EXPLORATION AND DEVELOPMENT OPTION
AGREEMENT
THIS EXPLORATION AND DEVELOPMENT OPTION
AGREEMENT is made and entered into effective as of October 14,
2004, by and between Radius Gold Inc., a British Columbia
corporation whose address is Suite 830, 355 Burrard Street,
Vancouver, B.C., Canada V6C 2G8, and its wholly-owned subsidiary,
Exploraciones Mineras de Guatemala, S.A., whose address is c/o
Radius Gold Inc. (hereinafter collectively referred to as "
Radius ”), and Glamis Gold Ltd., a British Columbia
corporation whose address is 5190 Neil Road, Suite 310, Reno,
Nevada 89502, and its wholly-owned subsidiary, Entre Mares de
Guatemala, S.A., a Guatemala corporation whose address is c/o
Glamis Gold Ltd. (hereinafter collectively referred to as "
Glamis "). Radius and Glamis will at times be referred
to herein as the "Parties" or individually as a
“Party.”
RECITALS
1.
Radius owns or controls certain property
interests in Guatemala held by way of mineral exploration
concessions as more particularly described in Exhibit A
attached hereto and incorporated by this reference (referred to
herein as the " Property ").
2.
Glamis desires to acquire (i) an
exclusive right to explore, evaluate and develop the Property and
(ii) options to acquire from Radius up to an undivided 75% interest
in and to the Property, and if Glamis acquires an interest in the
Property, the Parties desire to enter into an arrangement for the
joint exploration, development and, if warranted, mining,
production and marketing of minerals from the Property, all for the
consideration and upon the terms and conditions described
herein.
AGREEMENT
NOW, THEREFORE, for and in consideration
of the payment of Ten Dollars from Glamis to Radius, the receipt
and sufficiency of which the Parties hereby confirm and
acknowledge, and the mutual promises, covenants, and conditions
herein contained and recited, the Parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following
terms shall have the meanings assigned to them in this
Article I.
1.1
" Acquisition Costs " shall mean
costs incurred by Glamis in acquiring property interests within the
Area of Interest, including direct costs and expenses paid by
Glamis in acquiring and holding such property interests.
1.2
" Affiliate " shall mean any
person, partnership, joint venture, corporation or other form of
enterprise which directly or indirectly controls, is controlled by,
or is under common control with, a party to this Agreement.
For purposes of the preceding sentence, "control" means
possession, directly or indirectly, of the power to direct or cause
direction of management and policies through ownership of voting
securities, contract, voting trust or otherwise.
1.3
" Area of Interest " shall mean
any interest in real property located within an area extending
three (3) kilometers in all directions from the exterior boundaries
of the Property and shall include the Property. For purposes
of this Agreement, any properties now owned or controlled or
hereafter acquired by either Party within the Area of Interest
shall be included in the Property.
1.4
" Agreement " shall mean this
Exploration and Development Option Agreement, the recitals and all
exhibits attached hereto and by this reference incorporated
herein.
1.5
" Anniversary Date " shall mean
the date falling one or more years after the Effective
Date.
1.6
“ Back-In Right ”
shall have that meaning as set out in Section 3.1.
1.7
" Effective Date " shall mean the
date on which all necessary governmental approvals to conduct the
first year’s exploration program as set forth in Section
2.2(a) have been issued.
1.8
" Environmental Compliance " shall
mean actions taken during or after operations on the Property to
comply with the requirements of all Environmental Laws or
contractual commitments related to reclamation of the Property, or
other compliance with Environmental Laws.
1.9
" Environmental Laws " shall mean
all laws (including statutes, ordinances, rules, regulations,
codes, plans, judgments, orders and decrees) of federal, state and
local governments (and all agencies thereof) concerning pollution
or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water,
or lands, or otherwise relating to the existence, manufacture,
processing, distribution, use, treatment, storage, reclamation,
disposal, recycling, transport, or handling or reporting or
notification to any governmental authority in the collection,
storage, use, treatment or disposal of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or
wastes.
1.10
" Environmental Liabilities "
shall mean any liability arising out of, based on or resulting from
(i) the physical disturbance of the environment on or from the
Property or (ii) the violation or alleged violation of any
Environmental Laws relating to such property.
1.11
“ Feasibility Study ”
shall mean a comprehensive study of a deposit or deposits of
Valuable Minerals in which all geological, engineering, operating,
economic and other relevant factors are considered in sufficient
detail that it could reasonably serve as the basis for a final
decision by company to proceed with the development of a deposit or
deposits for mineral production. A Feasibility Study need not
be prepared or audited by a third party.
1.12
" First Option " shall mean
Glamis’ exclusive right to acquire an undivided 51% interest
in the Property pursuant to Section 2.2.
1.13
“Indemnified Party
” shall have that meaning as set
out in Section 9.3.
1.14
“ Indemnifying Party ”
shall have that meaning as set out in Section 9.3.
1.15
" Minimum Work Requirements "
shall mean the expenditure of required minimum amounts of Qualified
Expenditures totaling $4 million as set forth in Section 2.2, or
the payment of any applicable sums in lieu thereof by Glamis
pursuant to Section 2.2(c).
1.16
“
Mining Venture Agreement ” shall have that meaning as
set out in Section 2.5.
1.17
“ Newco ” shall have
that meaning as set out in Section 2.3.
1.18
" Option Period " shall mean the
period of time commencing on the Effective Date and continuing
until the exercise, termination or expiration of the First Option
and the Second Option.
1.19
“ Property ” shall
have that meaning as set out in Recital 1.
1.20
" Qualified Expenditures " shall
mean and include all costs or fees, expenses, liabilities and
charges paid or incurred by Glamis which are related to
prospecting, exploration, development and related work conducted on
or for the benefit of the Property from and after the date of
execution of this Agreement, including without
limitation:
(a)
All costs and expenses incurred in
conducting exploration and prospecting activities on or in
connection with the Property including, without limitation, the
pursuit of required authorizations or permits and the performance
of required environmental protection or reclamation obligations,
the building, maintenance and repair of roads, drill site
preparation, drilling, trenching, digging test pits, shaft sinking,
acquiring, diverting and/or transporting water necessary for
exploration, logging of drill holes and drill core, collection and
evaluation of geological, geophysical, geochemical or other
exploration data and preparation of interpretive reports, and
surveying and laboratory costs and charges (including assays or
metallurgical analyses and tests);
(b)
All costs and expenses incurred in
conducting development activities on or in connection with the
Property including, without limitation, the preparation of
feasibility studies, the pursuit of required authorizations or
permits and the performance of required environmental protection or
reclamation obligations, pre-stripping and stripping, the
construction and installation of a mill, leach pads or other
beneficiation facilities for Valuable Minerals, and other
activities, operations or work performed in preparation for the
removal of Valuable Minerals from the Property;
(c)
All Acquisition Costs;
(d)
All costs incurred in performing any
reclamation or other restoration or clean-up work required by any
federal, state or local government, agency or authority;
(e)
Salaries, wages, expenses and benefits of
Glamis' employees or consultants engaged in operations relating to
the Property, including salaries and fringe benefits of those who
are temporarily assigned to and directly employed on work relating
to the Property for the periods of time such employees are engaged
in such activities and reasonable transportation expenses for all
such employees to and from their regular place of work to the
Property;
(f)
All costs incurred in connection with the
preparation of feasibility studies and economic and technical
analyses pertaining to the Property, whether carried out by Glamis
or by third parties under contract with Glamis;
(g)
Taxes, fees and assessments, other than
income taxes, assessed or levied upon or against the Property or
any improvements thereon situated thereon for which Glamis is
responsible or for which Glamis reimburses Radius;
(h)
Costs of material, equipment and supplies
acquired, leased or hired, for use in conducting operations
relating to the Property; provided, however, that equipment owned
and supplied by Glamis shall be chargeable at rates no greater than
the most favorable rental rates available in the area of the
Property;
(i)
Costs and expenses of establishing and
maintaining field offices, camps and housing facilities;
(j)
Costs incurred by Glamis in examining and
curing title to and completing the legal registration of the
Property or any interest in real property within the Area of
Interest, in maintaining the Property or any interest in real
property within the Area of Interest whether through the
performance of assessment work or otherwise, in making required
payments or performing other required obligations under the
concession, in completing surface acquisitions or satisfying
surface use or damage obligations to landowners, or in conducting
any analyses of the environmental conditions at the Property;
and
(k)
An additional 10% as overhead on all
costs and expenses described in (a) through (j) above.
1.21
“ Second Option ”
shall mean the option of Glamis to acquire an additional 24%
interest in the Property by completing a Feasibility Study as set
forth in Section 2.4 of this Agreement.
1.22
“ Transfer Documents ”
shall have that meaning set out in Section 2.3.
1.23
" Valuable Minerals " shall mean
all ores, minerals, mineral deposits or mineral substances of every
kind or character located in, on or under the Property.
1.24
" $ " shall mean United States
currency.
ARTICLE II
GRANT OF RIGHTS AND REQUIREMENTS
FOR VESTING
2.1
Rights Granted . Radius hereby grants to Glamis the exclusive
right to enter upon the Property for the purpose of conducting
prospecting, exploration, development and production of Valuable
Minerals and work related thereto, along with the exclusive and
irrevocable option to earn up to an undivided 75% interest in the
Property by completing the requirements set forth in this Article
II.
2.2
Minimum Work Requirements
. Radius hereby grants to Glamis
the exclusive and irrevocable option to earn up to an undivided 51%
interest in the Property (the " First Option ") by
completing the following:
(a)
Glamis will incur a total of $250,000 in
Qualified Expenditures during the 12-month period following the
Effective Date. The $250,000 must be spent during this period
and is a firm commitment of Glamis. The remaining
expenditures are not committed and are required only as a condition
of maintaining the First Option.
(b)
Glamis may continue the First Option by
incurring Qualified Expenditures of:
(i)
not less than $250,000 during each of the
three subsequent 12-month periods, and
(ii)
inclusive of the annual $250,000
requirements, a total of not less than $4 million within four years
from the Effective Date (the “ Minimum Work
Requirements ”),
at which time it will have earned a 51%
interest in the Property. If Glamis does not complete either
the annual $250,000 expenditure obligation, or the total $4 million
expenditure obligation, this Agreement shall terminate with no
further obligations of either party.
(c)
In Lieu Payments
. If Glamis fails or elects not to
attain the Minimum Work Requirements during any annual period or
for the entire period of the First Option, and if such failure is
not excused by force majeure, then, in order to keep this Agreement
in full force and effect, within sixty days after the end of
any such period, Glamis may elect to make a payment to Radius which
shall equal the sum of the required minimum amount of Qualified
Expenditures for the period in question less the Qualified
Expenditures actually incurred by Glamis during that period.
Any such payment shall satisfy the Minimum Work Requirements
for the period of time to which the payment relates.
(i)
Proof of Expenditures
. Glamis shall provide Radius with
a written statement of Qualified Expenditures, certified as being
complete and accurate by Glamis, within sixty days after the end of
each one-year period from the Effective Date and after the end of
the Option Period, and shall make available for review by Radius
during normal business hours, for a period of six months after the
end of each period, backup invoices, statements and the like
verifying such expenditures promptly upon Radius’s written
request. In connection with such a review, Glamis may satisfy
any annual Minimum Work Requirements obligation by the payment to
Radius of any agreed-upon deficiency within thirty days after any
reported expenditure has later been determined not to be a valid
Qualified Expenditure, or if the amount of required Qualified
Expenditures has later been determined to be deficient.
2.3
Acquisition of 51% Interest in the
Property . Upon
completion of the Minimum Work Requirements, Glamis shall have the
right to immediately exercise the First Option and thereby acquire
and receive from Radius an undivided 51% interest in and to the
Property, as follows: Upon such completion, Glamis shall
promptly give Radius notice of the same, and of its decision to
exercise the First Option, and, within 30 days after the date of
Radius’s receipt of such notice, Radius shall execute and
deliver to Glamis such instruments (the “ Transfer
Documents ”) as are necessary to transfer to Glamis 51%
of the issued and outstanding share capital of a company newly
incorporated by Radius pursuant to the laws of Guatemala (“
Newco ”) and Radius will immediately transfer to Newco
a 100% undivided registered and beneficial interest in and to the
Property, such Transfer Documents to be in a form reasonably
acceptable to Glamis and its counsel to properly convey the shares
under local law. The Parties hereby agree that Glamis may, in
its sole discretion, accelerate the schedule for completion of the
Minimum Work Requirements, and in that event, Glamis may accelerate
its earning of a 51% interest in the Property by providing written
notice to Radius of such completion. Once Glamis has
completed its Minimum Work Requirements, and has provided written
notice to Radius of such completion and its decision to exercise
the First Option, Glamis shall be deemed immediately vested in an
undivided 51% interest in the Property. If Glamis notifies
Radius that it has completed the Minimum Work Requirements but has
elected not to exercise the First Option, this Agreement shall
terminate and the provisions of Section 10.2 shall
apply.
2.4
Second Option . Subject to Glamis having exercised the First
Option, Glamis may, but shall not be obligated to, earn an
additional 24% interest in the Property (the “ Second
Option ”), for a total of 75%, by completing at its sole
cost and expense, within five (5) years from the Effective Date, a
positive Feasibility Study for the development and construction of
a precious metals mine at the Property. In the event Glamis
completes the Feasibility Study, it shall have the right to give
notice to Radius of its exercise of the Second Option, in which
case Glamis shall have earned, and Radius shall deliver to Glamis,
an additional 24% interest in the Property, in the manner and in
accordance with the provisions set forth in Section 2.3
above.
2.5
Execution of Mining Venture
Agreement . Subject to
the grant of the 51% interest as set forth in Section 2.3 and in
the event Glamis does not exercise the Second Option, or upon grant
of the additional 24% interest as set forth in Section 2.4, in the
event Glamis does exercise the Second Option or in accordance with
Section 3.1(a) or (b), Radius and Glamis will execute and deliver a
Mining Venture Agreement in a form appropriate under Guatemalan law
to provide for the joint shareholding and management of the affairs
of Newco, the then owner of the Property, the essential terms of
which agreement shall include those terms set forth in Exhibit B
attached hereto and incorporated herein by this reference (the
“ Mining Venture Agreement ”). At such
time, this Agreement shall terminate and the Parties shall proceed
with any exploration, development or mining of the Property in
accordance with the Mining Venture Agreement.
2.6
Failure to Complete Minimum Work
Requirements or Second Option .
(a)
Election by Glamis
. Subject to the firm commitment
contained in Section 2.2(a), in the event Glamis elects (which it
may choose to do at any time in its sole discretion) not to
complete the Minimum Work Requirements, Glamis shall give Radius
written notice of such election, and this Agreement, upon receipt
of such notice by Radius, shall be conclusively deemed terminated
in accordance with Section 10.2.
(b)
Agreement Terminated
. In the event Glamis fails to
complete any of the Minimum Work Requirements, this Agreement may
be terminated by Radius in accordance with Article X.
(c)
Ongoing Obligations
. Radius expressly agrees that
Glamis shall not be liable for any actual, incidental or
consequential damages incurred by Radius as a direct or indirect
result of Glamis' failure to (i) satisfy all or part of its Minimum
Work Requirements, (ii) exercise the First Option, or (iii)
exercise the Second Option.
2.7
Geological and Other Data
. Upon execution of this
Agreement, Radius shall make available to Glamis all records,
information and data in its possession or reasonably available to
it relating to title to the Property or environmental conditions at
or pertaining to the Property, and all maps, assays, surveys,
technical reports, drill logs, samples, mine, mill, processing and
smelter records, and metallurgical, geological, geophysical,
geochemical, and engineering data, and interpretive reports derived
therefrom, concerning the Property. Radius makes no
representation or warranty as to the accuracy, reliability or
completeness of any such records, information or data, and Glamis
shall rely on the same at its sole risk.
2.8
Radius Obligations During Option
Period . During the
Option Period and until Glamis has vested in its interest in the
Property, Radius, as recorded owner of the Property, shall fully
cooperate with Glamis in obtaining all necessary permits,
authorizations and approvals to carry out the work contemplated
hereunder. In order to provide Glamis the authority to act on
behalf of Exploraciones Mineras de Guatemala, S.A., the owner of
the Property, during the Option Period, Radius shall, concurrent
with the execution of this Agreement, execute in favor of Glamis a
proxy (Carta Poder) or Power of Attorney granting to Glamis the
necessary legal authority to carry out its rights and obligations
with respect to the Property (but not including any other property
of Exploraciones Mineras de Guatemala, S.A) as set forth in this
Agreement. Radius shall promptly notify and provide Glamis
with copies of all communications from any governmental authority
relating to the Property or the work thereon during the Option
Period, including all notices of taxes, fees or other payments or
assessments due.
ARTICLE III
BACK-IN RIGHT
3.1
Back-In Right . In the event that Glamis exercises the First
Option, but does not exercise the Second Option, Radius shall have
the option to either:
(a)
elect to earn back (the “
Back-In Right ”) a 75% interest in the Property,
thereby reducing the interest of Glamis in the Property to 25%, by
completing, at its sole expense, within seven (7) years from the
Effective Date, a positive feasibility study for the development
and construction of a precious metals mine at the Property;
or
(b)
elect to enter into a Mining Venture
Agreement in accordance with Section 2.5.
3.2
Mining Venture Agreement
. In the event that Radius elects
to earn back in but fails to exercise the Back-In Right or does
exercise the Back-In Right, then Radius and Glamis will enter into
a Mining Venture Agreement in accordance with Section
2.5.
ARTICLE IV
RIGHTS OF GLAMIS
4.1
Glamis' Rights . During the term of this Agreement, Glamis'
rights shall include, without limitation, the following:
(a)
Glamis may carry out such operations at
the Property as it may, in its sole discretion, determine to be
warranted, and Glamis shall have exclusive control of all
operations on or for the benefit of the Property, and of any and
all equipment, supplies, machinery or other assets purchased or
otherwise acquired in connection with such operations;
and
(b)
Glamis' rights shall include all other
rights necessary or incident to or for its performance of its
operations hereunder, including, but not limited to the authority
to apply for all necessary permits, licenses and other approvals
from Guatemala or any other governmental or other entity having
regulatory authority over any part of the Property.
ARTICLE V
OBLIGATIONS OF
GLAMIS
5.1
Conduct of Operations by
Glamis . All of the work
which may be performed by Glamis hereunder shall be performed in
accordance with 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 Glamis, and there shall be no implied covenant to begin or
continue any such operations or activities.
5.2
Indemnity . Except as to damages sustained by Radius
while on the Property pursuant to Section 5.5, Glamis agrees to
indemnify and hold Radius harmless from and against any loss,
liability, expense or damage it may incur to third persons or
corporations for injury to or death of persons or damage to
property which is the result of Glamis’ negligence,
recklessness or willful misconduct in conducting any operations at
the Property.
5.3
Insurance . Glamis agrees to carry such insurance,
covering all persons working at or on the Property for Glamis, as
will fully comply with applicable legal requirements 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, Glamis agrees to carry liability insurance with
respect to its operations at the Property in reasonable amounts in
accordance with accepted industry practices.
5.4
Compliance with Laws
. Glamis agrees to conduct and
perform all of its operations at the Property in substantial
compliance with all valid and applicable laws, rules and
regulations, including, without limitation, Environmental Laws, and
Glamis shall indemnify and hold Radius harmless from payment of any
fines or damages occasioned by Glamis' failure to comply with said
laws.
5.5
Inspection . Radius and its authorized agents, at Radius's
sole risk and expense, shall have the right, exercisable during
regular business hours, at a mutually convenient time, in
compliance with Glamis’ safety rules and regulations, and in
a reasonable manner so as not to interfere with Glamis’
operations, to go upon the Property for the purpose of confirming
that Glamis is conducting its operations in the manner required by
this Agreement. Radius shall indemnify and hold Glamis
harmless from all claims for damages arising out of any death,
personal injury or property damage sustained by Radius, its agents
or employees, while in or upon the Property, whether or not Radius,
its agents or employees are in or upon the Property pursuant to
this Section 5.5, unless such death, injury or damage is due
to Glamis’ gross negligence or willful misconduct. If
requested by Glamis, Radius, its agents and employees will confirm
in writing their waiver of claims against Glamis.
5.6
Taxes . During the Option Period, Glamis shall be
responsible for payment of all taxes or fees levied or assessed
upon or against the Property and any facilities or improvements
located thereon; provided, however, that Glamis shall not be
responsible for any such payments for which Radius receives notices
of due dates and fails to timely forward copies of such notices to
Glamis.
5.7
Liens and Encumbrances
. Glamis shall keep the title to
the Property free and clear of all liens and encumbrances resulting
from its operations hereunder; provided, however, that Glamis may
refuse to pay any claims that it disputes in good faith. At
its sole cost and expense, Glamis shall contest or otherwise
resolve any suit, demand or action commenced to enforce such a
claim and, if the suit, demand or action is decided by a court or
other authority of ultimate and final jurisdiction against Glamis
or the Property, Glamis shall promptly pay the judgment and shall
post any bond and take all other action necessary to prevent any
sale or loss of the Property or any part thereof.
5.8
Reclamation and Remediation
. If this Agreement is terminated
and Glamis does not acquire an undivided interest in and to the
Property, Glamis shall reclaim the surface of the Property, to the
extent disturbed by Glamis, in accordance with applicable laws,
rules and regulations. Radius hereby agrees to grant to
Glamis such access to the Property following termination as is
reasonably necessary to complete such reclamation work.
Glamis shall not be liable for its failure to perform or
complete any reclamation work required under this Section 5.8 if
such failure arises out of Radius's unwillingness or inability to
provide Glamis with access to the Property necessary to complete
such work. If Glamis acquires an undivided interest in the
Property and the Parties enter into the Mining Venture Agreement,
the reclamation obligations associated with any disturbances of the
Property made by Glamis shall become obligations of the
Venture.
5.9
Reports and Meetings
. Glamis shall provide Radius
reports quarterly describing in reasonable detail the activities
undertaken on or for the benefit of the Property during the
previous three-month period and shall include copies of any
material exploration data and results. Glamis further agrees
that it shall make its representatives available not less than once
annually, at times and places mutually agreeable to the Parties, to
review with Radius results from Glamis’ activities at the
Property and to discuss Glamis’ planned activities at the
Property going forward. The Parties acknowledge and agree
that notwithstanding the provisions of this Section 5.9, Glamis
shall, as set forth in Section 4.1, ultimately retain sole
discretion as to the conduct and the nature of the activities, if
any, on the Property.
5.10
Maintenance of Concession
. Glamis shall make such
filings and payments and take such other actions as are necessary
to maintain the concessions comprising the Property in good
standing. All costs incurred by Glamis in doing so shall be
deemed Qualifying Expenditures.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
RADIUS
6.1
Representations and
Warranties . Radius
represents and warrants to Glamis as of the date hereof as
follows:
(a)
Organization and Standing
. Radius Gold Inc. is a
corporation duly organized, validl
