GOLD CONCENTRATE SUPPLY CONTRACT DATED February 25th 2010
Exhibit
10.3
DATED
February 25th
2010
This
contract is made as of the 25th day
of February, 2010 (the "Effective Date") between MEGO GOLD, LLC, registered
offices at ▇▇▇▇▇ #▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇
(the "Seller") and INDUSTRIAL
MINERALS SA, ▇/▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ (the
"Buyer").
1.
SCOPE OF THE AGREEMENT AND EXCLUSIVITY
The Buyer
hereby agrees to buy and the Seller hereby agrees to sell Gold Concentrates on
the following specific terms and conditions. During 2010, 2011 and 2012 the
Seller shall deliver exclusively to the Buyer any and all Gold Concentrates from
its or any affiliate’s mines including but not limited to Toukhmanuk Mine,
Armenia. The Seller shall not deliver and not offer to nor solicit offers from
third parties.
2.
MATERIAL AND QUALITY
Gold
Concentrates produced from gravitation process (‘Grade A’) and from flotation
process (‘Grade B’) ex Toukhmanuk Mine Armenia, assaying typically as per the
specification in Schedule 1 to this agreement (‘Concentrates’)
The
material shall be otherwise free of constituents deleterious to the smelting and
refining process and be free from Radioactivity. Moisture content of the
material shall be sufficient to avoid blowing and dusting and shall conform to
all local regulations, and the IMO / BC code of safe practice for solid bulk
cargoes. In the event that the quality of the material deviates from the typical
assay as per the above then Seller shall promptly advise Buyer of the revised
provisional assays. In case of adverse changes to the quality of concentrates,
Seller shall inform Buyer promptly of those changes and both parties will meet
to discuss potential solutions.
3. QUANTITY
A minimum
of 2’250 dmt of Grade A and Grade B.
In case
the Seller has delivered a lesser quantity in 2010, 2011 and 2012 than 2’250
dmt, then the contract terminates at such time the full quantity has been
delivered.
In case
the Seller has delivered a higher quantity in 2010, 2011 and 2012 than 2’250
dmt, then the Payables as per 6.A. shall be amended to a higher
percentage.
4. SHIPMENT
Evenly
spread from January 2010 to December 2012 in big bags of 1-2 mt. The month of
shipment shall be the month in which falls the railway ▇▇▇▇ of lading
(‘Shipment’).
5. DELIVERY
Seller
shall deliver concentrates to the Buyer on the basis DAF stowed Yerevan,
Armenia. All customs clearance procedures in Armenia to be performed and paid by
Seller.
6.
PRICE
The price
per dry metric ton of Gold Concentrates for all shipments shall be the sum of
the following payable metals less the sum of the deductions as listed
below.
6.A) Payable
Metals:
6.A.1 Silver: 80% of the final
Silver content subject to a minimum deduction of 30 grams per dmt at the
official London Silver Spot/US Cents equivalent quotation as published in Metal
Bulletin, averaged over the Quotational Period.
For any
delivered quantity above 2’250 dmt the payable shall be 85% of the final Silver
content subject to a minimum deduction of 30 grams per dmt at the official
London Silver Spot/US Cents equivalent quotation as published in Metal Bulletin,
averaged over the Quotational Period.
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6.A.2 Gold: 80% of the final Gold
content subject to a minimum deduction of 1 gram per dmt at the average of the
London AM/PM Gold Fixation, as published in Metal Bulletin, averaged over the
Quotational Period
For any
delivered quantity above 2’250 dmt the payable shall be 85% of the final Gold
content subject to a minimum deduction of 1 gram per dmt at the average of the
London AM/PM Gold Fixation, as published in Metal Bulletin, averaged over the
Quotational Period
6.A.3 No
other metals shall be payable.
6.B) Deductions:
6.B.1 Treatment
Charge:
The
Treatment Charge shall be US Dollars 220.00 (two hundred twenty) per dry metric
ton DAF Yerevan.
6.B.2 Refining
Charge:
Gold: The Refining Charge
shall be USD 6 (six) per ▇▇▇▇ ounce of payable Gold.
Silver: The
Refining Charge shall be USD 0.40 (fourty US cents) per ounce of payable
Silver
6.B.3. Penalties
Arsenic: U.S. Dollars 5.0
(five) per dry metric ton of Gold Concentrates for each 0.1% (zero point one
percent) by which the final arsenic content exceeds 0.3% (zero point three
percent) fractions pro rata.
Lead: U.S. Dollars 1.0 (one)
per dry metric ton of Gold Concentrates for each 0.1% (zero point one percent)
by which the final arsenic content exceeds 3% (three percent) fractions pro
rata.
Alumina Al2O3:
Penalties to be agreed after the trial shipments.
7.
QUOTATIONAL PERIOD
Silver and Gold: First (M+1)
following the deemed ocean ▇▇▇▇ of Lading (‘Deemed BL Month’) for all payable
metals (‘QP’). Buyer shall declare the Deemed BL Month in the month following
the railway ▇▇▇▇ of lading.
8.
PAYMENT
8.A)
Prepayment
Buyer
shall make a prepayment amounting to US$ 450’000 (‘Prepayment’). Any Provisional
and Final Payment as per 8.B. and 8.C. shall count towards the amortization of
such Prepayment until it is fully amortized (‘Amortization’). The Prepayment is
to be fully amortized in 2010 (‘Period of Amortization’).
The
prepayment shall be secured during the Period of Amortization as per the
Security Agreement dated February 25th 2010
in Schedule 1 to this agreement and the Parent Company Guarantee dated February
25th 2010
in Schedule 2 to this agreement.
8.B) Provisional
Payment
Buyer
shall make a provisional payment (‘Provisional Payment’) for 85% (eighty five
percent) of the provisional invoice less the deductions and penalties and based
on
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the
Railway ▇▇▇▇ of Lading weight at
Yerevan
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the
last shipment’s effective assay for the Annual Tonnage (ASA trial stock
assay for the Trial Tonnage)
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average
price for gold and silver over the week preceding the week of the railway
▇▇▇▇ of lading date
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The
provisional payment shall be made within 5 business days against presentation of
the following original documents to the Buyer’s Agent Vienna office (the full
dispatch details shall be advised accordingly to Buyer’s Agent, including
courier Airway ▇▇▇▇ number):
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Railway
▇▇▇▇ of Lading
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Provisional
Commercial Invoice certifying that material is free for
Export.
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Original
Certificate of Origin issued and legalised by the local Chamber of
Commerce or EUR .I certificates, if
required.
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Provisional
Assay issued by Producer.
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8.C) Final
Payment
Final
settlement (‘Final Payment’) shall be made promptly by the owing party when all
final details relating to weight, assays and prices become known against the
Final Commercial Invoice and Independent Assayer’s assay/weight
report.
If due
date falls on a Saturday or New York banking holiday other than Monday, payment
shall be made on the preceding New York banking day. If payment due date falls
on a Sunday or Monday bank holiday in New York, payment to be made on the next
New York banking day.
If the
final balance is in favour of the Buyer or the cargo is rejected due to the
material not corresponding to the specification under clause 2, the Seller has
to state these amounts in his final invoice and pay the Buyer within 5 banking
days after the date of the final invoice by wire transfer to the bank account
indicated by the Buyer. If the Seller fails to pay such amounts, the Buyer,
shall be entitled to set off any liability of the Buyer to the Seller against
any liability of the Seller to the Buyer Any exercise by the Buyer of its rights
under this clause shall be without prejudice to any other rights or remedies
available to the Buyer under this agreement or otherwise.
9. WEIGHING SAMPLING AND MOISTURE
DETERMINATION:
For the
purpose of final settlement, sampling and moisture determination shall be
carried out in Yerevan upon loading rail cars in accordance with standard
international practices under the supervision of approved supervision companies.
Weighing shall be determined by the Railway ▇▇▇▇ of Lading weight and the
resulting net dry weight shall apply for final settlement purposes and shall be
final and binding on both parties. Buyer and Seller shall appoint an
internationally recognized supervision company, to be mutually agreed, on a
joint basis to represent them during these operations. The cost for the
supervision charge shall be shared equally between Buyer and
Seller.
The
sample lot size shall be five big bags. Representative sample with a minimum
weight of 250 grams shall be taken from each lot. Five sets of samples shall be
prepared and sealed in order to allow the following distribution unless
otherwise agreed:
- 2 set
for the Seller
- 2 set
for the Buyer
- 1 set
for independent supervision company
10.
ASSAYING
An
international assayer selected from the list below will make a chemical analysis
of the samples taken in accordance with clause 9 and the results of these
analyses, together with the results of the moisture determination shall be final
and binding for settlement purposes and notified to Buyer and Seller in
writing. Silver and gold shall be assayed by commercial fire assay
adjusted for cupel absorption and slag losses. The costs for these
services shall be shared equally between both parties.
▇▇▇▇
▇▇▇▇▇▇▇ (Assayers) Ltd., UK
or
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ International Ltd, UK
or
SGS
Laboratory Services, NL
11. SUSPENSION OF
QUOTATIONS:
The metal
prices and currency quotations specified under this contract are the quotations
in general use for the pricing of the metal content of concentrates. Should any
quotation referred to in this contract cease to be published or cease to be
representative, Buyer and Seller shall negotiate in good faith to establish a
mutually acceptable pricing method and in the event of their inability to agree
within thirty days of cessation of the quotation, the pricing method shall be
determined by arbitration conducted pursuant to arbitration clause of this
Contract.
12.TITLE
AND RISK, INSURANCE
Title
shall pass from Seller to Buyer upon Buyer making a provisional payment. Risk of
loss shall pass from Seller to Buyer upon loading material into the Railcars at
Yerevan. Insurance shall be covered by Buyer
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13.
TOTAL OR PARTIAL LOSS
In case
of total or partial loss of shipment after risk passes from Seller to Buyer,
provisional payments and final settlement shall be made in accordance with
Clause No. 8 PAYMENT and otherwise in accordance with the terms of this
contract. Seller undertakes to assist Buyer in providing any documentation Buyer
may request from time to time in order to pursue any insurance
claim. The insurance settlement shall accrue to Buyer.
14. FORCE MAJEURE
If the
performance of any obligation (other than the obligation to pay for material) by
any party to this Contract is hindered or prevented by reason of any of the
following events, beyond the control of the parties:
- Act of
God, strike, fire, lockout, flood, war, insurrection, mob violence, combination
of workmen, interference of Unions or Government, suspension of labour,
accident, lack of transportation or delay en route or of any other cause
whatsoever beyond the reasonable control of Buyer or Seller; this shall be
hereinafter referred to as Force Majeure. Such notice shall set forth in
reasonable detail the nature of the Force Majeure and the best estimate by the
party claiming Force Majeure of the duration thereof. The party so affected
shall not be liable to the other for damages on account
thereof. However, if Seller has commenced loading of the material, or
quotational period has commenced, Buyer may not declare Force
Majeure.
- Any
event of Force Majeure so preventing or delaying the performance of any such
obligation (other than the obligation to pay for material) shall entitle the
party affected to suspend such performance during the time and to the extent of
the Force Majeure, provided that the party affected shall inform the other
promptly in writing or by telex or facsimile.
- If the
circumstances giving rise to a Force Majeure declaration continues for more than
60 consecutive days, the party not declaring Force Majeure shall have the right
to renounce any further fulfilment of its obligations hereunder, with the
exception of obligations which shall have accrued hereunder between Buyer and
Seller.
- Except
by the written agreement of Buyer, this clause shall not apply to any material
for which pricing has been established or vessel space has been booked or the
Quotational Period is running or any advance payment has been made
15. LIQUIDATION
Without
limiting any other rights that may be available to the liquidating party (as
hereinafter defined), in the event that a party hereto (the defaulting party) is
the subject of a bankruptcy, insolvency or other similar proceedings or fails to
pay its debts generally as they become due, the other party hereto (the
liquidating party) shall have the right, exercisable in its sole discretion and
at any time, to liquidate this and any or all other contracts, then outstanding
between the parties (whether the liquidating party is the seller or buyer
hereunder) by declaring any or all such contracts terminated (whereupon they
shall become automatically terminated, except for the obligation to effect
payment), calculating the difference, if any between the price specified
therein, and the market price for the relevant commodity (as determined by the
liquidating party in a commercially reasonable manner at a time or times
reasonably determined by the liquidating party), and aggregating or netting such
market damages to a single liquidated settlement payment that will be due and
payable upon demand therefore.
16.
CHANGE OF CONTROL
In the
event of any actual or prospective change in the organisation, control or
management of the Seller including without limitation a change in ownership,
this contract will not be changed or in any way modified and shall continue in
full force and effect.
17. TAXES, DUTIES, CHARGES AND
COMMISSIONS
If
applicable, all duties, taxes, charges and commissions levied or assessed in the
country of origin on the material shall be for Seller's account; and all similar
levies or assessments outside of the country of origin shall be for Buyer's
account.
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18.
LICENSES
Seller
undertakes that all the necessary export licenses and all other authorisations
required for the gold concentrates have been obtained and/or will be obtained
for the entire quantity covered by this contract. Seller furthermore guarantees
that such licenses will remain in force for the full life of the
contract.
19. LIABILITIES
In no
event shall Seller or Buyer be liable for indirect or consequential damages or
for specific performance.
20.
WARRANTIES
The
Seller warrants that the material conforms, within any tolerances stated, to the
description stated herein.
21.
ASSIGNMENT
Seller
shall not assign the whole or any part of its rights and obligations hereunder
directly or indirectly without the prior written consent of the
Buyer. Buyer shall have the right to assign to its designated
financing bank the whole or any part of its rights under this Contract,
including without limitation, its right to receive and take delivery of the
material in accordance with the terms of this Contract and its right, title and
interest on any material delivered or held to Buyer's order and in relation to
which the Buyer has made an Advance Payment.
22.
SET-OFF
The
Buyer, shall be entitled but not obliged, at any time or times, with notice to
the Seller, to set off any liability of the Buyer to the Seller against any
liability, as determined in a commercially reasonable manner by the Buyer, of
the Seller to the Buyer (in either case howsoever arising, under whatever
contract between the parties and whether any such liability of the Seller is
present or future, liquidated or unliquidated and irrespective of the currency
of its denomination) and the Buyer may for such purpose convert or exchange any
currency. Any exercise by the Buyer of its rights under this clause shall be
without prejudice to any other rights or remedies available to the Buyer or to
the Seller under this agreement or otherwise.
23.
CHOICE OF LAW
The
construction, validity and performance of the agreement shall be governed by The
Laws of England to the exclusion of any other law which may be imputed in
accordance with Choice of Law Rules applicable in any
jurisdiction. However, neither party shall be precluded from pursuing
arrest, attachment and/or other conservatory actions in the courts of any other
country or exercising any contractual rights in relation to the goods or vessel
provided for elsewhere in the agreement.
The
United Nations Convention on Contracts for the International Sale of Goods of
Vienna, 11th
April 1980, shall not apply to this transaction.
24. ARBITRATION
Any
dispute arising out of or in connection with this agreement including any
question regarding its existence, validity or termination, shall be referred to
and finally resolved by arbitration under the rules of conciliation and
arbitration of the London Court of International Arbitration (LCIA), which rules
are deemed to be incorporated by reference into this section. The
tribunal shall consist of three arbitrators, one to be nominated by the Seller,
one by the Buyer and one by the President of the LCIA. The place of arbitration
shall be London. The language of the arbitration shall be English. The
arbitrator shall give a written record of the award and the reasons therefore.
The award shall be final and binding.
25. DEFINITIONS
The
following terms shall have the following meanings when used in this
Contract:
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a)
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Wet
metric ton or wmt means 2,204.62 pounds avoirdupois, natural
state.
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b)
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Dry
metric ton or dmt means 2,204.62 pounds avoirdupois, dry
state.
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c)
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Dollars
and Cents means the lawful currency of the United States of
America.
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d)
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A
▇▇▇▇ Ounce equals 31.1035 grams.
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e)
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A
pound equals 453.593 grams
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f)
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A
Gram equals 1/1000 of a kilogram.
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g)
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A
unit equals 1% of the dry net
weight
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h)
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A
Calendar month refers to a named month in the Gregorian
calendar.
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i)
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A
calendar week refers to the calendar days Monday to and including
Friday.
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j)
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A
business day refers to any calendar day Monday to and including Friday,
which is not a legal and recognised
holiday.
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k)
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Metal
Bulletin refers to the publication known as "METAL BULLETIN" which is
published twice a week in London by Metal Bulletin Journal,
Ltd.
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l)
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LME
refers to London Metal Exchange
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m)
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Date
of Shipment shall be the date on which the last Railway ▇▇▇▇ of Lading of
the current shipment is issued, stamped and
signed.
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n)
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Date
of arrival at discharge port shall be the month during which the carrying
vessel reports to the Customs at the discharge
port.
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o)
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Normal
Office Hours means 8:00 - 17:00 on Monday through
Friday.
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p)
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INCOTERMS
2000 means International rules for the interpretation of the most commonly
used trade terms in international trade, published by
the International Chamber of Commerce in 1936 and
amended in 1953, 1967, 1976, 1980, 1990 and
2,000
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q)
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TML
means the Transportable Moisture Limit valid in Buyer’s sole option for
current shipment.
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r)
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FMP
means Flow Moisture Point valid in Buyer’s sole opinion for current
shipment
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s)
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IMP/BC
Code refers to a cargo shipped/loaded in accordance with latest
International Maritime Organisation / Bulk Cargo
Code.
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26. WAIVER
No party
shall be deemed to have waived any right, power or privilege under this
agreement unless such waiver is in writing and duly executed by it. No failure
or delay in exercising any right hereunder shall be deemed a waiver thereof by
any party. No exercise or partial exercise of any right, power or privilege
shall preclude any other or further exercise thereof or of any other right,
power or privilege.
27. ENTIRE AGREEMENT
Notwithstanding
anything contained in any other agreement to the contrary this contract contains
the entire agreement between the parties with respect to the subject matter
hereof and all representations relating thereto are merged herein.
28.
CONFIDENTIALITY
The Buyer
and the Seller shall keep confidential and not disclose to any other person any
business secrets or other confidential information it acquires about the other
party. The parties shall not be bound by the foregoing confidentiality
obligation in those cases where the other party has consented to disclosure,
disclosure is required by any applicable law or relevant government authority or
the secrets or information are obtained or available from any other source
(other than as a result of the breach of this Contract).
29.
FUTURE PRODUCTION
Both
parties are in agreement to continue the commercial relationship beyond the
contract period and agree to extend the frame contract for the full production
of Gold Concentrates by one year at the end of each contractual year. The
parties agree to negotiate terms during the 4th
quarter of the year for the following year’s production. The parties will make
good faith attempts to reach agreement on the terms and conditions for treating
similar qualities and shall be based on the international market for smelters
treating such material. In the event the Seller receives other bids,
the Buyer shall have the right of first and last refusal to match such terms on
that year’s production of concentrates. Buyer agrees to cooperate with and
reasonably accommodate requirements set in Seller’s financing
obligations.
30.
NOTICES
All
notices shall be made to the addresses of the parties set forth below or such
subsequent address as any party may subsequently advise the other party in
writing by first class mail, postage paid or via telefax:
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Buyer: Industrial Minerals SA, ▇/▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
.. .
Buyer’s agent for shipping and
back-office matters: Trade Service Consult ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇-▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Phone: ▇▇▇
▇ ▇▇▇▇▇▇▇
Mobile: ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
Facsimile: ▇▇▇
▇ ▇▇▇▇▇▇▇▇
Email:
▇▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇-▇▇▇.▇▇▇
Seller: Mego Gold LLC registered
offices at ▇▇▇▇▇ #▇, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇
Phone : +
▇▇▇ ▇▇ ▇▇ ▇▇ ▇▇
Fax : +
374 10 54 56 98
Email:
▇▇▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇
IN WITNESS WHEREOF, the
parties hereto have caused their duly authorised representatives to execute this
Contract of Purchase and Conditions of Purchase.
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