Exhibit 10.1
OPTION AGREEMENT
THIS AGREEMENT made as of the 3rd day of January, 2011 at Kelowna, British
Columbia
BETWEEN:
Candorado Operating Company Ltd.
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▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
(collectively referred to as the "Optionor")
OF THE FIRST PART
AND:
Pepper Rock Resources Corp.
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(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionor is the owner of British Columbia Mineral Claims known as
Man/Prime, (the Property), located in British Columbia, Canada; ATTACHED AS
SCHEDULE A.
B. The Optionor has agreed to grant an exclusive option to the Optionee to
acquire a 70% interest in and to the Property, subject only to the Royalty,
on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and provisos herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:
DEFINITIONS
1. For the purposes of this Agreement, the following words and phrases shall
have the following meanings, namely:
"Commencement of Commercial Production" means:
if a mill is located on the Property, the last day of a period of 40 consecutive
days in which, for not less than 30 days, the mill processed ore from the
Property at 60% of its rated concentrating capacity; or
if a mill is not located on the Property, the last day of a period of 30
consecutive days during which ore or other products has been shipped from the
Property on a reasonably regular basis for the purpose of earning revenues, but
any period of time during which ore, concentrate or other products is shipped
from the Property for testing purposes, or during which milling operations are
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undertaken as initial tune-up, shall not be taken into account in determining
the date of Commencement of Commercial Production;
"Exchange" means the Toronto Stock Exchange, The TSX Venture Stock Exchange and
such other stock exchanges on which the Optionee's shares may be listed;
"Exchange Acceptance Date" means the date that the Exchange notifies the
Optionee of the regulatory acceptance of this agreement pursuant to regulations
of the of the Exchange.
"Exploration Expenditures" means the sum of:
i. all costs of maintenance of the Property, all expenditures on the
exploration and development of the Property, and all other costs and
expenses of whatsoever kind or nature incurred or chargeable by the
Optionee with respect to the exploration and development of the
Property and the placing of the Property into commercial production;
and
ii. as compensation for general overhead expenses which the Optionee may
incur, an amount equal to 10% of all amounts included in subparagraph
(i) in each year but only 5% of such amounts when paid by the Optionee
under any contract involving payments by it in excess of $500,000 in
one year;
"Net Smelter Returns" has the meaning set out in Schedule "B" hereto;
"Option" means the option to acquire a 70% interest in and to the Property and
the Property Rights as provided in this Agreement;
"Option Period" means the period from the date of this Agreement to and
including the date of exercise or termination of the Option;
"Property" means the mineral applications, mineral exploration licenses, permits
and claims as described in Schedule "A" hereto, including any replacement or
successor applications, mineral exploration licenses, permits, claims and all
mining leases and other mining interests derived from any of the foregoing. Any
reference herein to any mineral application, mineral exploration license, permit
and claim comprising the Property includes any mineral leases or other interests
into which such mineral application, mineral exploration license, permit, claim
may have been converted;
"Property Rights" means all applications, licenses, permits, easements,
rights-of-way, certificates and other approvals obtained by either of the
parties either before or after the date of this Agreement and necessary for the
exploration of the Property, or for the purpose of placing the Property into
production or continuing production therefrom;
"Royalty" means the amount of royalty from time to time payable to the Optionor
hereunder, being 2% of Net Smelter Returns.
"Shares" means common shares in the capital of the Optionee to be issued to the
Optionor pursuant to the exercise of the Option. For the Shares to be used as
payment under this agreement, the Shares shall be listed for trading on either
the Toronto Stock Exchange, The TSX Venture Exchange or Frankfurt Exchange, The
AIM exchange or the AMEX, New York or Nasdaq Exchanges.
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONOR
2. The Optionor represents and warrants to and covenants with the Optionee, with
the knowledge that the Optionee relies upon same in entering into this
Agreement, that:
a) The Optionor is legally entitled to hold the Property and the Property
Rights and will remain so entitled until the interest of the Optionor
in the Property which is subject to the Option has been duly
transferred to the Optionee as contemplated hereby;
b) The Optionor is, and at the time of each transfer to the Optionee of
an interest in the mineral claims comprising the Property pursuant to
the exercise of the Option it will be, the recorded holder and sole
beneficial owner of all of the Property and the Property Rights free
and clear of all liens, charges, claims of others and adverse
interests of any nature or kind, and no taxes or rentals are or will
be due in respect of any of the Property or the Property Rights;
c) the mineral applications, mineral exploration licenses, permits,
claims comprising the Property and the Property Rights have been, to
the best of the Optionors knowledge and belief, duly and validly
located and recorded pursuant to the laws of the jurisdiction in which
the Property is situate and are in good standing with respect to all
filings, fees, taxes, assessments, work commitments or other
conditions on the date hereof and until the dates set opposite the
respective names thereof in Schedule "A" hereto;
d) there are not any adverse claims or challenges against or to the
ownership of or title to any of the Property or the Property Rights
other than as a possible Treaty Land Entitlement Selection Site which
has been disclosed to the Optionee and the Optionee acknowledges
knowledge thereof, nor to the knowledge of the Optionor is there any
basis therefore, and there are no outstanding agreements or options or
other rights to acquire or purchase the Property or the Property
Rights or any portion thereof, and no person other than the Optionor,
pursuant to the provisions hereof, has any royalty or other interest
whatsoever in production from any of the Property or the Property
Rights;
e) it has duly obtained all third party consents and authorizations for
the execution of this Agreement and for the performance of this
Agreement by it, and the consummation of the transactions herein
contemplated will not conflict with or result in any breach of any
covenants or agreements contained in, or constitute a default under,
or result in the creation of any encumbrance under the provisions of
any indenture, agreement or other instrument whatsoever to which the
Optionor is a party or by which it is bound or to which it or the
Property may be subject;
f) no proceedings are pending for, and the Optionee is unaware of any
basis for, the institution of any proceedings leading to, the placing
of the Optionor in bankruptcy or subject to any other laws governing
the affairs of insolvent persons; and
g) the Property is not the whole or substantially the whole of the
undertaking of the Optionor;
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h) The representations and warranties contained in this section are
provided for the exclusive benefit of the Optionee, and a breach of
any one or more thereof may be waived by the Optionee in whole or in
part at any time without prejudice to its rights in respect of any
other breach of the same or any other representation or warranty, and
the representations and warranties contained in this section shall
survive the execution of this Agreement and of any transfers,
assignments, deeds or further documents respecting the Property.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE
3. The Optionee represents and warrants to and covenants with the Optionor, with
the knowledge that the Optionor relies upon same in entering into this
Agreement, that:
a) it has been duly incorporated, amalgamated or continued and validly
exists as a corporation in good standing with respect to the filing of
annual reports under the laws of its jurisdiction of incorporation,
amalgamation or continuation;
b) it is lawfully authorized to hold mineral applications, mineral
exploration licenses, permits, claims and real property under the laws
of the jurisdiction in which the Property is situate;
c) it has duly obtained all corporate authorizations for the execution of
this Agreement and for the performance of this Agreement by it, and
the consummation of the transactions herein contemplated will not
conflict with or result in any breach of any covenants or agreements
contained in, or constitute a default under, or result in the creation
of any encumbrance under the provisions of the Articles or the
constating documents of the Optionee or any shareholders' or
directors' resolution, indenture, agreement or other instrument
whatsoever to which the Optionee is a party or by which it is bound or
to which it or the Property may be subject;
d) no proceedings are pending for, and the Optionee is unaware of any
basis for, the institution of any proceedings leading to, the
dissolution or winding up of the Optionee or the placing of the
Optionee in bankruptcy or subject to any other laws governing the
affairs of insolvent corporations;
The representations and warranties contained in this section are provided for
the exclusive benefit of the Optionor and a breach of any one or more thereof
may be waived by the Optionor in whole or in part at any time without prejudice
to its rights in respect of any other breach of the same or any other
representation or warranty, and the representations and warranties contained in
this section shall survive the execution hereof.
GRANT AND EXERCISE OF OPTION
4. The Optionor hereby grants to the Optionee the sole and exclusive right and
option to acquire a 70% interest in and to the Property, free and clear of all
charges, encumbrances, claims and adverse interests of any nature or kind,
except for the Royalty. The Option may be exercised by:
(a) Share Issuances
(i) 1,000,000 shares issued on approval from the TSX Venture Exchange
("Exchange");
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(ii) 250,000 shares issued within 12 months of the Exchange Acceptance
of this Agreement;
(iii)250,000 shares issued within 24 months of the Exchanged
Acceptance of this Agreement;
(b) Work commitments
The Optionee incurring Exploration Expenditures on the Property as
follows:
i. Total expenditures of $500,000 within 12 months of the Exchange
Acceptance of this Agreement;
ii. Total expenditures of $750,000 within the period of 24 months
after the Exchange Acceptance of this Agreement;
iii. Total expenditures of $1.5 Million within the period of 36 months
after Exchange Acceptance of this agreement.
The Optionee may elect to accelerate the expenditures on the
Property at their discretion. The Optionee agrees that the
Optionors 30% interest shall be "carried thru" to the feasibility
stage and that the Optionor is not required to provide any
additional funding to advance this property to the feasibility
stage. The Optionee shall retain the right of first refusal to
acquire the Optionor's 30% interest at any time up to the five
year anniversary of the Exchange Acceptance of this Agreement. In
the event that the Optionor receives an offer from a third party
to purchase the Optionors 30% interest, the Optionor shall give
written notice to the Optionee of the receipt of the offer and
the Optionee shall have thirty business days to either match such
an offer or allow the Optionor to vend the 30% interest to a
third party. If the Optionor fails to acquire the 30% by the
fourth anniversary of the Exchange Acceptance of this Agreement,
the Optionor shall be free to vend the 30% interest to any
interested third parties.
Upon completion of the payments and deliveries in section 4, the Option shall be
deemed exercised without further notice or act by the Optionee, and 70%
undivided right, title and interest in and to the Property shall vest in the
Optionee, free and clear of all liens, charges, encumbrances, claims and adverse
interests of any nature or kind, except for the obligation of the Optionee
hereunder to pay the Royalty to the Optionor. The Optionee shall register and
transfer title at the Optionee's expense.
TRANSFER OF PROPERTY
5. Concurrently with the full exercise of this Agreement, the Optionor shall
deliver to the Optionee duly executed transfers in registerable form of the
appropriate interest in the Property which shall be acquired by the Optionee
upon exercise of the Option.
The Optionee shall be entitled to record such transfers at its own cost with the
appropriate government office to effect legal transfer of such interest in the
Property into the name of the Optionee.
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RIGHT OF ENTRY
6. Throughout the Option Period, the directors and officers of the Optionee and
its servants, agents and independent contractors, shall have the sole and
exclusive right in respect of the Property to:
a) enter thereon;
b) have exclusive and quiet possession thereof;
c) do such prospecting, exploration, development and other mining work
thereon and thereunder as the Optionee in its sole discretion may
determine advisable;
d) bring upon and erect upon the Property such buildings, plant,
machinery and equipment as the Optionee may deem advisable; and
e) remove there from and dispose of reasonable quantities of ores,
minerals and metals for the purposes of obtaining assays or making
other tests.
OBLIGATIONS OF THE OPTIONEE DURING OPTION PERIOD
7. During the Option Period the Optionee shall:
a) maintain in good standing those mineral applications, mineral
exploration licenses, permits and claims comprising the Property by
the doing and filing of assessment work, by the payment of taxes and
rentals, and the performance of all other actions which may be
necessary in that regard and in order to keep such mineral
applications, mineral exploration licenses, permits and claims free
and clear of all liens and other charges arising from the Optionee's
activities thereon except those at the time contested in good faith by
the Optionee; The Optionee agrees that the Optionor's 30% interest
shall be carried thru to the feasibility stage and that the Optionee
will expend 100% of the costs required to maintain the claims in good
standing;
b) duly record all exploration work carried out on the Property by the
Optionee as assessment work;
c) permit the Optionor, or their representative duly authorized in
writing, at their own risk and expense, to visit and inspect the
Property at all reasonable times and intervals, and to inspect the
data obtained by the Optionee as a result of its operations thereon,
provided always that the Optionor and their representatives shall
abide by the rules and regulations laid down by the Optionee relating
to matters of safety and efficiency in its operations and,
notwithstanding, the Optionee shall be under no liability to the
Optionor or their representatives for any personal injury, including
death, or any damage to property other than such as might be
occasioned by or through any gross negligence on the part of the
Optionee, its servants or agents;
d) do all work on the Property in a good and workmanlike fashion and in
accordance with all applicable laws, regulations, orders and
ordinances of any governmental authority;
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e) indemnify and save the Optionor harmless in respect of any and all
costs, claims, liabilities and expenses arising out of the Optionee's
activities on the Property; but the Optionee shall incur no obligation
hereunder in respect of claims arising or damages suffered before and
after termination of the Option if upon Termination of the Option any
workings on or improvements to the property made by the Optionee are
left in a safe condition and in full compliance with requirements of
all environmental laws and regulations;
f) permit the Optionor, at their own expense, reasonable access to the
results of the work done on the Property during the last completed
calendar year; and
g) deliver to the Optionor, forthwith upon receipt thereof, copies of all
reports, maps, assay results and other technical data compiled by or
prepared at the direction of the Optionee with respect to the
Property.
The Optionor acknowledges and agrees that all information provided by the
Optionee to it shall be treated on a confidential basis unless and until
such information is publicly disclosed by the Optionee. Without limiting
the foregoing, the Optionor shall not directly or indirectly disclose to
any other person, shall take all necessary steps to prevent accidental
disclosure of, and shall not make use for his own purpose, any such
non-publically disclosed information. The Optionor acknowledges and agrees
that it is solely responsible for compliance with applicable securities and
other laws relating to such information, including but not limited to
provisions regarding ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and tipping.
TERMINATION OF OPTION
8. Prior to the exercise of the Option and upon the occurrence of the following
events, the Optionor may terminate the Option by the Optionor giving written
notice of such termination to the Optionee:
a) upon the Optionee failing to incur or make when due any payment or
issuance of Shares which must be made or issued in exercise of the
Option;
b) upon the Optionee being in default of this Agreement as provided for
in section 12 and failing to remedy the default all as provided for
therein, always provided that if the Optionee shall make such payment
or issuance, or cure or commence proceedings to cure such default,
prior to the Optionor giving written notice of termination hereunder,
such event shall no longer constitute grounds for the termination of
the Option.
The Optionee may terminate this Agreement at any other time by the Optionee
giving written notice of such termination to the Optionor.
If the Option is terminated otherwise than upon the exercise thereof, the
Optionee shall:
c) leave in good standing for a period of at least 6 months from the
termination of the Option Period those mineral applications, mineral
exploration licenses, permits and claims comprising the Property;
d) deliver or make available at no cost to the Optionor within 30 days of
such termination, all drill core, copies of all reports, maps, assay
results and other relevant technical data compiled by, prepared at the
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direction of, or in the possession of the Optionee with respect to the
Property and not theretofore furnished to the Optionor;
e) reclaim the Property in accordance with the requirements of all
applicable environmental laws and regulations, but only to the extent
that such requirements result from the Optionee's activities on the
Property hereunder;
If the Option is terminated otherwise than upon the exercise thereof, the
Optionee shall have the right, within a period of 180 days following the end of
the Option Period, to remove from the Property all buildings, plant, equipment,
machinery, tools, appliances and supplies which have been brought upon the
Property by or on behalf of the Optionee, and any such property not removed
within such 180 day period shall thereafter become the property of the Optionor.
ROYALTY
9. Upon the Commencement of Commercial Production, the Optionee shall pay to the
Optionor the Royalty, being 2% of Net Smelter Returns on the terms and
conditions as set out in this paragraph and in Schedule "B" hereto, in
accordance with section 7. b and c. The Optionee has the right to acquire
one-half of the Royalty (i.e. equal to 1% of Net Smelter Returns) by paying the
Optionor $1,000,000.00 in Canadian currency.
Installments of the Royalty payable shall be paid by the Optionee to the Royalty
Holders immediately upon the receipt by the Optionee of the payment from the
smelter, refinery or other place of treatment of the proceeds of sale of the
minerals, ore, concentrates or any other product from the Property.
Within 120 days after the end of each fiscal year, commencing with the year in
which Commencement of Commercial Production occurs, the accounts of the Optionee
relating to operations on the Property and the statement of operations, which
shall include the statement of calculation of Royalty for the year last
completed, shall be audited by the auditors of the Optionee at its expense. The
Royalty Holders shall have 45 days after receipt of such statements to question
the accuracy thereof in writing and, failing such objection, the statements
shall be deemed to be correct and unimpeachable thereafter.
If such audited financial statements disclose any overpayment of Royalty by the
Optionee during the fiscal year, the amount of the overpayment shall be deducted
from future installments of Royalty payable.
If such audited financial statements disclose any underpayment of Royalty by the
Optionee during the year, the amount thereof shall be paid to the Royalty
Holders equally forthwith after determination thereof.
The Optionee agrees to maintain for each mining operation on the Property,
up-to-date and complete records relating to the production and sale of minerals,
ore, bullion and other product from the Property, including accounts, records,
statements and returns relating to treatment and smelting arrangements of such
product, and the Royalty Holders or their agents shall have the right at all
reasonable times, including for a period of 12 months following the expiration
or termination of this Agreement, to inspect such records, statements and
returns and make copies thereof at their own expense for the purpose of
verifying the amount of Royalty payments to be made by the Optionee to the
Royalty Holders pursuant hereto. The Royalty Holders shall have the right to
have such accounts audited by independent auditors at their own expense once
each fiscal year.
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SURRENDER OF PROPERTY INTERESTS PRIOR TO TERMINATION OF AGREEMENT
10. The Optionee may at any time during the Option Period elect to abandon any
one or more of the mineral applications, mineral exploration licenses, permits
or claims comprised in the Property by giving notice to the Optionor of such
intention. Any applications, mineral exploration licenses, permits and claims so
abandoned shall be in good standing under the laws of the jurisdiction in which
they are situate for at least 6 months from the date of abandonment. Upon any
such abandonment, the mineral applications, mineral exploration licenses,
permits and claims so abandoned shall for all purposes of this Agreement cease
to form part of the Property and, if title to such applications, mineral
exploration licenses, permits or claims has been transferred to the Optionee,
the Optionee shall retransfer such title to the Optionor at the Optionee's
expense.
FORCE MAJEURE
11. If the Optionee is at any time either during the Option Period or thereafter
prevented or delayed in complying with any provisions of this Agreement by
reason of strikes, lock-outs, labour shortages, power shortages, fuel shortages,
fires, wars, acts of God, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons, other than lack of
funds, beyond the control of the Optionee, the time limited for the performance
by the Optionee of its obligations hereunder shall be extended by a period of
time equal in length to the period of each such prevention or delay, but nothing
herein shall discharge the Optionee from its obligations hereunder to maintain
the Property in good standing;
The Optionee shall give prompt notice to the Optionor of each event of force
majeure and upon cessation of such event shall furnish to the Optionor with
notice to that effect together with particulars of the number of days by which
the obligations of the Optionee hereunder have been extended by virtue of such
event of force majeure and all preceding events of force majeure.
After the Commencement of Commercial Production, the Optionee shall work, mine
and operate the Property during such time or times as the Optionee in its sole
judgment considers such operations to be profitable. The Optionee may suspend or
curtail operations, both before and after Commencement of Commercial Production,
during periods when the products derived from the Property cannot be profitably
sold at prevailing prices or if an unreasonable inventory thereof, in the
Optionee's sole judgment, has accumulated or would otherwise accumulate.
GOVERNING LAW AND ARBITRATION
11. This Agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia and the parties hereby irrevocably
attorn to the jurisdiction of the courts of such Province.
All disputes arising out of or in connection with this Agreement, or in respect
of any defined legal relationship associated therewith or derived therefrom
shall be referred to and finally resolved by arbitration under the rules of the
British Columbia International Commercial Arbitration Centre.
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The appointing authority shall be the British Columbia International Commercial
Arbitration Centre and the case shall be administered by the British Columbia
International Commercial Arbitration Centre I accordance with its "Procedure for
Cases under the BCICAC Rules" at Vancouver, British Columbia.
DEFAULT
12. For purposes of section 11, the Optionee shall be in default under this
Agreement if, at any time during the Option Period, the Optionee is in default
of any material provision in this Agreement and the following procedure shall
have been followed (other than the a default with respect to paragraph 4, for
which no notice of default and cure period need be given):
a) the Optionor shall have first given to the Optionee a notice of
default containing particulars of the obligation which the Optionee
has not performed, or the representation and warranty which has been
breached; and
b) the Optionee has not, within 45 days following delivery of such notice
of default, cured such default or commenced proceedings to cure such
default by appropriate payment or performance, the Optionee hereby
agreeing that should it so commence to cure any default it will
prosecute the same to completion without undue delay.
TERMINATION OF MINING OPERATIONS
13. The Optionee may permanently discontinue mining operations on the Property
at any time after the Commencement of Commercial Production when in its opinion
no further mining operations can be economically carried out thereon. At such
time, the Optionee shall dispose of all mining plant and equipment used on the
Property, effect all reclamation work as required by law, and otherwise dispose
of the Property as it thinks fit. Any bona fide purchaser of the Property,
dealing at arm's length, after termination of mining operations on the Property
shall take the Property free and clear of all claims by the Optionor, save and
except that the Property shall continue to be subject to payment of all Royalty
pursuant to paragraph 12 of this Agreement. The accounts of the Optionee
relating to its mining operation on the Property shall be audited by the
auditors of the Optionee as soon as practicable after the sale or disposition of
all mining plant and equipment from the Property and completion of reclamation.
Final settlement of any Royalty payable to the Optionor shall be effected
without delay after receipt of the final audited statements. After receipt of
such final audited statements and payment of Royalty, if any, this Agreement and
the mutual obligations of the Optionee and the Optionor hereunder shall
terminate and the obligation to pay the Royalty to the Optionor, in accordance
with this Agreement, shall transfer to the purchaser of the Property.
NOTICES
14. Each notice, demand or other communication required or permitted to be given
under this Agreement shall be in writing and shall be delivered or faxed (with
electronic confirmed receipt) to such party at the address for such party
specified above. The date of receipt of such notice, demand or other
communication shall be the date of delivery or facsimile transmission if
delivered or faxed during normal business hours on a regular business day, and
the next business day if delivered or faxed after normal business hours or on a
day other than a regular business day. Either party may at any time and from
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time to time notify the other party in writing of a change of address and the
new address to which notice shall be given to it thereafter until further
change.
GENERAL
15. This Agreement shall supersede and replace any other agreement or
arrangement, whether oral or written, heretofore existing between the parties in
respect of the subject matter of this Agreement.
No consent or waiver expressed or implied by either party in respect of any
breach or default by the other in the performance by such other of its
obligations hereunder shall be deemed or construed to be a consent to or a
waiver of any other breach or default.
The parties shall promptly execute or cause to be executed all documents, deeds,
conveyances and other instruments of further assurance and do such further and
other acts which may be reasonably necessary or advisable to carry out fully the
intent of this Agreement or to record wherever appropriate the respective
interest from time to time of the parties in the Property.
This Agreement shall enure to the benefit of and be binding upon the parties and
their respective successors and permitted assigns.
This Agreement shall be governed by and construed in accordance with the laws of
British Columbia and shall be subject to the approval of the Exchange.
Time shall be of the essence in this Agreement.
Wherever the neuter and singular is used in this Agreement it shall be deemed to
include the plural, masculine and feminine, as the case may be.
Any reference in this Agreement to currency shall be deemed to be Canadian
currency.
AREA OF MUTUAL INTEREST
16. The parties hereby agree that each and every mineral application, mineral
exploration license, permit and claim (including internal fractions) or interest
therein which they may stake or otherwise acquire mineral rights to during the
currency of this Agreement, located wholly or partly within an area 5 miles from
the outermost boundary of the Property as of the date of this Agreement, shall
at the option of the other party form a part of the Property. Such party shall,
upon acquisition of any such additional claims or interests, forthwith give
notice to the other party of same and thereafter the other party shall have
thirty days from the date on which the notice of acquisition is given within
which to give notice of its desire to have such additional claims or interests
form part of the Property and be subject to this Agreement. The Optionee shall
be responsible to pay any costs of acquiring the additional claims or interests.
All title to such additional claims or interests shall be held subject to the
terms of this Agreement. This paragraph shall cease to operate if and when the
Optionee loses its right to exercise the Option in full.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
Candorado Operating Company Pepper Rock Resources Corp.
Per: /s/ ▇▇▇▇ ▇. ▇▇▇▇ Per: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------- -----------------------
Authorized Signatory President/Director
Print Name Per:
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
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Title/Position:
Director/CEO
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SCHEDULE A
Tenure Number Area (ha) Good to Date
------------- --------- ------------
512584 1022.76 2020.07.24
552632 521.56 2020.02.24
612403 522.04 2014.07.27
612404 522.09 2014.07.27
SCHEDULE "B"
NET SMELTER RETURNS
1. For the purposes of this Agreement, the term "Net Smelter Returns" shall
mean the net proceeds actually paid to the Optionee from the sale by the
Optionee of minerals or other products mined and removed from the Property,
after deduction of the following:
smelting costs, treatment charges and penalties including, but not being limited
to, metal losses, penalties for impurities and charges for refining, selling and
handling by the smelter, refinery or other purchaser; provided, however, in the
case of leaching operations or other solution mining or beneficiation
techniques, where the metal being treated is precipitated or otherwise directly
derived from such ▇▇▇▇▇ solution, all processing and recovery costs incurred by
the Optionee, beyond the point at which the metal being treated is in solution,
shall be considered as treatment charges;
costs of handling, transporting and insuring ores, minerals and other materials
or concentrates from the Property or from a concentrator, whether situated on or
off the Property, to a smelter, refinery or other place of treatment;
actual sales and brokerage costs, if any, and
ad valorem taxes and taxes based upon production, but not income taxes.
2. In the event the Optionee commingles minerals from the Property with
minerals from other properties, the Optionee shall establish procedures, in
accordance with sound mining and metallurgical techniques, for determining
the proportional amount of the total recoverable metal content in the
commingled minerals attributable to the input from each of the properties
by calculating the same on a metallurgical basis, in accordance with
sampling schedules and mining efficiency experience, so that production
royalties applicable to minerals produced from the Property may reasonably
be determined.