor's employees shall at all times be under
Contractor's sole direction and control. Contractor shall receive directions
from MSR as to the desired results of Work and any Force Account Work and
Contractor shall be responsible for directing Contractor's employees as to the
means for accomplishing such results. Neither Contractor nor anyone used or
employed by Contractor shall be deemed for any purpose to be the agent, servant,
employee, or representative of MSR in the performance of this Agreement. Nothing
in this Agreement shall be construed to mean that Contractor is a partner of MSR
or a joint venturer with MSR. The relationship of Contractor to MSR under this
Agreement and with respect to the Work and any Force Account Work, shall be that
of an independent contractor. Neither Contractor nor its employees or agents is
entitled to worker's compensation benefits from or through MSR. Contractor shall
be responsible for and shall withhold or pay, or both, as may be required by
law, all taxes pertaining to the employment of its personnel and/or performance
of the Work and any Force Account Work. All fines, penalties or other charges
imposed or assessed against Contractor by reason of its violation of, or failure
to comply with, any provisions of such law, together with all expenses of
defending litigation in respect thereto, shall be paid by Contractor. Contractor
also assumes full responsibility for the payment of all payroll burdens, fringe
benefits and payroll taxes, whether federal, state, municipal or otherwise, as
to its employees, servants or agents engaged in the performance of the Work and
any Force Account Work. Further, Contractor shall make all contributions to the
pension funds that may be required to be made on behalf of its employees,
servants or agents under any collective bargaining agreement to which they are
subject, and shall defend, indemnify and hold MSR harmless from any claims or
damages (including reasonable attorney's fees) arising as a result of its
failure to do so.
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12. Site and Equipment Inspection and Access
12.1 Inspection
Contractor represents and warrants that (a) it has inspected the Mine site
where the Work is to be performed, and is familiar with the topography and
physical characteristics of the area, and after careful examination, has been
satisfied as to the nature, extent and location of the Work, the conditions of
the ground, the character, quality of the surface or subsurface materials and
structures to be encountered (as indicated by subsurface data included in drill
hole information included in the Mining Plan), the character of equipment and
facilities needed preliminary to and during the execution of the Work, the
availability of labor, water and power, the adequacy of roads and means of
ingress and egress, uncertainties of weather, conditions pertaining to
transportation, disposal, handling and storage of materials, the general and
local conditions, the prices and availabilities of equipment and materials, and
all other matters which may affect the Work, and (b) it has taken all actions
that a reasonable and prudent person engaged in providing and performing
services of a similar nature would take to become fully informed regarding all
existing and expected conditions and matters which, during the performance of
the Work, could affect the Work or performance of the Work in any way, and
especially the cost of performing the Work. Contractor hereby accepts the
conditions at the Mine site as suitable for the performance of the Work, and
hereby expressly waives and releases MSR from any and all demands or claims for
damages, fees and/or costs, incurred by Contractor by reason of any alleged
representations, warranties, tests, descriptions or statements made by MSR prior
to the date hereof, and not expressly set forth in this Mining Contract.
Although MSR has used good faith efforts to make available to Contractor such
information concerning the Mine and the Mine site as is in MSR's possession, MSR
makes no representation or warranty as to the accuracy, reliability or
completeness of any information previously provided by MSR to Contractor,
including any information contained in any of the Appendices to this Mining
Contract, and Contractor shall rely on the same at its sole risk. The failure of
Contractor to acquaint itself with any applicable conditions such as all
underground installations and workings, electrical cables, utilities,
telephone\fiber optic lines and other obstacles, shall not relieve Contractor
from the responsibility for properly estimating the difficulties and costs of
successfully performing the Work and completion of this Contract, and shall not
be grounds for adjusting either the price or the schedule for the performance of
the Work.
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12.2 Access to Site
Reasonable working areas for storage, shops, equipment yards, stockpiles,
and other facilities required in connection with Contractor's performance of the
Work will be made available to Contractor by MSR during the Term of this Mining
Contract without charge. Whenever possible, the areas designated for
Contractor's working area will be located as requested by Contractor. MSR agrees
to give Contractor access to all areas which are necessary for performance of
the Work. The designated areas and their usage will be subject to approval by
MSR and shall not be occupied by Contractor without the prior written consent of
MSR, which consent shall not be unreasonably withheld.
12.3 Problems at the Site
To the extent it becomes aware of same, Contractor shall advise MSR's
Representative in writing of any deficiencies caused by others at the Mine site
which affect Contractor's Work. MSR's Representative shall have a reasonable
period of time to have such deficiencies corrected and Contractor shall be
required to proceed with the Work unless such deficiencies are not timely
corrected (and Contractor agrees to notify MSR in writing that in its view such
a deficiency has not been timely corrected prior to any cessation of the Work by
Contractor). In the event of such a cessation of the Work, Contractor shall be
entitled to an equitable adjustment through a Force Account Work Authorization
form. This Section 12.3 shall in no way require or allow Contractor to inspect
and approve the work of MSR's other contractors or subcontractors.
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13. Additional Contractor Duties
13.1 Dust Control
Contractor shall control dust created by its activities from all Mine
access and haul roads, waste dumps and from the Mine in accordance with
applicable federal, state and local laws, rules and regulations.
13.2 Additional Equipment
In addition to the Contractor's Equipment, Contractor shall supply at its
sole expense all equipment, supplies, tools, fuels, labor, transportation, and
support (including, but not limited to, security, sanitation and trash disposal
facilities) necessary to perform the Work and any Force Account Work. No part of
the Contractor's Equipment shall become affixed to the Mine site and Contractor
shall be entitled to make such filings with governmental agencies as it deems
necessary or advisable to protect its title in and to Contractor's Equipment.
13.3 Survey Control
Contractor shall maintain accurate survey control as required to follow
the Mining Plan. If Contractor fails to maintain such accurate survey control,
Contractor shall remedy that failure at its sole expense, with no increase in
compensation. In the event Contractor does not maintain accurate survey control
and MSR incurs any expenses in remedying such failure (which such expenses MSR
may incur in its reasonable discretion), the amount of all such expenses may be
deducted by MSR from future payments due to Contractor under this Mining
Contract.
13.4 Monuments
Contractor shall protect and preserve all existing land survey monuments,
including but not limited to section corners, quarter sections corners, bench
marks, and reference points established by MSR or others. Contractor shall
inform the MSR Representative immediately if any such bench xxxx or reference
point is disturbed or damaged and shall be responsible for its repair and/or
replacement.
13.5 Labor Disputes
Contractor shall promptly notify MSR of any labor dispute which has
occurred or which Contractor anticipates may occur, and which has affected or
will or may affect Contractor's ability to perform the Work, or the Contractor's
ability to obtain any required materials, equipment or construction aids, and
shall give MSR such full and complete information concerning any such labor
dispute as MSR may reasonably request. Contractor shall consult with MSR prior
to making any settlement of such labor dispute.
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13.6 Wages
Contractor agrees to pay its hourly employees at the Mine at wage rates at
least equal to the minimum rates required by applicable federal, state and local
law.
13.7 Ad Valorem Taxes
Contractor shall pay when due any property tax imposed on Contractor's
Equipment or otherwise on any real or personal property owned by Contractor and
any business or occupation or transportation or other tax which may be imposed
or assessed against it or its operations or activities hereunder.
13.8 Legal Issues
If Contractor observes that any portions of the Mining Plan or activities
at the Mine are at variance with applicable federal, state or local laws, rules
or regulations, Contractor shall promptly notify MSR in writing.
13.9 Spare Parts
Contractor agrees to maintain an adequate quantity of spare parts, fuel,
and other consumable products at all times as necessary to avoid undue
disruption of the performance of the Work.
13.10 Maintenance
Incidental safety, mining-related or maintenance requirements pertaining
to the Mine site shall be provided by Contractor at no additional charge to MSR.
Any such requirements which impose additional costs to Contractor in excess of
$1,000 per occurrence shall be billed by Contractor to MSR, but only after MSR
has approved the performance of such requirements in writing; provided, however,
that in any event Contractor shall timely pay the first $1,000 per occurrence,
and provided further, that if Contractor fails to perform any such incidental
safety, mining-related or maintenance requirements within a reasonable period of
time after becoming aware of the need for such performance, MSR may perform the
same on Contractor's behalf, and all reasonable expenses (not to exceed $1,000
per occurrence) incurred by MSR in connection with such performance may be
deducted by MSR from future payments due to Contractor under this Mining
Contract.
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13.11 Non-Discrimination
MSR requires that the Contractor comply with all applicable federal, state
and local laws, rules and regulations concerning non-discrimination in
employment. Contractor agrees to so comply and will not discriminate against any
employee or applicant for employment because of race, age, color, religion, sex
or national origin, or because of any other conditions, as provided in Section
1st of the Mexican Constitution.
13.12 Antiquities
All fossils, coins, articles of value or antiquity and structures and
other remains or relics of geological or archaeological interest discovered on
or in the areas of the Mine are and will remain the absolute property of the
Mexican government, as and to the extent that this is mandated by Mexican law.
Contractor shall: (a) take all reasonable precautions to prevent unauthorized
removal of, or damage to, any such discovery; (b) inform MSR's Representative
immediately upon discovery; and (c) obtain and comply with MSR's instructions
for removal and disposal of the discovery.
14. Additional Duties of MSR
MSR shall, in accordance with and subject to the terms and conditions of
this Mining Contract:
14.1 Payment of Taxes
Pay any tax applicable to the mining concessions covering the properties
that make up the El Chanate project, as well as all royalty or lease fees which
may now or hereafter become due any landowner(s) as a result of ore mined
hereunder (which it is understood shall at all times remain MSR's property) or
otherwise.
14.2 Access
Provide Contractor full and complete access, subject to MSR's normal
security control and safety procedures and applicable governmental laws, rules
and regulations and the limitations set forth in any applicable permit, to the
Mine site as required for the orderly and timely performance of the Work.
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14.3 Problems with the Work
If it becomes aware of any problem in the Work or non-conformance with the
Mining Plan, give prompt written notice to Contractor; provided, however, that
MSR's failure to give such notice shall not be deemed a waiver of any of its
rights or remedies under this Mining Contract.
15. Insurance
15.1 Coverage
Contractor shall, prior to the execution hereof, procure, and before
commencing any activities under this Mining Contract and during the progress of
the Work and for any additional periods after termination of this Mining
Contract necessary to ensure complete coverage for any incidents that occurred
during the Term of this Mining Contract, carry, at its own expense, on forms and
with reliable insurance companies selected by Contractor and acceptable to MSR
and authorized to do business in the State of Sonora, the following insurance
coverage (which insurance, notwithstanding any provision of this Article 15 to
the contrary, shall be for the greater of the liability limits set forth below
or the limits required by applicable law):
(a) Worker's Compensation as required by the Mexican Ley del Seguro
Social, as amended from time to time.
(b) Comprehensive General Liability Insurance, including
premises/operations, independent contractors, contingent coverage, contractual
liability for assumed liabilities, and completed operations coverage for a
period of one year following completion of the Work, coverage for explosion,
collapse, and underground property damage liability coverage, and broad form
property damage liability endorsement, with inclusive limits of One Million
Dollars ($1,000,000.00) for injury or death resulting from any one occurrence,
and property damage liability limits of One Million Dollars ($1,000,000.00) per
occurrence, including, subject to policy terms and conditions, damage to MSR
property.
(c) Automobile and truck liability insurance, including all
Contractor-furnished, non-owned, hired, rented, or owned equipment, with bodily
injury liability limits of One Million Dollars ($1,000,000) for injuries to or
death of any one person and Three Million Dollars ($3,000,000) for injuries to
or death of more than one person resulting from any one occurrence, and property
damage liability limits of One Million Dollars ($1,000,000) per occurrence.
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(d) All policies providing coverage hereunder shall contain provisions
that no cancellation or material changes in the policies shall become effective
except on thirty (30) calendar days' advance written notice thereof to MSR. Any
notice of cancellation or change may be challenged by MSR if it is inconsistent
with this Mining Contract or detrimental to MSR's rights or interests hereunder.
15.2 Additional Insured
All of the above-described insurance policies (with the exception of
worker's compensation) shall name MSR as an additional insured (subject to the
policy terms and conditions and the limitations on liability set forth herein)
and shall contain provisions that the insurance companies will have no right of
recovery or subrogation against MSR, its affiliates or subsidiaries, it being
the intention of the parties that Contractor's carrier shall be liable for any
and all losses covered by the above-described insurance.
15.3 Deductibles
Any and all deductibles in the above-described insurance policies shall
not be in excess of industry norms and shall be assumed by, for the account of,
and at Contractor's sole risk.
15.4 Certificates
Before mobilization commences or any Work is performed by Contractor,
Contractor shall secure and deliver to MSR certificates evidencing that
insurance coverage of the types and limits provided for above are in full force
and effect.
15.5 Default
If Contractor has failed to obtain any of the above-referenced insurance
policies, such failure shall be cause for termination of this Agreement pursuant
to Section 20.2. Failure to secure the required insurance coverage, or the
failure to comply fully with any of the insurance provisions of this Mining
Contract, or the failure to secure such endorsements on the policies as may be
necessary to carry out the terms and provisions of this Mining Contract, shall
in no way act to relieve Contractor from any of its obligations under this
Mining Contract, anything in this Mining Contract to the contrary
notwithstanding. In the event that liability for any loss or damage be denied,
as a result of any of the foregoing failures by the Contractor, or if Contractor
fails to maintain any of the insurance policies herein required, Contractor will
defend, indemnify and hold MSR harmless from and against all losses, claims,
demands, and expenses (including reasonable attorneys' fees), which would
otherwise be covered by said insurance.
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15.6 Scope of Coverage
The insurance protection afforded MSR under this Agreement shall inure to
the benefit of MSR and all of its affiliates; and when so requested by MSR,
Contractor shall furnish certificates of insurance showing contractual liability
coverage specifically indicating Contractor's contractual indemnity requirements
as set forth in Article 17 of this Mining Contract to apply to MSR and all
subsidiaries and affiliates of MSR as set forth in Article 17. The sum for which
insurance coverage shall be procured and maintained shall not be taken as a
liquidated damages amount and will not limit Contractor's liability under this
Mining Contract; Contractor shall continue to be responsible with all of its
assets, proceeds, and income (including income due to Contractor hereunder) for
the payment of any indemnification or other amounts due by Contractor under this
Mining Contract irrespective of the recovery of any insurance payments.
15.7 Additional Insurance
Contractor shall have the right to maintain at its own expense any
additional kinds of insurance or increase limits above those set forth in this
Article 15.
15.8 Subcontractor Insurance
Contractor will not allow any permitted subcontractor to enter upon or
continue the performance of any portion of the Work unless such subcontractor is
and remains insured under policies affording the same coverage and in compliance
with the same terms as described above in Sections 15.1 - 15.6. Each
subcontractor will also furnish a standard endorsement to its Comprehensive
General Liability policy naming Contractor and MSR as additional insureds under
said policy. The policy must also contain a cross-liability or severability of
interest clause. Certificates of Insurance or other evidence of insurance
acceptable to MSR shall be made available to MSR before the commencement of any
portion of the Work by any subcontractor. The parties hereby agree that the
provisions of this Section 15.8 are not intended to alter any of Contractor's
obligations set forth in the remainder of this Article 15, and that any
subcontractor's insurance policies shall be supplemental to rather than
substitutes for the policies required to be maintained by Contractor.
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16. Liens and Encumbrances
16.1 Prompt Payment
Contractor agrees to pay promptly all debts incurred by Contractor in
performance of the Work and any Force Account Work.
16.2 No Liens
Contractor shall keep the property on which the Work is performed free of
all liens for labor or materials. Contractor shall keep all of the Contractor's
Equipment and any other equipment used in conducting the Work, free and clear of
all liens and encumbrances arising by, through, or under the Contractor, except
liens and encumbrances placed on Contractor's Equipment to secure the repayment
of money borrowed to purchase Contractor's Equipment.
16.3 Repairs
Contractor shall at its sole expense immediately repair all damage to any
property, including without limitation Contractor's Equipment, any fixed
facilities at the Mine site, and any utilities, water lines, pipe lines, power
lines, telephone poles, power poles, buildings, and fences at the Mine site,
which may result directly or indirectly from performance of the Work.
16.4 Indemnity
Contractor agrees to defend, indemnify and hold MSR harmless from and
against any and all losses, expenses or damages (including reasonable attorney's
fees) arising from any failure of Contractor to perform its obligations under
this Article 16. The provisions of this Article 16 shall survive any termination
or expiration of this Mining Contract notwithstanding any payment or settlement
between the parties unless such settlement is in writing and such writing
explicitly refers to this Article 16.
17. Indemnification and Distribution of Risk
17.1 Indemnification by Contractor
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In addition to those specific indemnification obligations set forth
elsewhere in this Mining Contract, Contractor agrees to indemnify, hold harmless
and defend MSR and any subsidiaries or affiliates, and their officers, directors
and employees, from and against any claim, demand, cause of action, loss,
damage, expense (including reasonable attorneys' fees), or liability whether on
account of injury to or death of persons (including the employees of MSR or
Contractor) or damage to or loss of property (including the property of MSR) or
otherwise, arising from or related to (a) the performance by Contractor, its
agents or employees of any Work or Force Account Work under this Mining
Contract, or the conduct by Contractor of any other activities at the Mine site,
including without limitation: (i) any claim, loss, or liability arising under
non-delegable duties of Contractor or arising from supplies provided for
Contractor's use by MSR; (ii) any Materials of Environmental Concern (as defined
below) which arise from or are related to activities or operations of whatever
nature undertaken by Contractor at the Mine site or pursuant to this Mining
Contract; and (iii) any action to enforce Contractor's indemnification
obligations under this Mining Contract, including without limitation this
Article 17, (b) the breach of any of Contractor's representations or warranties
in this Mining Contract, or (c) Contractor's failure to perform any of its
obligations under this Mining Contract. In connection with the foregoing
indemnity, it is agreed that Contractor shall, in particular (but without
limitation except as stated herein), be responsible for injuries to or death of
any of its employees in the course of performance of any Work or Force Account
Work under this Mining Contract or in the course of performance of any
operations or activities at the Mine, and shall indemnify, hold harmless, and
defend MSR from and against any claim based on a theory or principle involving
allegations that such employees of Contractor are borrowed servants of MSR, or
based on a theory or principle involving allegations of MSR's negligence in its
failure to supervise or control their actions.
17.2 Damage to Contractor's Equipment
Contractor assumes responsibility for all loss of, damage to or
destruction of any of Contractor's Equipment, and all other property used in
connection with the performance of any Work under this Mining Contract or the
conduct of any activities or operations by Contractor at the Mine site,
including Contractor's facilities and personal property of Contractor's
employees, from whatever cause arising.
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17.3 Indemnification by MSR
In addition to those specific indemnification obligations set forth
elsewhere in this Mining Contract, MSR agrees to indemnify, hold harmless and
defend Contractor and any subsidiaries or affiliates, and their officers,
directors and employees, from and against any claim, demand, cause of action,
loss, damage, expense (including reasonable attorneys' fees), or liability
whether on account of injury to or death of persons (including the employees of
MSR or Contractor) or damage to or loss of property (including the property of
Contractor) or otherwise, arising from or related to (a) the conduct by MSR of
any of its activities at the Mine site, including without limitation: (i) any
Materials of Environmental Concern (as defined below) which arise from or are
related to activities or operations of whatever nature undertaken by MSR at the
Mine site or pursuant to this Mining Contract; and (ii) any action to enforce
MSR's indemnification obligations under this Mining Contract, including without
limitation this Article 17, (b) the breach of any of MSR's representations or
warranties in this Mining Contract, or (c) MSR's failure to perform any of its
obligations under this Mining Contract. In connection with the foregoing
indemnity, it is agreed that MSR shall, in particular (but without limitation
except as stated herein), be responsible for injuries to or death of any of its
employees in the course of performance of any of its operations or activities at
the Mine, and shall indemnify, hold harmless, and defend Contractor from and
against any claim based on a theory or principle involving allegations that such
employees of MSR are borrowed servants of Contractor, or based on a theory or
principle involving allegations of Contractor's negligence in its failure to
supervise or control their actions.
17.4 Joint Liability
If any claim, loss, damage, injury (including death) or liability is
attributable to the joint or concurring negligence of the Contractor and MSR or
the employees or agents of each of them, then all such loss, damage and
liability, and the cost and expenses attributable thereto, shall be borne by the
parties hereto in such proportion as may be determined by mutual agreement or by
a final judgment or award rendered on third-party or cross claims between the
parties hereto, or in the absence of either such determination, then equally
between the Contractor and MSR, and each party shall bear its own attorneys'
fees incurred in connection therewith.
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17.5 Procedure
Promptly after receipt by either party hereto of the assertion of any
claim, demand, action, suit or the commencement of any proceeding (collectively,
a "Claim"), or the discovery of any fact (whether or not it involves a third
party claim) upon which such party expects to make a claim for indemnification
under this Mining Contract, such party shall give the party who may become
obligated to provide indemnification under this Mining Contract (the
"Indemnifying Party") written notice describing such Claim or fact in reasonable
detail (the "Notice of Claim"). Failure to give such notice which does not
materially disadvantage the Indemnifying Party shall not relieve the
Indemnifying Party from any liability under this Mining Contract. Except as
otherwise provided in this paragraph, the Indemnifying Party shall have the
right, at its option, to compromise or defend, at its own expense and by its own
counsel, any such matter involving the asserted liability of the party seeking
indemnification (the "Indemnified Party") as to which the Indemnifying Party
shall have acknowledged its obligation to indemnify the Indemnified Party;
provided, however, that if (i) such Claim seeks an order, injunction or other
equitable relief against the Indemnified Party or (ii) the Indemnified Party
shall have reasonably concluded that there is a substantial conflict of interest
between the Indemnified Party and the Indemnifying Party in the conduct of the
defense of such Claim, then the Indemnified Party may employ separate counsel
and participate in the defense of such Claim to the extent necessary to protect
its interests, and the Indemnifying Party shall be responsible for the fees and
expenses of such separate counsel. If the Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in the compromise of, or
defense against, any such asserted liability. All costs and expenses incurred in
connection with such cooperation shall be borne by the Indemnifying Party. The
Indemnifying Party shall not settle or compromise any matter with respect to
which a party is seeking indemnification without the prior written consent of
the Indemnified Party. In any event, the Indemnified Party shall have the right
at its own expense to participate in the defense of such asserted liability.
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17.6 Materials of Environmental Concern
For purposes of this Article 17, "Materials of Environmental Concern"
means (i) those substances included within the statutory and/or regulatory
definitions of "hazardous substance," "hazardous waste," "extremely hazardous
substance," "regulated substance," "hazardous materials," or "toxic substances"
under any applicable federal, state or local law, rule or regulation pertaining
to the protection of the environment; (ii) any material, waste or substance
which is (a) petroleum, oil or a component thereof, (b) any chemical released
from the rock, (c) explosives, (d) radioactive materials (including naturally
occurring radioactive materials), or (e) solid wastes that pose imminent and
substantial endangerment to human health and safety or the environment; and
(iii) such other substances, materials or wastes that are or become classified
or regulated as hazardous or toxic under any applicable federal, state or local
law, rule or regulation.
17.7 Limitation on Damages
Neither party shall be liable to the other for any consequential,
punitive, special, or indirect damages, including but not limited to, loss of
profit, loss of use, loss of opportunity, loss of production or products,
whether such liability is based, or asserted to be based, upon any breach of
either party's obligations under this Mining Contract, or whether such liability
is based, or asserted to be based, upon any negligent act or omission of a
party, its personnel, agents or representatives, or whether such liability is
based, or asserted to be based, on any other legal ground.
18. Force Majeure
18.1 Definition
The term "Force Majeure," as used in this Mining Contract, shall mean any
and all causes beyond the control and without the fault or negligence of the
party failing to perform, such as acts of God, acts of public authorities and/or
regulatory agencies (including without limitation an inability to obtain
required permits or other approvals on terms reasonably acceptable to MSR or the
imposition of material new requirements for permits or other approvals that did
not exist on the Effective Date), lack of a viable market for the minerals
produced from the Mine (as determined by MSR in its sole discretion), actions
taken by any ejido group or other non-governmental organizations, acts of the
public enemy, expropriation, insurrections, riots, labor disputes, boycotts,
material shortages (including vendor failure), fires, explosions, floods,
breakdowns of or damage to plants, equipment, or facilities, interruptions to
transportation, embargoes, acts of military authorities, or other causes of a
similar nature which wholly or partly prevent the performance of the Work or any
other obligations under this Agreement. Notwithstanding the foregoing, inclement
weather shall not be included as an event of force majeure hereunder unless and
until twenty (20) consecutive calendar days' Work have been lost by Contractor
during any Annual Period as a result of inclement weather. For purposes of this
Section 18.1, a day of Work shall be deemed to be two (2) working shifts, each
of which represents one-half a work day. A shift shall not be deemed lost to
inclement weather unless Contractor engages in less than three (3) hours of Work
on the shift in question.
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18.2 Suspension of Obligations
If because of Force Majeure, either party hereto is unable to carry out
any of its obligations under this Mining Contract (other than the obligation of
a party to pay money in connection with the performance of this Mining
Contract), or MSR is unable to allow the Work to continue or is unable or no
longer authorized to conduct mining operations at the Mine as contemplated under
any Permit, and if such party shall promptly give to the other party concerned
written notice of such Force Majeure, then the obligations of the party giving
such notice and the corresponding obligations of the other party shall be
suspended as of the date of such notice to the extent made necessary by such
Force Majeure and during its continuance, and the Term of this Mining Contract
shall be extended for a period of time equal to the period of Force Majeure
(subject to the provisions of Section 18.3) provided, however, that the party
giving such notice shall use its best efforts to eliminate such Force Majeure
insofar as possible with a minimum of delay.
18.3 Duration
On the occurrence of an event of Force Majeure which substantially impairs
performance of the Work for a period in excess of 180 consecutive calendar days
or more, either party shall have the option of terminating this Mining Contract,
exercisable by giving fifteen (15) calendar days prior written notice to the
other party at any time after such inability has continued for a period of 180
consecutive calendar days and prior to the cessation of the event of Force
Majeure. In the event of termination pursuant to this Section 18.3, the parties'
obligations shall be the same as though this Agreement were terminated pursuant
to Section 20.1.
19. Contract Suspension
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19.1 Right to Suspend
MSR reserves the right to suspend (but not terminate) this Mining Contract
at any time for its convenience. Such suspension will be made by written notice
to Contractor and may include the whole or any specified part of the Mining
Contract for a period not to exceed ninety (90) calendar days. The Term of this
Mining Contract as set forth in Article 2 shall be extended by the duration of
any such suspension.
19.2 Consequences of Suspension
If this Mining Contract, or a specified part hereof, is suspended for the
convenience of MSR, Contractor agrees to permit MSR to, by written notice,
direct the amount and type of plant, labor and equipment to be committed to the
Work, provided that MSR shall equitably compensate Contractor for such Work in
any such circumstance. Upon receipt of any such notice, Contractor will, unless
the notice requires otherwise:
(a) Immediately discontinue Work on the date and to the extent specified
in the notice.
(b) Place no further orders for material, services, or facilities with
respect to suspended Work other than to the extent required in the notice or as
otherwise agreed to by MSR in writing.
(c) Promptly make every reasonable effort to obtain suspension on
reasonable terms of all such orders to the extent required in the notice.
(d) Use its best efforts to utilize its labor and equipment in such a
manner as to minimize costs associated with suspension
19.3 Compensation for Suspension
As compensation for suspension, Contractor will be reimbursed for the
following items and costs, to the extent that such costs result from or are
directly attributable to such suspension of Work:
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(a) A standby charge to be paid to Contractor during the period of
suspension, which standby charge will be sufficient to compensate Contractor for
keeping (to the extent required in MSR's notice of suspension or Contractor's
obligation to subsequently perform Work hereunder) Contractor's organization and
Contractor's Equipment committed to the Mine in a standby status. Standby rates
for Contractor's Equipment shall be ownership cost of the equipment calculated
as set forth in Appendix E; provided, however, that for any particular piece of
Contractor's Equipment such rates will not be charged for more than the regular
number of hours in any 24-hour period that the particular piece of Contractor's
Equipment would be used for the Work.
(b) All reasonable costs associated with the demobilization and
remobilization of Contractor's personnel and Contractor's Equipment.
(c) Contractor will prepare and submit invoices for the foregoing in
accordance with Section 5.1.1, which invoices will be paid by MSR in accordance
with and subject to the provisions of Section 5.1.3.
19.4 Resumption of Work
Upon receipt of notice to resume suspended Work, Contractor will resume
performance of the suspended Work as promptly as is practicable under the
circumstances. If, as a result of any such suspension of the Work, the parties
agree that the cost to Contractor of subsequently performing the Work is
increased, MSR will pay such increased cost in its payment for any remaining
portion of the Work, subject to a written amendment of this Agreement reflecting
such agreed upon modifications. Further, the Term of this Agreement will be
subject to extension as necessitated by the suspension, plus a reasonable
additional period for remobilization. Any claim by Contractor for an adjustment
hereunder must be asserted within sixty (60) calendar days after receipt of
written notice to resume the Work.
19.5 Duration of Suspension
If, as a result of one or more suspensions, the Work or part of the Work
is suspended for ninety (90) consecutive calendar days or an accumulated total
of one hundred and eighty (180) calendar days during any 365 calendar day
period, Contractor shall have, during the continuation of the last suspension,
the right to terminate this Agreement in whole or in part by written notice to
MSR. Said notice shall advise MSR that unless operations are immediately resumed
on the Work under suspension, this Agreement shall be terminated in respect of
such part or whole of the Work at a date specified in the notice, but not less
than thirty (30) calendar days after receipt of the notice by MSR. In the event
of termination pursuant to this Section 19.5, the parties' obligations shall be
the same as though the Contract were terminated under Section 20.1.
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19.6 Suspension for Cause
Notwithstanding any of the provisions of this Article 19 to the contrary,
MSR may suspend (but not terminate) this Mining Contract, without any obligation
to make any further payments to Contractor or any further liability on the part
of MSR, in the event of negligence or willful disregard by Contractor with
respect to health, safety, environmental protection, legal matters or proper
business practices.
20. Contract Termination
20.1 Mutual Agreement
The Mining Contract may be terminated if mutually agreed upon by MSR and
the Contractor in writing.
20.2 Default by Contractor
Each of the following events shall constitute a default by Contractor for
purposes of this Section 20.2: (a) commencement of proceedings by or against
Contractor under any law relating to bankruptcy, moratorium, reorganization or
insolvency; or (b) any material uncorrected failure by Contractor to comply with
any of the terms or conditions of this Mining Contract, irrespective of whether
or not such failure is identified as a reason for termination elsewhere in this
Mining Contract. In the event of any alleged default by Contractor, MSR shall
notify Contractor in writing of such default condition, and if Contractor fails
to present in writing to MSR within ten (10) calendar days after its receipt of
such notice either a statement of reasons why Contractor in good faith disputes
the existence of such a default or a plan acceptable to MSR (in its sole
discretion) to correct the alleged default, Contractor shall be deemed to be in
default. In the event of such a default, MSR shall have the right to terminate
this Mining Contract for cause without liability of any kind to Contractor other
than payment for Work previously completed (including services, material and
equipment for which Contractor has executed written contracts, it being
understood that all such material and equipment covered by such contracts shall
become the property of MSR), and MSR shall have the right if it so desires to
take over the Work of the Contractor in full, and exclude the Contractor from
any further participation in the Work covered by this Mining Contract; or, at
its option MSR may take over such portion of the Work as MSR shall deem to be in
the best interest of MSR, and require the Contractor to continue with the
remaining portions of the Work. Whichever method MSR might elect to pursue, MSR
agrees to complete the Work to the best of its ability and in the most
economical manner available to it at the time. Any costs incurred by MSR in
performing any such portion of the Work covered by this Mining Contract shall be
charged against any payments due or to become due to Contractor under the terms
of this Mining Contract, and in the event the total amount due or to become due
to Contractor under the terms of this Mining Contract shall be insufficient to
cover the costs incurred by MSR in completing the Work, then the Contractor and
its sureties and/or insurers, if any, shall be liable to MSR for the difference.
If Contractor timely provides notice to MSR that it disputes the existence of
such a default, the provisions of Articles 25 and 26 shall apply, although the
termination shall take effect immediately.
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20.3 Use of Equipment
If this Mining Contract is terminated pursuant to Section 20.2, Contractor
shall make available to MSR (for use by MSR or any third party selected by MSR),
for a period of time equivalent to the remainder of the Term of this Mining
Contract, (i) all of Contractor's Equipment and current inventories of spare
parts, consumables and mining supplies and materials owned by Contractor and
used in the performance of the Work, and all other materials, tools and supplies
used by Contractor in the performance of the Work, and (ii) all of Contractor's
employees at the Mine. If MSR chooses to use any Contractor Equipment and
materials, Contractor shall be paid for all such Contractor Equipment, current
inventories of spare parts, consumables, mining supplies and other materials
used by MSR in performance of the Work, at Contractor's cost. If MSR chooses to
use Contractor's employees for the Work, MSR must pay such employees at the same
wage and benefit rates previously paid to those employees by the Contractor. The
parties hereby acknowledge that it is their intention that if MSR uses
Contractor's Equipment and materials or employees in performing any of the Work,
the costs to MSR to use any such Contractor's Equipment and materials and
employees shall be no greater than the costs MSR would have incurred had
Contractor performed that Work under this Mining Contract.
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20.4 Default by MSR
Should any amounts invoiced by Contractor become past due by thirty (30)
calendar days or more, or if MSR fails to perform any of its other material
obligations under this Mining Contract in a timely manner as required by this
Mining Contract, Contractor may elect to give notice in writing of such default,
specifying the same and the corrective measures to be taken. If MSR, within a
period of thirty (30) calendar days after receipt of such notice, shall fail to:
(i) remedy the default or, (ii) if the default (other than a failure to make
payment on any invoice) cannot be remedied with thirty (30) calendar days, to
implement measures within thirty (30) calendar days and diligently pursue such
measures to remedy the default within the shortest reasonable time, then and in
any such event, Contractor may terminate this Mining Contract for cause and
treat it as having been repudiated by MSR. If MSR timely provides notice to
Contractor that it disputes the existence of such a default, the provisions of
Articles 25 and 26 shall apply, and MSR shall not be deemed in default until a
final decision by the arbitrators as set forth in Article 26. In the event of
termination for MSR's default, the parties' obligations shall be the same as if
this Mining Contract had been terminated under Section 20.5, and in addition MSR
shall be obligated to make the demobilization payment to Contractor required
under Section 5.7.
20.5 Termination for Convenience
If MSR decides, which it shall have the right to do at any time in its
sole discretion, to terminate this Mining Contract for any reason other than (a)
pursuant to Section 20.2 as the result of a default by Contractor, (b) as
specifically provided for in any of the other provisions of this Mining
Contract, (c) bankruptcy, moratorium, reorganization or insolvency or (d) as a
result of Force Majeure, then MSR will pay Contractor a termination payment
based on when such termination occurs, in accordance with the following
schedule:
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Year 1 $650,000
Year 2 $350,000
Year 3 $180,000
Year 4 $ 0
Year 5 $ 0
Year 6 $ 0
The above termination payment shall be prorated on a monthly basis during the
year that the Mining Contract is terminated pursuant to this Section 20.1.5. As
an example, if MSR terminated the Mining Contract pursuant to this Section
20.1.5 in the fourth month of the second year of the Mining Contract (each year
running from the Effective Date or any anniversary thereof to the next
anniversary), the termination payment would be calculated as follows:
$350,000 - ($350,000 - $180,000) x 4 = $293,333
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12
Such termination payment (if any) shall be the sole obligation and liability of
MSR to Contractor in connection with MSR's termination of this Mining Contract
under this Section 20.5. For purposes of this Section 20.5, Year 1 shall be
deemed to have begun on the date of commencement of the Work, and each
subsequent year shall be deemed to have begun on the appropriate anniversary of
the date of commencement of the Work.
20.6 Survival
The parties agree that in addition to those provisions of this Mining
Contract which expressly survive its termination, the provisions of Sections
5.7, 5.8, 8.2-8.4, 9.4, 15.1-15.8, 16.2, 17.1-17.7, 21.2, Articles 7, 11, 23,
24, 26, 27 and 31, and this Article 20 shall survive the termination of this
Mining Contract for any reason.
20.7 No Decree Required
No judicial or arbitration proceedings or judgments or awards of any kind
shall be required for the termination of this Mining Contract to take effect on
account of a default by Contractor, or when terminated as provided in Section
20.1 or 20.5 hereof.
20.8 Release
Upon termination of this Mining Contract for any reason, Contractor shall
provide MSR with a release satisfactory in form and substance to counsel for
MSR.
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21. Contract Award and Effective Date
21.1 Notice of Award and Notice to Proceed
The parties agree that this Mining Contract shall not become effective
until the date of receipt by Contractor of a formal Notice of Award, in the form
of the attached Appendix F, by email, FAX and first class mail (the "Effective
Date"). The Notice of Award will inform Contractor that it is MSR's choice of
Contractor for the Mine, should it proceed. Contractor shall return the
Acceptance of Notice as directed. The parties' obligations under this Mining
Contract are then conditional upon MSR obtaining its project financing for the
Mine and MSR's formal decision to proceed with the Mine at that point. Upon such
a decision by MSR to proceed, MSR will send the Notice to Proceed. Upon receipt
of the Notice to Proceed, Contractor agrees to mobilize for actual physical Work
as directed by MSR, which shall be no sooner than sixty (60) days but no later
than ninety (90) calendar days after receipt of the Notice to Proceed. The
Notice to Proceed shall indicate the date Contractor's Work hereunder shall
commence.
21.2 Change in Rates
Both MSR and Contractor acknowledge that MSR's Mining Plan and Feasibility
Study are based on Contractor's rates for mining and equipment set forth in
Appendix A, and the standby rates set forth in Appendix E. MSR and Contractor
also acknowledge that the mining rates set forth in Appendix A may need to be
adjusted for inflation, and are subject to change after September 1, 2006. MSR
and Contractor agree that, as long as the Notice to Proceed is received by
Contractor on or before June 1, 2006, with a specified date of commencement of
the Work not later than September 1, 2006, the mining rates set forth in
Appendix A shall apply; provided, however, that those mining rates shall be
adjusted as described in this Section 21.2 for the rate of inflation between
September 23, 2005 and the date of commencement of the Work, calculated using
the escalation formula set forth in Section 5.5. For purposes of this Section
21.2, the baseline numbers for tires, lubricants, replacement parts, interest
rates and labor are the ones described in Appendix K hereto. For purposes of
this Section 21.2, if the escalation percentage between September 23, 2005 and
the date of commencement of the Work is four percent or less, the mining rates
set forth in Appendix A shall remain unchanged. If that escalation percentage is
greater than four percent, the mining rates set forth in Appendix A shall be
increased by an amount equal to one-half of the percentage increase in excess of
four percent (so that, for example, if that escalation percentage turns out to
be six percent, the mining rates for Year 1 and each subsequent year in Appendix
A would be increased by one percent). After any initial adjustments made to the
mining rates pursuant to this Section 21.2, subsequent adjustments will be made
pursuant to Section 5.5. MSR and Contractor further agree that if the Notice to
Proceed (as that term is defined in Section 21.1) has not been received by
Contractor on or before 5:00 Pacific Time on June 1, 2006, Contractor shall have
the right to terminate this Mining Contract. Otherwise, Contractor shall have no
right to terminate this Contract prior to June 1, 2006. Alternatively, if
Contractor has not received the Notice to Proceed by June 1, 2006, and if
Contractor subsequently increases any of its mining, equipment or standby rates,
MSR shall have no obligation to proceed with Contractor under this Mining
Contract, and may terminate this Mining Contract at any time after it receives a
notice from Contractor indicating that any of these rates will be increased and
prior to the date it delivers the Notice to Proceed. Upon termination of this
Mining Contract pursuant to this Section 21.2, MSR shall have no obligation or
liability to Contractor for any payments under Sections 5.7 or 5.8, or any other
obligations or liabilities to Contractor pursuant to this Mining Contract,
Contractor shall have no obligations or liabilities to MSR under this Mining
Contract, and MSR shall be free to enter into negotiations for contract mining
at the Mine with any third party.
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22. Representations And Warranties
22.1 MSR Representations and Warranties
MSR represents that it is a corporation duly organized, validly existing
and in good standing in Mexico, and is legally authorized to transact business
in the State of Sonora, and that, except as set forth in Appendix H, it
possesses the Permits for the Mine insofar as the Work contemplated by this
Mining Contract is concerned (other than any permits required to be obtained by
the Contractor under this Mining Contract); that it has the power to execute,
deliver and perform under this Mining Contract; that it has duly executed and
delivered this Mining Contract; that there is no action, suit, investigation or
proceeding affecting MSR, pending or (to MSR's knowledge) threatened before any
court, governmental agency or arbitrator that affects or would affect the
legality, validity or enforceability of this Mining Contract, or the
consummation of the transactions contemplated hereunder; and that, upon its
execution and delivery of this Mining Contract (assuming valid execution and
delivery by Contractor), the same will be a legal, valid and binding obligation
of MSR, enforceable against MSR in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws and by
equitable principles generally. MSR further represents that the authority of the
individuals who signs this contract on its behalf has not been rescinded,
revoked, or restricted in any manner whatsoever.
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22.2 Contractor Representations and Warranties
Contractor represents that it is a corporation duly organized, validly
existing and in good standing under the laws of Mexico, and is legally
authorized to transact business in the State of Sonora, and that it has the
power and authority to execute, deliver and perform under this Mining Contract;
that it has duly executed and delivered this Mining Contract; that there is no
action, suit, investigation or proceeding affecting Contractor, pending or (to
Contractor's knowledge) threatened before any court, governmental agency or
arbitrator that affects or would affect the legality, validity or enforceability
of this Mining Contract, or the consummation of the transactions contemplated
hereunder; and that, upon its execution and delivery of this Mining Contract
(assuming valid execution and delivery by MSR), the same will be a legal, valid
and binding obligation of Contractor, enforceable against Contractor in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws and by equitable principles generally.
Contractor further represents that the authority of the individual who signs
this contract on its behalf has not been rescinded, revoked, or restricted in
any manner whatsoever.
22.3 Performance Warranty
Contractor represents and warrants that the equipment, labor, materials
and Work furnished under this Contract will be in accordance with this Contract,
the Mining Plan and industry standards, and that Work will be free from defects
not inherent in the quality required or permitted and that the Work will conform
with the requirements of the Mining Contract. Contractor warrants that the Work
(a) shall be adequate for the purpose for which intended; and (b) shall be
comparable to similar work performed by a first class, efficient, experienced
and competent mining contractor of national stature. Work not conforming to
these requirements, including substitutions not properly approved and
authorized, may be considered defective. Contractor further warrants that all
Contractor's Equipment will be first quality and suitable for the performance of
the Work, as will all other materials and supplies furnished by Contractor.
Contractor's warranty excludes remedies for damages or defects caused by normal
wear and tear under normal usage. Contractor shall repair or replace any
defective equipment or materials and shall correct (by repair or replacement)
deficient design, engineering or construction of the Work. Contractor shall
promptly re-execute any defective Work in accordance with the Mining Contract
and the Mining Plan and without expense to MSR.
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22.4 No Third-Party Beneficiaries
Except as specifically provided in this Mining Contract, there are no
third-party beneficiaries of this Mining Contract, this Mining Contract does not
create or confer any legal claim or cause of action in favor of any party not a
signatory to this Mining Contract and the obligations and legal duties imposed
on any party by this Mining Contract are owed exclusively to the other party or
parties and are not owed to any party not a signatory to this Mining Contract.
22.5 Exclusivity
The express warranties provided in the Mining Contract are EXCLUSIVE AND
ARE IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR IMPLIED INCLUDING ANY WARRANTY OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE (WHICH OTHER WARRANTIES ARE
EXPRESSLY DISCLAIMED).
23. Labor Law Related Liabilities
23.1 Contractor's Obligations
Contractor shall promptly and timely discharge and fulfill all its
obligations (contractual, statutory, or otherwise) directly or indirectly
relating to its labor relationships, including, but not limited to, those
derived from individual or collective employment contracts and to the Instituto
Mexicano del Seguro Social, to the Instituto del Fondo Nacional para la Vivienda
de los Trabajadores, to retirement pension funds or plans (or Afores), and to
federal, state, or local tax laws applicable to those labor relationships.
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23.2 Indemnity
Contractor shall defend, indemnify and hold MSR harmless from and against
any and all disputes, complaints, blockades, stoppages, closure orders,
attachments, garnishments, investigations, audits, and like proceedings directly
or indirectly relating to Contractor's labor relationships and for any losses,
claims or damages (including reasonable attorney's fees) that MSR might sustain
on account of those labor relationships and applicable federal, state and local
laws, rules regulations, and Mexican official standards.
23.3 No Responsibility
MSR is not and will not be responsible for and will not discharge any of
Contractor's liabilities and obligations to its employees, or to any agency or
authority, including, but not limited to, the Instituto Mexicano del Seguro
Social, to the Instituto del Fondo Nacional para la Vivienda de los
Trabajadores, to retirement pension funds or plans (or Afores), and to federal,
state, or local tax laws, rules or regulations applicable to those labor
relationships, and MSR is not and will not be Contractor's substitute or
surrogate employer for any purpose whatsoever.
24. Performance Bond
To secure and guarantee the timely and complete performance of the Work
and all of Contractor's other obligations hereunder, Contractor shall, within
thirty (30) calendar days after the Effective Date, post and periodically
maintain a performance bond issued by a Mexican licensed bonding company in the
sum of $2,000,000, in form and content satisfactory to counsel for MSR, payable
to MSR. This clause is not and will not be interpreted as a liquidated damages
clause and will not limit Contractor's liability hereunder. Contractor shall
continue to be responsible with all of its assets, proceeds, and income
(including income due to Contractor hereunder ) for the payment of any damages
or losses incurred by MSR on account of Contractor's failure to comply with any
of its obligations under this Mining Contract notwithstanding the posting of the
bond provided herein.
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25. Dispute Resolution
25.1 Informal Resolution
Any dispute or claim arising between MSR and Contractor relating to
interpretation of the provisions of this Mining Contract, to the Work, to the
performance of MSR or Contractor hereunder, or to payment or any portion
thereof, which has not been resolved by the appropriate staff level personnel of
the parties, shall be referred to the following parties for resolution:
Level MSR Contractor
----- ------------------ ----------
I MSR Representative Contractor Representative
II President President
25.2 Memorandum
If the disputed issues are not resolved at Level I, a memorandum will be
prepared jointly by the Level I participants and signed by each of them clearly
outlining the unresolved issues, the amount of disagreement and the principal
persons responsible for activities leading to the dispute. Within five calendar
days of delivery of this memorandum to the Level II participants, the Level II
participants shall attempt to resolve the dispute issues, either through
telephone conversation or meeting, as appropriate. If the Level II participants
cannot resolve the dispute, then the dispute will be settled by arbitration in
accordance with the provisions of Article 26.
25.3 Refusal to Perform
Contractor shall have no right to refuse to perform any Work requested by
MSR as provided for in this Mining Contract, except: (a) in the event of an
unexcused failure by MSR to pay any undisputed portions of Contractor's
invoices; (b) when a requested action is in violation of any applicable federal,
state or local law, rule or regulation; or (c) when in Contractor's reasonable
opinion the requested action is unsafe.
26. Formal Dispute Resolution
26.1 Arbitration
Unless otherwise specifically provided in this Mining Contract, all
disputes or differences between the parties that arise in connection with this
Mining Contract and that cannot be settled or resolved pursuant to Article 25
shall be resolved or settled by arbitration pursuant to the following rules:
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26.1.1 Arbitration Rules
Any arbitration proceedings engaged in pursuant to this Article 26 shall
be governed by the rules set forth in Book Fifth, Title IV (four), of the
Mexican Code of Commerce (the "Code of Commerce") (to the extent that they have
not been modified by this Article 26) and by the rules agreed upon in this
Article 26, and the arbitral award shall be rendered in abidance by all those
rules.
26.1.2 Place of Arbitration
The arbitration shall be conducted in Hermosillo, Sonora, at the offices
selected by the arbitral board. The arbitral board shall be entitled to convene
in any place or offices that it may deem fit for its members to deliberate and
to hear the parties, the witnesses, or the experts, or to examine goods or
documents.
26.1.3 Arbitral Board
The arbitral board shall be composed of three members designated (a) by
the Asociacion de Mineros de Sonora A.C. or (b) by a federal or state judge of
first instance sitting in Hermosillo, Sonora, Mexico, if the Asociacion de
Mineros de Sonora A.C. declines to designate the board or fails to designate the
board within thirty (30) calendar days after having been requested in writing to
do so by either MSR or Contractor, or if the designated board members cannot or
decline to serve as such within that thirty (30) calendar day period. The
arbitrators must be individuals, of age, legally qualified, of public good
ethical character, independent, and impartial, and with experience in the
settlement of commercial disputes, preferably attorneys at law. All the
decisions of the arbitral board, including the award and all kinds of procedural
rulings, shall be approved by a majority of votes.
26.1.4 Language of the Arbitration
The arbitration shall be conducted in the Spanish language. This rule
shall apply to all the parties' requests, to all hearings, and to all awards,
decisions, or communications of any other kind issued by the arbitral board.
26.1.5 Applicable Substantive Law
The disputes or differences shall be settled or resolved applying the
applicable Mexican substantive law, but the arbitrators shall have no authority
to award consequential, punitive, or special damages or losses, or both,
including lost profits. The damages or losses that may be awarded by the
arbitrator are only those that qualify as immediate and direct pursuant to
Mexican law.
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26.1.6 Applicable Procedural Law
The arbitral procedure, including the kinds and effects of the objections
to or recourses against the arbitral board's decision, shall be governed by this
clause and by the rules established by the arbitral board, as provided in
Section 1,435 (one thousand four hundred thirty-five) second paragraph of the
Code of Commerce, seeking (i) the prevailment of the material over the formal
truth, (ii) the equality of the parties, and (iii) their full opportunity to
propound and submit evidence and the unrestricted exercise of their rights.
26.1.7 Award
The arbitral award may be challenged before competent judge or court only
for invalidity in the cases set out in Section 1,457 (one thousand four hundred
fifty-seven) of the Code of Commerce; the judgment rendered in the invalidity
proceeding shall not be attackable or appealable by any of the recourses
provided in the Code of Commerce.
26.1.8 Express Waiver of Other Procedures
In a clear, precise, and irrevocable manner, the parties waive any other
dispute resolution procedure to which they are entitled pursuant to the law if
not for the arbitral covenant contained in this Article 26, with strict abidance
by and without prejudice to the stipulation contained in the first paragraph and
in Section 26.1.9.
26.1.9 Interim or Provisional Remedies
Notwithstanding the provisions of this Article 26, the parties may
petition to the competent state or federal tribunals for interim or provisional
remedies, and no such petition shall be understood as implying waiver or
abandonment of the right that the definitive issues be settled or resolved as
provided in this Article 26.
26.1.10 Cost of Arbitration and Attorneys' Fees
The parties shall bear equally the costs of arbitration, including the
arbitrators' fees. Each party shall bear separately its attorneys' fees and
costs.
26.1.11 Judicial Remedies
This arbitration agreement shall not be construed as barring pursuit in
any court of competent jurisdiction of judicial remedies in aid of arbitration,
including without limitation applications to compel arbitration, to stay
judicial proceedings pending arbitration, or to issue interlocutory orders of
injunction, replevin, attachment, or other measures that may be necessary to
prevent irreparable injury to a party pending arbitration.
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26.1.12 Termination Right
The prevailing party in any arbitrated matter shall have the option to
terminate this Mining Contract within thirty (30) calendar days after the
arbitrators' award, without any further liability or obligation whatsoever to
Contractor.
26.1.13 Waiver of Right of Appeal
Judgment upon the award rendered by the arbitrators may be entered in any
court of competent jurisdiction, and the parties hereby waive any right of
recourse or appeal to the Mexican courts, or any other court, in connection with
any question arising in the course of the arbitration. The award recognition and
enforcement judgment shall not be attackable or appealable by any of the
recourses provided in the Code of Commerce.
26.1.14 Notices and Notifications
The parties agree that service of any notices or notifications in
reference to any arbitration proceeding at their addresses as given in this
contract (or as subsequently amended in writing) shall be valid and sufficient.
27. Jurisdiction
This Mining Contract is to be governed by the laws of Mexico. The
Contractor must provide proof of its legal authority and/or authorization to do
business in Mexico, and of the duly authorized appointment and authority of
whoever is to sign this Mining Contract and any related document on its behalf.
28. Transferability of Contract
This Mining Contract and the rights and obligations hereunder may not be
assigned or delegated by Contractor to any third party. If either MSR or the
Contractor has a change in ownership or control, MSR (for any change in
ownership or control of the Contractor) or the Contractor (for any change in
ownership or control of MSR) shall have the option to immediately terminate this
Mining Contract, with no further liability or obligation respectively to
Contractor (other than the obligation to make payments for Work performed prior
to such termination) or to MSR (other than the Contractor's obligations that
have not been discharged as of termination of this Mining Contract under this
Article 28 or the Contractor's obligations that survive the termination,
expiration, or rescission of this Mining Contract). If Contractor elects to
terminate this Mining Contract pursuant to Section 20.5, it must render services
for at least three months after notification. Contractor may not subcontract any
portion of the Work without prior written agreement from and in accordance with
any reasonable conditions imposed by MSR. Contractor may, however, subcontract
maintenance work for Contractor's Equipment and similar activities. Contractor
shall be responsible for any non-compliance with this Mining Contract by, and
for the acts and omissions of, its permitted subcontractors, including, but not
limited to, the preservation of any and all information generated by or provided
to any such subcontractor in direct or indirect relation to its work as
confidential during the term of its contract with Contractor and for a period of
two (2) years thereafter.
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29. Successors and Assignees
MSR and the Contractor each is hereby bound, and the partners, successors,
administrators, and legal representatives of each are hereby bound, to the other
party to this Mining Contract and to the partners, successors, administrators,
and legal representatives (and said assigns) of such other party, in respect of
all covenants, agreements and obligations of this Mining Contract.
30. Records and Audit
At any time and from time to time during the Term of this Mining Contract,
MSR's Representative shall have the right, during normal business hours and so
as not to unreasonably interfere with Contractor's operations, to review all
records and information in Contractor's possession (other than information
concerning Contractor's costs related to the performance of the Work) pertaining
to the activities and operations conducted by Contractor under this Mining
Contract.
31. Confidentiality
During the Term of this Mining Contract and for a period of two (2) years
thereafter, Contractor and Contractor's employees shall treat all information
previously provided by MSR to Contractor, and all other information in
Contractor's possession or which Contractor acquires relating to the Work as
confidential, and neither Contractor nor any of its employees shall disclose to
any third-party any such information or use any such information for its or his
personal benefit. Originals of all drawings, engineering design calculations,
estimate work sheets, specifications, and all other original documents
pertaining to the Work (other than information concerning Contractor's costs
related to the performance of the Work) shall be, and remain at all times
throughout the Work and thereafter, the sole property of MSR. On completion or
termination of the Work, or from time to time as may be determined by MSR,
Contractor shall release and deliver to MSR any and all such originals which
Contractor may have prepared or may have received from others; provided,
however, that Contractor shall have the right to reproduce at its own expense
all such originals for the purposes of Contractor's record files of the project.
Contractor will not sell or copy any specifications, drawing or drawings, or
blueprints for use on any other project. Contractor specifically agrees not to
use drawings and technical information obtained from MSR with regard to the Mine
on any other project. Contractor agrees not to issue any press releases or other
public announcements concerning this Mining Contract or the Mine unless the
information contained in such press releases or other public announcements has
already been made public by MSR.
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32. Miscellaneous
32.1 Amendment; Waivers
No change in, addition to, or waiver of any of the provisions of this
Mining Contract shall be binding upon either party unless in writing signed by
an authorized representative of each party. No waiver by either party of any
breach of the other party of any of the provisions of this Mining Contract shall
be construed as a waiver of any subsequent breach, whether of the same or of a
different provision of this Mining Contract.
32.2 Entire Agreement
This Mining Contract sets forth the entire Mining Contract between MSR and
Contractor with respect to operations at the Mine and supersedes all prior
negotiations and dealings between parties pertaining to the subject matter
thereof.
32.3 Counterparts
This Mining Contract may be executed, accepted and delivered in any number
of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument. The section headings are
inserted for convenience only and are not to be construed as part of this Mining
Contract.
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32.4 Invalidity
If any term or provision hereof or the application thereof to any
circumstance shall to any extent, be invalid or unenforceable, the validity of
the remainder of the Mining Contract shall not be affected and such invalid or
unenforceable term or provision shall be deemed modified to the minimum extent
necessary to bring such term or provision into compliance with the law.
32.5 No Solicitation
Each of Contractor and MSR covenant to the other that during the Term of
this Mining Contract and for two (2) years thereafter, they will not for
themselves or any other entity, directly or indirectly, solicit, induce or
attempt to induce, hire or employ key employees of the other, as an employee,
agent, consultant, advisor, representative or otherwise, without the prior
written consent of the other party, which consent shall not be unreasonably
withheld.
32.6 Further Assurances
At the request of either party to this Mining Contract, the parties shall
execute and deliver any further instruments, mining contracts, documents or
other papers reasonably requested by that party to effect the purposes of this
Mining Contract and the transactions contemplated hereby.
32.7 Schedule for Performance
Time is of the essence in the performance by Contractor of the Work and
all of its other duties and obligations under this Contract. Contractor agrees
to conduct the Work in such a manner as to timely meet the specific milestones
set forth in Appendix A. Otherwise, all of the Work shall commence on and shall
continue on a mutually agreed to schedule until the termination of this
Contract.
32.8 Interpretation
The use of the term "including" anywhere in this Mining Contract shall be
deemed to mean "including without limitation."
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33. Notices
33.1 Procedure
Any payments required or permitted to be given hereunder shall be deemed
properly given upon personal delivery or mailing, by registered or certified
mail, return receipt requested, to the addresses set forth below. Any notices or
other written communications required or permitted to be given hereunder shall
be given or made in person, by reputable overnight courier, or by facsimile with
receipt acknowledged. Such notices shall be deemed to have been duly given and
received when actually delivered in person or sent by facsimile (during normal
business hours), or the next business day following the date they are sent if
sent by courier, and addressed as follows:
If intended for MSR to:
Minera Santa Xxxx X. de X.X. de X.X.
Xxxxx Xxxxxxxx Xxxxxxxxx 73, esquina con Xxxxxxx "X"
Xxxxxxx, Xxxxxx 00000, Xxxxxx
Attention: Xxxx Xxxxx
Telephone: (000) 000 0000
Facsimile: (000) 000 0000
and if intended for Contractor, to:
Sinergia Obras Civiles y Mineras, S.A. de C.V.
Calle de Cobre No. 91, Parque Industrial
Xxxxxxxxxx, Xxxxxx 00000, Xxxxxx
Attention: Xxxxxx Xxxxxxxxx Xxxxx
Telephone: (000) 000 0000 (13 and 14)
Facsimile: (000) 000 0000
or to such other person or address as the party to be notified may have
designated prior thereto by written notice to the other party.
33.2 Electronic Communications
The electronic mail (also known as "e-mail"), capable of generating a
printed version of the sent and received message and of generating and printing
an acknowledgment of receipt received by the sender (which capabilities both
MSR's and the Contractor's systems have), shall be an acceptable means of
transmission and reception of all kinds of notices, communications, and
correspondence related to this Mining Contract, in addition to those methods of
communication set out in Section 33.1, and any notices, communications, and
correspondence sent and received by e-mail shall have the same effect as
communications made by the means set out in Section 33.1, unless the Contractor
or MSR communicates to the other, by any of the means provided in Section 33.1,
that it wishes to exclude certain types or categories of notices,
communications, and correspondence from the application of this Section 33.2 and
the date as of and from which this exclusion is to take effect, or that the
Contractor's or MSR's system has ceased to have the above capabilities. All
e-mail communications shall be deemed to have been duly given and received the
business day following the reception in the sender's system of the particular
addressee's acknowledgment of receipt. For the purposes of this Section 33.2,
the parties designate these as their respective e-mail addresses, which they may
change at any time hereafter by communication sent to the other either as
prescribed in this Article 33: (a) Contractor's: xxxxxxx@xxxxxxx.xxx.xx or
xxx@xxx.xxxxxxx.xxx.xx, to the attention of Xxxxxx Xxxxxxxxx Xxxxx, and (b)
MSR's: xxxxx@xxxxxxxxxxxxxxx.xxx, to the attention of Xxxx Xxxxx, and
xxxxxxxxx@xxxxxxxxxxxxxxx.xxx, to the attention of Xxxx Xxxxxxxxx.
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34. Mining Contract Signature Page
MINING CONTRACT
Contract Mining for El Chanate Mine
As set forth in Article 21, the effectiveness of this Mining Contract is
conditional upon (a) MSR obtaining its project financing for the Mine, (b) MSR's
decision to proceed with the project at that point, and (c) Contractor's receipt
of a Notice of Award.
Mining Contract terms are agreed to by MSR:
/s/ Xxxxxxx Xxxxxxxx 12/7/05
------------------------------ ----------------
Xxxxxxx Xxxxxxxx Date
Minera Santa Xxxx X. de X.X. de C.V.
Legal Address: Xxxxx Xxxxxxxx Xxxxxxxxx 00, xxxxxxx con Xxxxxxx "X", Xxxxxxx,
Xxxxxx 00000, Xxxxxx
Xxxxxxx Xxxxxxxx hereby represents and warrants that the authority by which he
is signing and delivering this Mining Contract on behalf of Minera Santa Xxxx X.
de X.X. de C.V., granted and formalized by the notarial instrument attached
hereto as Appendix I, has not been rescinded, restricted or modified in any way
or by any means whatsoever.
Mining Contract terms are agreed to by Contractor:
/s/ Xxxxxx Xxxxxxxxx Xxxxx
------------------------------------ November 24, 2005
Xxxxxx Xxxxxxxxx Xxxxx Date
Attorney in Fact
Sinergia Obras Civiles y Mineras, S.A. de C.V., Obras Civiles y Mineras
Legal Address: Calle del Cobre No. 91, Parque Industrial, Xxxxxxxxxx, Xxxxxx
00000, Xxxxxx
Xxxxxx Xxxxxxxxx Xxxxx hereby represents and warrants that the authority by
which he is signing and delivering this Mining Contract on behalf of Sinergia
Obras Civiles y Mineras, S.A. de C.V., granted and formalized by the notarial
instrument attached hereto as Appendix J, has not been rescinded, restricted or
modified in any way or by any means.
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X-00
XXX Xxxxxxxxxxxxxx
XXXXX XX XXX XXXX )
)ss.
CITY AND COUNTY OF NASSAU )
On the 7th day of December, 2005, before me personally came Xxxxxxx
Xxxxxxxx, to me known, who, being by me duly sworn, did depose and say that he
resides in Xxxxx Harbor, New York; that he is the President of Minera Santa Xxxx
X. de X.X. de C.V., the corporation described in and which executed the above
instrument; and that he signed his name thereto by authority of the board of
directors of said corporation.
Witness my hand and official.
________s/_________________________________
Notary Public
My commission expires: April 30, 2007
--------------
[SEAL]
State of New York
County of Nassau ss.: I, XXXXX X. XXXXXX, County Clerk and Clerk of
the County Court and the Supreme Court, Nassau
County, Courts of Record having by law a common seal,
DO HEREBY CERTIFY that
XXXXXXXXX X. XXXXX
Whose name is subscribed to the annexed affidavit, deposition, certificate of
acknowledgement or proof, was at the time of taking the Same a NOTARY PUBLIC in
an for the State of NEW YORK, duly commissioned and sworn and qualified to act
as such throughout The State of New York; that pursuant to law a commission, or
a certificate of their official character, and autograph signature, have been
filed in my office; that as such the Notary Public was duly authorized by the
laws of the State of New York to administer oaths And affirmations, to receive
and certify the acknowledgement or proof of deeds, mortgages, powers of attorney
and other written instruments for lands, tenements and hereditaments to be read
in evidence or recorded in this State, to protest notes and to take and certify
affidavits and depositions; and that I am well acquainted with the handwriting
of such Notary Public or have compared the signature on the annexed instrument
with their autograph signature deposited in my office, and believe that the
signature in genuine.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal
This the 9th day of December, 2005
XXXXX X. XXXXXX
COUNTY CLERK, NASSAU COUNTY
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