I\UNERAL PROPERTY OPTION AGREEMENT
I\UNERAL
PROPERTY OPTION AGREEMENT
THIS
AGREEMENT made as of May 10,2005, the effective date of this Agreement.
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BETWEEN:
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Western
Geoscience, Inc.
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▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
(As
to a 50% interest)
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And
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▇. ▇▇▇▇▇▇
▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
(As
to a 50% interest)
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(The
"Optionors")
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OF
THE FIRST PART AND:
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Mosquito
Consolidated Gold Mines Limited
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
lTl
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(The
"Optionee ")
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OF
THE SECOND PART WHEREAS:
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A.
The
Optionors is the owner of a l00% interest in the Pine Tree unpatented mineral
claims (the "Claims") located in Mineral County, Nevada and more particularly
described in Appendix I;
B.
The
Optionors has agreed to grant an option to purchase the Claims to the
Optionee;
WITNESS
THAT in consideration of the payment of $1.00 by cash to the Optionors, receipt
of which is hereby acknowledged, and other good and valuable consideration,
the
parties mutually covenant and agree as follows:
SECTION
1
-
ACQUISITION
OF CLAIMS
1.1
The
Optionee will make the following advance net smelter royalty cash payments
to
the
Optionors:
a)
$10,000.00
within 7 days of signing,
b)
$10,000.00
upon approval of the TSX-Venture Exchange,
c)
$25,000.00 on the first anniversary of this Agreement.
d)
$35,000.00 on the second anniversary of this Agreement,
e)
$50,000.00 on the third anniversary of this Agreement,
f)
$125,000.00 on the fourth anniversary of this Agreement.
g)
$25,000.00 on the fifth anniversary of this Agreement and each year thereafter
until a total of $2,000,000.00 has been paid to the Optionors under this
paragraph 1.1 and paragraph 1.3 after which the 2% net smelter return shall
be
reduced to a 0.5% (a one half percent) net smelter return.
1.2
The
Optionee will issue 300,000 common shares of Mosquito Consolidated Gold Mines
Limited to the Optionors as follows:
a)
50,000
shares upon approval of this Agreement by the TSX-Venture. Exchange
(the "TSX")
b)
50,000
shares on the first anniversary of this Agreement; and
c)
60,000
shares on the second anniversary of this Agreement; and
d)
60,000
shares on the third anniversary of this Agreement; and
e)
80,000
shares on the fourth anniversary oftrus Agreement.
1.3
At
any time within 2 years of the approval of the TSX-Venture Exchange, the
Optionee may purchase all and any rights and interests contained in this
Agreement and owned by to the Optionors for a one time payment of $1,000,000.00
(One million dollars) to the Optionors.
Upon
the
payment of the $1,000,000.00 and the transfer of the Optionors interests to
the
Optionee, all obligations of the Optionee and the Optionors to each other with
the exception of the shares described in paragraph 1.2, shall cease.
1.4
a)
The
Optionors will receive a 2% net smelter return royalty a described in paragraph
1.1 (g) from all minerals, concentrates or other products ("Products") mined
or
milled from the Claims, payable quarterly, by negotiable instrument, in
accordance with sale receipts of Products during the immediately preceding
quarter.
b)
For
the purpose of this Agreement, "net smelter return" means the total gross sale
proceeds received by or credited to the Optionee for Products, less only:
(i)
all
actual costs incurred by the Optionee for transportation of the Products to
the
point or points of sale including Insurance:
(ii)
all
sampling, assaying, weighing, treatment or processing, milling,
smelter or refining charges, or penalties which are charged
by the purchaser to the Optionee except those deducted by the purchaser directly
from the proceeds of sale: and
2
(iii)
All taxes levied upon production or severance of the Products, or upon the
sale
upon which the net smelter return is computed. There
shall be no deduction for cost of any treatment, processing or beneficiation
by
or on behalf of the Optionee.
(c)
Any
net smelter return proceeds received by the Optionors prior to the payment
of the full $2,000,000.00 payable under paragraph 1.1 will be credited to
the
Optionee as payments to the Optionors under paragraph 1.1.
1.5
Upon
payment of the full amount under paragraph 1.1 and issuance of the shares under
paragraph 1.2 the Optionee will have earned a 1.00% interest in the Claims,
subject only to the net smelter return interest retained by the Optionors under
paragraph 1.3.
1.6
Upon
execution of this Agreement the Optionors will deposit registerable transfer
documents transferring the Claims to Optionee in trust with the solicitors
for
the Optionee, to be held by such solicitors until either:
(a)
the
Optionee has earned 100% interest in the Claims, at which time the documents
will be released to the Optionee for filing with the appropriate mining
authorities; or
(b)
This
Agreement has been terminated under Section 6, at which time the documents
will be returned to the Optionors.
1.7
All
payments and shares issued to the Optionors shall be made in the individual
names of the Optionors.
1.8
If
any of the parties of this Agreement acquire any property within 2 miles of
the
boundary of the claims, this property will form part and be subject to the
terms
and conditions of this Agreement.
SECTION
2
-
WORK
COMMITMENT
| 2.1 |
(a)
The
Optionee must incur exploration and development expenses in the amount
of$50,000.00 in the first year of this Agreement and $100,000.00
per year
for the next four year. All expenses incurred in exploration and
development may be carried forward and credited to subsequent years
obligations.
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(b)
The
Optionee will pay all costs of exploration and development of the Claims and
expenses to keep the Claims in good standing from the date of execution
of this Agreement until it has earned a 100% interest in the Claims under
paragraph 1.4 or this Agreement has been tenninated under subsection 6.2.
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SECTION
3
- REPRESENTATIONS AND WARRANTIES OF THE OPTIONORS
3.1
The
Optionors represents and warrants to the Optionee that:
| (a) |
it
is the beneficial owner of all of the Claims, free and clear of all
liens,
charges
and claims of others and no taxes or rentals are due in respect
of any
part thereof;
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| (b) |
the
Claims are duly and validly located and recorded pursuant to the
laws of
the jurisdiction in which they are situate and are in good standing;
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| (c) |
to
the best of its knowledge there is no claim or challenge against
or to
the ownership
of or title to any of the Claims, nor to the best of its knowledge
is
there any basis therefor and there are no outstanding Agreements
or
options to acquire or purchase the Claims or any portion thereof,
and no
person has any royalty or other interest whatsoever in production
from any
of the Claims; and
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| (d) |
To
the best of its knowledge, there are no restrictions on exploitation
of
minerals
on the Claims.
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3.2
The
representations and warranties contained in this section are provided for the
exclusive benefit of the Optionee who at any time without prejudice to its
right
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.
SECTION
4
- REPRESENTATIONS AND WARRANTIES OF OPTIONEE
4.1
the
Optionee represents and warrants to the Optionors that:
| (a) |
it
will save the Optionors harmless in respect of all claims, liabilities
and
expenses arising out of the Optionee 's activities on the Claims;
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| (b) |
it
will employ due diligence and best efforts to raise the funds necessary
to
conduct exploration and development of the Claims to obtain the approval
of the TSX to the release of shares under paragraph 1.2;
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| (c) |
it
will keep the Claims in good standing; and
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| (d) |
it
will do all work on the Claims in good and minerlike fashion and
in
accordance with all applicable laws, regulations, orders and ordinances
of
any governmental authority.
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4
SECTION
5
-
SUBJECT
CLAUSES
5.1
The
obligations of the Optionee under this Agreement are subjects to receipt by
the
Optionee of a favourable independent engineering report on the Claims indicating
the Claims have a potential which is acceptable to the Optionee and receipt
of
an
acceptable title opinion.
SECTION
6
- DEFAULT AND TERMINATION
6.1
In
the
event of a default by the Optionee in the performance of its obligations under
this Agreement; this Agreement will entitle the Optionors, at its sole option,
to terminate this Agreement if the default is not remedied by the Optionee
within 30 days of receiving written notice of the default from the Optionors
6.2
The
Optionee may terminate this Agreement by giving the Optionors 30 days' written
notice of termination.
SECTION
7
- FORCE MAJEURE
7.1
Neither
party will be in default under this Agreement by reason of its failure to
perform or delay in the performance of its obligations if such failure or delay
is caused by acts of God, government laws and regulations, regulatory
authorities, strikes, lockouts, war or any other cause beyond its control and
without its fault or negligence. The party subject to force majeure will give
the other party notice of the same within 10 .
days
of
its knowledge of such failure or delay and will report monthly thereafter upon
its reasonable efforts or progress to end the same.
7.2
Where
either party has failed or delayed performance as a result of any of the causes
(the "Cause") specified in paragraph 7.1, the other party may elect to cease
to
perform its obligations under this Agreement as long as the Cause is subsisting.
SECTION
8
- NOTICES
8.1
Each
notice, demand or other communication required or permitted to be given under
this Agreement shall be in writing and shall be sent by prepaid registered
mail
deposited in a Post Office in Canada addressed to the party entitled to receive
the same, or delivered to such party as follows:
If
to the
Optionors:
Western
Geoscience, Inc.
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▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
And
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▇.▇.
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▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
AND:
If
to the
Optionee;
Mosquito
Consolidated Gold Mines Limited
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇,▇▇▇
ITI
The
date
of receipt of such notice, demand or other communication shall be the date
of
delivery thereof if delivered, or, if given by registered mail as aforesaid,
shall be deemed conclusively to be the tenth day after the same shall have
been
so mailed except in the case of interruption of postal services for any reason
whatever, in which case the date of receipt shall be the date on which the
notice, demand or other communication is actually received by the addressee.
8.2
Either
party may at any time and from 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.
SECTION
9 - GENERAL
9.1
All
references to monetary amounts in this Agreement are in United States Dollar
currency.
9.2
This
Agreement will 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.
9.3
No
consent or waiver expressed, or implied by either party in respect of any breach
or default by the other in performance by such other of its obligations
hereunder will be deemed or construed to be a consent to or a waiver of any
other breach or default.
9.4
The
parties will promptly execute or cause to be executed all documents, deeds,
conveyances and other instruments of further assurance which may be reasonably
necessary or advisable to carry out fully the intent of this Agreement.
9.5
If
there
is a disagreement or dispute between the parties with respect to this Agreement
or its interpretation, the same will be referred to an arbitrator appointed
pursuant to the Commercial Arbitration Act of British Columbia, and the
determination of such arbitrator will be final and binding on the
parties.
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9.6
This
Agreement may not be assigned by either party without the written consent of
the
other party. This consent may not be unreasonably withheld.
In
the
event that the Optionee sells, assigns or creates a joint venture with any
arms
length third party within 24 months of the effective date of this Agreement;
the
Optionee will pay to the Optionors 20% (twenty percent) of the shares received
by the Optionee from any third party with regard to the sale, assignment or
joint venture of any interest in the claims.
9.7
This
Agreement will enure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns.
9.8
This
Agreement will be construed in accordance with the laws in force from time
to
time in the Province of British Columbia, except with respect to matters
regarding title to the Claims, to which the law of the State of Nevada will
apply, and any proceeding commenced or maintained in respect of this Agreement
will be so commenced and maintained in the court of appropriate jurisdiction
in
the City of Vancouver, British Columbia
IN
WITNESS WHEREOF this Agreement has been executed by the parties as of the day
and year first above written.
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| COUNTY OF WASHOE | ) |
| )ss | |
| STATE OF NEVADA | ) |
On
this
10th day of May, 2005, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ personally appeared before me, a
,
Notary
Public and acknowledged that he executed the above Option Agreement in his
.}
Gapacity
of President of Mosquito Consolidated Gold Mines Limited, as indicated
above,
on
behalf of said Corporation and that the Corporation executed same.
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APPENDIX
I
PINE
TREE
PROPERTY
Claims
are located in Sections 7,8 17 and 18; T6N, R36E,
MDBM
Mineral County, Nevada
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Claim
Name
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BLM
Serial No.
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County
Inst. No.
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PT-l
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883981
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131376
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;~pr-2
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883982
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131377
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~"
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883983
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131378
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PT'""3
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883984
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131379
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')'P1:i4
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883985
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131380
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PT~5
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PT-6
thru
PT-15 Claims have been staked but not recorded and are to be part of
Agreement.