MOSQUITO CONSOLIDATED GOLD MINES LTD. VANCOUVER, B.C. V6C ITI
MOSQUITO
CONSOLIDATED GOLD MINES LTD.
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VANCOUVER,
B.C.
V6C
ITI
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TELEPHONE;
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FAX;
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June
10,
2005
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Jr.
And
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And
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lntelisano
And
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And
Lakeview
Realty Corporation
(The"Optionors")
251
Hideout,
Lake
Ariel,
Pennsylvania,
USA
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BY
Fax:
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Dear
Mr.
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RE:
Option to Purchase A2reement-Red Lake Mineral Claims
Further
to our recent discussions, this letter will confirm our agreement whereby the
Optionors have agreed to grant an option to purchase Patented Mineral claims
KRL
252, 253,254 and 255 (the "Properties") located near Red Lake,
Ontario.
Mosquito
Consolidated Gold Mines Ltd. (the "Optionee") will purchase a 100% interest
in
the Properties under the following terms and conditions.
1.
Purchase Price: $500,000.00
on approval of TSX Venture Exchange with due diligence
and effort on the part of the Optionee.
2.
Payments: A. $ 25,000 - On approval of the TSX-Venture Exchange.
PAGE
TWO OF FIVE
B.
$
50,000 - 1 year from the date of approval of the TSX-Venture
Exchange.
C.
$
75,000 - 2 year from the date of approval of the TSX-Venture Exchange.
D.
$100,000 - 3 years
from the date of approval of the TSX-Venture Exchange.
E.
$250,000 - 4 years from the date of approval of the TSX-Venture
Exchange.
3.
Subjects: Approval of the TSX -
Venture
Exchange, by August 30,2005 or this letter
agreement will become null and void, and any monies paid by the Optionee to
the
Optionor shall be retained by the Optionor as damages and the properties shall
be retained in the possession of the Optionor.
4.
If the
Optionee shall fail to make any required payment by the due date then the option
to purchase in this letter agreement, will at the sole discretion of the
Optionor, expire and become null and void. Any monies paid to the Optionor
by
the Optionee shall be retained as damages, and the properties shall be retained
by the Optionor.
5.
The
Optionee is not entitled to conveyance of the title to the properties until
the
final installment of the purchase price has been paid.
6.
Upon
the exercise of the Option, by payment of the $25,000.00 and approval of the
TSX
as indicated in paragraph 2 A, the Optionors as Vendors shall retain a 2% NSR
on
all production from properties. The payment of the NSR shall be included in
any
sale or conveyance of the properties to any other entity. The Optionee as
Purchaser may buy back 1% of the NSR at anytime for CDN $1,000,000.00 (one
million dollars Canadian funds). In this agreement, "Net Smelter Returns" with
respect to the Properties will be computed as follow:
| (a) |
If
minerals, mineral concentrated or other substances, ore-bearing Materials
and rock of every kind whether metalliferous or nonmetalliferous
substances are removed from the Properties and delivered to a mill,
smelter in bona fide arm's length transaction or any process plant,
the
net smelter return will be the total, gross sale proceeds there from
which
are received by or credited to the Purchaser, including any proceeds
of
insurance, less only (1) all actual costs incurred by the Purchaser
for
transportation of the substance to points or point of sale; and (2)
all
sampling, assaying, weighing, treatment, smelter or refining charges
or
penalties which are charged by the Buyer of all minerals and ore-bearing
materials to the Purchaser (optionee), except those deducted for
cost of
any treatment, processing or beneficiation by or on behalf of the
Purchaser (optionee).
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PAGE
THREE OF FIVE
| (b) |
If
ores are removed from the Properties other than in a bona fide arm's
length sale transaction, the net smelter returns will be based upon
a
value equivalent to Net Smelter Returns which will be the gross fair
market value of the ores at the Properties, in the form and condition
in
which the ores are transported from the Properties, without any deduction
for cost of any treatment, processing or
beneficiation;
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| (c) |
Any
sale of by-products of operations or other materials produced from
The
Properties, such as tailing or dump wastes, sand, gravel, or clays
and Any
use of them off the Properties without a sale (except solely as a
waste
Disposal) will be subject to the Net Smelter Return
royalty;
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| (d) |
Within
120 days after the end of each calendar year for which the Net Smelter
Returns are payable, the records relating to the calculations of
Net
Smelter Returns for such year will be audited by a mutually acceptable
Independent auditor. Any resulting adjustment in the payment of Net
Smelter Returns will be made forthwith after completion of the audit.
All
payments of Net smelter Returns for a calendar year will be deemed
final
and in full satisfaction of all obligations of the Purchaser in respect
thereof if such payments or calculations thereof are not disputed
by the
Vendor within 60 days after receipt by the Vendor of the audited
statements;
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| (e) |
The
Purchaser will maintain an accurate record of the results of all
mining
Operations on Properties and results of such sampling, weighing and
Assaying with respect to any ore mined and concentrated and bullion
Produced on the Properties;
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| (f) |
The
Vendor, or its authorized agents will be permitted the right to Examine,
at least quarterly, such records pertaining to the Calculations of
Net
smelter Returns and have, at their own risk, access To the
Properties;
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| (g) |
Payment
of Net Smelter Return Royalties will be made within seven (7) days
following each month end, during which the Purchaser received proceeds
from the mining operations on the Properties;
and
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| (h) |
The
Vendor has the right to register its Net Smelter Royalty in the
Appropriate Land Title Office or Mining Recorder's Office. As the
case
Maybe.
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PAGE
FOUR
OF FIVE
7.
Other
conditions:
(a)All
payments are Canadian funds but may be converted, at the Bank of Montreal
closing rate of the day, to US funds and paid in US funds at the option of
the
Optionor.
(b)
This
Agreement will enure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, successors and assigns.
(c)
Optionee shall pay all taxes, including but not limited to real estate, school
and .;;
~g
fees/taxes or any other monies necessary to carry out operations and maintain
the
properties in good standing.
(d)
Optionee shall complete all and any reclamation required as a result of
operations on the properties but not to include previous
operations.
(e)
Optionee will comply with any and all reclamation, environmental, and/or
compliance issues ordered by any regulatory authorities concerning the
properties and hold the Vendors non-liable and harmless.
8.
Reports and access to data: The Optionee will supply the Optionor with copies
of
its' field reports on the properties as the exploration program develops, as
well as reports at reasonable intervals based on annual project milestones.
The
Optionor will have access to all data generated on the properties and review
activities and results.
9.
Insurance: The Optionee shall obtain and maintain or cause any contractor
engaged on the properties to obtain and maintain, during any period when there
is active work is carried out on the property, adequate insurance, which in
no
case will contain less than Two Million Dollar ($2,000,000.00) liability clause.
This insurance shall name the Optionors as additional insured. The optionee
(purchaser) shall also maintain a One Million Dollar general liability insurance
on the properties, also naming the Vendors (optionors) as additional
insured.
10.
Legal
Jurisdiction: The laws of the Province of Ontario shall govern this agreement
and formal agreement.
If
the
above meets with your approval, please signify your acceptance below and return
to us by fax. ▇-▇▇▇ ▇▇▇-▇▇▇▇
Upon
receipt of your acceptance, we will initiate the approval process with the
TSX-Venture Exchange
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