________________________________________________________________________________
SOUTH COPPERSTONE
PROJECT ACQUISITION AGREEMENT
BETWEEN
COPPERSTONE MINING LIMITED
AND
SEARCHLIGHT EXPLORATION, LLC.
Dated as of October 7, 2005
________________________________________________________________________________
PROJECT ACQUISITION AGREEMENT
This PROJECT
ACQUISITION AGREEMENT (this "Agreement"), dated as of October
7, 2005 is made by and between Copperstone Mining Limited, a company
incorporated in the United Kingdom and Wales having offices at c/0 St James
Resource Management Limited, 16 Hanover
Square, London, W1S
1HT, United Kingdom
("Company") and Searchlight Exploration LLC, an Arizona limited liability
company with offices at 9212 Empire Rock
Street., Las Vegas, NV 89143 U.S.A.
("Searchlight" or "Claimholder") .
1. Grant of Lease, Purchase Option and 75% Net Profits Interest. In
consideration for the sum of US$10,000 to be
paid by Company to
Claimholder on
or before October 31, 2005 (the "Initial Payment"), the further payments of
$10,000 to be paid by Company to Claim
holder quarterly during the Lease Term
("Quarterly Payments"), in as many shares in Copperstone Mining, Inc.
representing 9.99% of the Company's capital
stock on a fully diluted basis) and
other good and valuable consideration,
the receipt and
sufficiency of which are
hereby acknowledged, Claimholder hereby leases the unpatented
placer and / or
lode mining claims known as the South
Copperstone Project
and more particularly
described in Exhibit A hereto (the
"Property")
to Company
(the "Lease") and
grants to Company a 75% net profits
interest and an exclusive irrevocable option
(the "Purchase Option") to purchase the Property, each on the terms and
conditions set forth below. Provided the
Initial Payment has been made, the term
of the Lease shall commence on October 7,
2005 and, provided
that all Quarterly
Payments are made, shall run to and including
September 30, 2008
(the "initial
term"), with the right of Company at its option to extend the Lease
for up to
three (3) additional three year terms on the same terms
and conditions to
and
including September 30, 2017 (an "extended term") (the initial and extended
terms being hereinafter referred to as the
"Lease Term"). Company shall have the
right to sooner terminate the Lease pursuant to Section 6 and, subject to
Section 15 below, to exercise the Purchase
Option pursuant to
Section 7 at any
time during the Lease Term. The Purchase
Option may be exercised by Company only
upon the delivery to Claimholder of each of
(a) a "positive"
feasibility study
for the Property, (b) corporate resolution of the Company (and any parent
company thereof) evidencing an affirmative
production decision
for the Property
and (c) evidence satisfactory to Claimholder that Company has obtained the
financing necessary to develop and operate
the Property. Upon
transfer of title
pursuant to exercise of the Purchase
Option, the Lease shall terminate.
2. Title to the
Property.
A. Claimholder hereby
represents and warrants to Company as follows:
(i) Claimholder owns or is able to
convey a full and undivided interest in
and to each of the unpatented mining claims included in the Property
as of the date hereof;
(ii) To the best
of the knowledge,
information and belief
of Claimholder,
all such claims have been validly located and maintained in
accordance
with all applicable laws and regulations;
(iii) All such
claims are free and clear of all liens, claims, and
encumbrances whatsoever, subject only to the paramount interest of
the
United States of America and / or the State of Arizona;
all taxes, if
any, which may be or which may become a lien upon the Property,
as of
the date hereof, have been paid;
(iv) The
Property is not in any manner encumbered as a result of any
conduct or activity of Claimholder;
(vi) Having
secured the approval of its sole member to the terms and
conditions of this
Agreement,
Claimholder
has full and complete
authority to execute
this Agreement
and to grant the
rights herein
conferred on Company; and
(vii)
Claimholder has no knowledge that any of the mining claims
comprising
the Property
are invalid,
or that, except for any patented
ground
lying within the Project Area, there are other senior mining claims
in
conflict with any of such claims. The foregoing notwithstanding, it
is
acknowledged and
agreed that it is not possible to determine whether
there are conflicting
unpatented claims for
a period of 90 days from
the date of claim location as any conflicting claimants have 90 days
in which to file their claim notices with the BLM. In the event
that
senior conflicting unpatented claims are filed within 90 days of
claim
location, Claimholder
shall use its reasonable efforts to (1) acquire
such claims and incorporate them in the project under this
agreement,
(2) replace
such claims with
additional
claims of similar
acreage
within the Project Area or (3) replace the entire Project with
another
project reasonably acceptable to Company.
3. Lease
Payments and Other Payments.
A. During the Lease Term,
Company shall make the following payments to
Claimholder, which shall constitute a portion of the purchase price for the
Property:
(i) The Initial
Payment of $10,000,
on or before
October 31, 2005;
and
(ii) The Quarterly Payments each in the amount of $10,000,
payable on
January 1, April 1, July 1 and October 1 of each year during
the
Lease Term, commencing with January 1, 2006.
B. Following
Company's exercise of
the Purchase Option under Section 7 and
resulting termination of the Lease as provided in
Section 1, Company shall pay
to Claimholder (i) the Claimholder's net
profits interest (NPI) under Section 8A
and (ii) the Claimholder's net smelter return (NSR) royalty under Section
8B.
Company's obligation to make payment under
Section 8A and Section 8B shall cease
to accrue on the first to occur of (i) completion by Company of mining
operations, residual leaching and reclamation
in the Project Area or (ii) other
decision of Company to terminate operations in the Project Area and, if
Claimholder so desires, to reconvey the
property to Claimholder once reclamation
and other environmental obligations have
been satisfied, although this provision
shall not relieve Company from its obligation to make payments that accrued
prior to such occurrence.
C. All payments
shall be paid in US$dollars in immediately available funds.
D. Company hereby represents and warrants to Claimholder that it has
adequate financial resources to make the
payments required under this Section 3,
as well as the Work Expenditures required
under Section 4.
E. Company
shall also issue
within 30 business
days of execution of
this
Agreement to Searchlight shares of Copperstone Mining, Inc.'s common stock
(representing 9.99% of the Company's capital stock, fully diluted. For no
additional consideration, the Company shall, from time to time, issue to
Searchlight such additional shares as shall be necessary to maintain
Searchlight's 9.99% interest in the Company). The shares shall be validly
issued, fully paid and nonassessable. The shares shall be restricted and
eligible for resale pursuant to Rule 144 in
accordance with said rule. Company,
following its initial public offering,
shall use its best efforts to comply with
its reporting obligations under applicable securities law so as to enable
Searchlight to utilize Rule 144 for resale of the shares following the
applicable holding period.
4. Work
Expenditures.
During the Lease Term,
until terminated by
Company
under Section 6 or until the
Purchase Option is exercised under Section 7,
Company shall make work expenditures ("Work
Expenditures") on or for the benefit
of the Property in the following
amounts:
A. The sum of
$100,000 on or before
December 31,
2006. This is a
firm commitment. If
Company fails to perform the total amount of
such Work Expenditures, Company shall pay Claimholder the
deficiency in immediately available funds.
B. The sum of
$100,000 on or before September 30, 2007.
C. The sum of
$100,000 on or before September 30 of each year
thereafter.
Any excess of Work Expenditures in any year shall be carried forward to the
succeeding year. If Work Expenditures in any year after the period ended
December 31, 2006 are deficient and Company desires to maintain the Lease
and
Purchase Option in effect, Company shall pay Claimholder in immediately
available funds a sum equal to the
deficiency in lieu of
the Work
Expenditure
shortfall. For purposes of this Agreement,
"Work Expenditures" is defined as
sums spent or incurred by Company
directly on the
Property for
exploration and
development of the Property, including drilling, geochemical sampling,
geophysical or seismic survey, assaying, and ore reserve calculation;
metallurgical and engineering analyses; environmental and permitting
analyses
and activities; feasibility studies; and financing
investigations;
plus 5% of
such direct costs in lieu of headquarters overhead and general and
administrative expenditures.
5. Rights and
Obligations
During Lease Term.
The parties
shall have the
following rights and obligations during the
Lease Term:
A. Access to
Property and Provision of Data. Company shall have full access
to the Property to conduct such
investigations
and examinations as
Company may
deem desirable and to all information and
data in Claimholder's
possession and
control pertaining to the Property
necessary or desirable
to enable Company to
fully evaluate the Property and its
commercial
feasibility.
Claimholder agrees
to cooperate fully with Company in its
investigation.
B. Activities by Company.
Company shall have
exclusive possession
of the
Property, subject to the paramount rights of the United States and / or the
State of Arizona with respect to unpatented mining claims included in the
Property, and shall have the exclusive right to conduct such exploration,
evaluation, and development activities on
the Property (including bulk sampling)
as Company may desire. Claimholder shall provide at Company's expense all
reasonable assistance to Company for the
obtaining of any permits, licenses, and
third party consents needed for such work.
Company shall also
have the right to
contact the pertinent federal, state, and local permitting agencies, and to
negotiate with such agencies.
C. Maintenance of Property. Company shall maintain in good standing all
unpatented mining claims that comprise the
Property. Company
shall, as required
by the Federal Government with respect to unpatented
mining claims on
federal
lands, perform required assessment work or timely pay all
claim maintenance or
rental fees and all required property taxes, and shall timely make all
filings
and recordings in the appropriate
governmental
offices required in connection
with such payments. In the event
Claimholder makes any such payment (although it
shall have no obligation to do so), Company
shall promptly reimburse Claimholder
for payment of such holding costs upon receipt by Company of evidence of
such
payment. Company shall have the right to amend or
relocate in the name(s) of
Claimholder any unpatented mining claims included in the Property,
to locate
different types of claims on ground covered
by existing claims,
and to locate
any fractions.
D. Sharing of
Data. During each year of the Lease Term, Company will share
with Claimholder all information
(including
interpretive and
non-interpretive
data, subject to typical disclaimers
regarding interpretive
data and statements
that Claimholder may not rely upon the same)
obtained from the exploration,
evaluation, and development activities pertaining to the Property,
including
providing a copy of any geological and
other principal
reports relating to
the
Property, and will report to Claimholder in
writing at least quarterly regarding
the progress of the exploration and
evaluation work and Work Expenditures made
during the period.
E. Claimholder Access to Property. Claimholder may have access to the
Property at its sole risk on reasonable
notice, and shall be entitled to conduct
tours of the Property for investor relations and financing activities.
Claimholder's exercise of its access rights
shall not interfere in any way with
Company's operations on the Property,
which shall take
precedence in the event
of any conflict.
F. Conduct of Operations by Company at the Property. All of the
exploration, development, mining, milling and related work and any other
activities which may be performed by Company or its agents or contractors
hereunder shall be performed in accordance
with all of the terms and conditions
of this Agreement and good mining
practices, but the
timing, nature, manner and
extent of any exploration, development or any other operations or activities
hereunder shall be in the sole discretion of Company, and there shall be no
implied covenant to begin or continue any
such operations or activities.
G. Indemnity. Except for damages sustained by Claimholder while on the
Property pursuant to Section 5F., Company agrees to indemnify and hold
Claimholder and its affiliates, and their respective, officers, directors,
employees, agents, members, partners and agents harmless from
and against any
loss, liability, cost, expense or damage (including
reasonable attorney's fees)
that may be incurred for injury to or death
of persons or damage to property, or
otherwise, as a result of Company or its
agents or contractors
conducting any
operations on or in connection with the
Property.
H. Insurance.
Company agrees to carry such insurance, covering all persons
working at or on the Property for Company, as will fully comply with the
requirements of the statutes of the State of Arizona
pertaining
to worker's
compensation and occupational disease and
disabilities as are now in force or as
may be hereafter amended or enacted. In addition, Company agrees to carry
liability insurance with respect to its
operations at the Property in reasonable
amounts in accordance with accepted industry practices. Company agrees that
Claimholder shall be named as an additional
insured on all such
policies, and
agrees to forward to Claimholder
certificates
of such insurance policies not
later tha
