GUARANTY AND AGREEMENT
IN SUPPORT OF SOMITA FUNDING AGREEMENT
This GUARANTY AND
AGREEMENT IN SUPPORT OF SOMITA FUNDING AGREEMENT (this “
Agreement ”) dated as of February 22, 2006, is
from HIGH RIVER GOLD MINES LTD., a corporation formed under the
laws of Canada (“ High River ”) to and for the
benefit of ROYAL GOLD, INC., a Delaware corporation (“
Royal Gold ”).
A. Société
des Mines de Taparko, also known as SOMITA, SA, a
société anonyme formed under the laws of the
Republic of Burkina Faso (“ Somita ”) and Royal
Gold entered into a Funding Agreement dated as of December 1,
2005 (the “ Original Funding Agreement ”), as
amended by First Amendment to Funding Agreement dated as of
February 8, 2006 (the “ First Amendment ”),
and as further amended and restated by Amended and Restated Funding
Agreement dated as of February 22, 2006 (as so amended and
restated, the “ Funding Agreement ”). Pursuant
to the Funding Agreement Royal Gold has agreed to provide funding
to Somita in the amount of U.S. $35,000,000 to be used in the
development of the Taparko — Bouroum Project (defined below)
in the Republic of Burkina Faso.
B. As
consideration for the funding to be provided pursuant to the
Funding Agreement, Somita has executed a Conveyance of Production
Payments (PP1 and PP2) (the “ Production Payment
Conveyance ”) and a Conveyance of Tail Royalty and Grant
of Milling Fee (the “ Tail Royalty Conveyance
”), both dated as of February 22, 2006 and both in favor
of Royal Gold (collectively, the “ Conveyances
”).
C. High River
is the indirect owner of 90% of the issued and outstanding shares
of Somita, through its subsidiary High River Gold Mines (West
Africa) Ltd., a corporation formed under the laws of the Cayman
Islands (“ Shareholder ”). The Government of the
Republic of Burkina Faso is the owner of the remaining 10% of the
issued and outstanding shares of Somita.
D. Prior to
the date of this Agreement, Royal Gold has provided Somita the
amount of $9,414,000 under the First Tranche pursuant to the terms
and conditions of the Original Funding Agreement, as amended by the
First Amendment.
E. It is a
condition precedent to Royal Gold’s obligation to disburse
the Second Tranche under the Funding Agreement that High River
shall execute and deliver to Royal Gold an undertaking by High
River to assure completion of the Taparko — Bouroum Project,
to assure proper application of the funds provided by Royal Gold in
accordance with the Funding Agreement and the other Funding
Documents, to contribute capital to Somita or obtain other
financing of the Taparko — Bouroum Project in the event of a
shortfall prior to completion, to assure payment of amounts that
have become due and payable under the Conveyances, and such other
matters as are set forth herein.
F. The board
of directors of High River has determined that (i) High River
will derive substantial direct and indirect benefit from the
transactions contemplated by the Funding Agreement and the
documents related thereto, (ii) Somita’s ability to
continue to obtain the
funding from
Royal Gold under the Funding Agreement is important to the
financial success of Somita and High River, (iii) High River
will derive economic benefit from the financial success of Somita,
and (iv) it is in the best interests of High River, and
necessary and convenient to the conduct, promotion and attainment
of the business of High River, for High River to support the
obligations of Somita under the Funding Agreement and the documents
related thereto.
G. This
Agreement is executed and delivered to Royal Gold by High River to
induce Royal Gold to disburse the Second Tranche and each
subsequent Tranche to Somita under the Funding Agreement and in
satisfaction of a condition precedent to Royal Gold providing such
funding. High River acknowledges and agrees that Royal Gold would
not provide the funding to Somita under the Funding Agreement
unless High River executed and delivered this Agreement.
H. This
Agreement is the document referred to as “Guaranty II”
in the Funding Agreement.
THEREFORE, in
consideration of Royal Gold’s providing funding as set forth
in the Funding Agreement, and the benefits to be derived therefrom
by High River, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, High
River agrees as follows:
1.
Definitions . Reference is hereby made to the Funding
Agreement for all purposes. All terms used in this Agreement that
are defined in the Funding Agreement and not otherwise defined
herein shall have the same meanings when used herein. As used
herein, terms defined above in the recitals shall have the meanings
indicated above, and the following terms shall have the following
meanings:
“ Bouroum
Lands ” means all of the land included in the Bouroum
Permit, being approximately 11.7 square kilometers, which land is
more particularly described in Schedule A attached
hereto.
“ Bouroum
Permit ” means Decree No. 2005-342/PRES/PM/MCE/MFB
issued by the Government of the Republic of Burkina Faso on
June 21, 2005.
“
Obligations ” means the obligations of High River and
Somita described in Sections 2, 3 and 4
collectively.
“ Pledge
Agreement ” means the Pledge Agreement dated as of
February 22, 2006 among High River Gold Mines (International)
Ltd. (“ International ”), Shareholder and Royal
Gold.
“ Taparko
— Bouroum Project ” means development and
exploitation of the Taparko Lands and the Bouroum Lands for
production of gold and associated precious metals, including
construction of a mine, support facilities and the Taparko
Processing Facility.
“ Taparko
Lands ” means that portion of the land included in the
Taparko Permit that is more particularly described in
Schedule B hereto, being approximately 34.7 square kilometers
out of the total 666.5 square kilometers included in such
permit.
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“ Taparko
Mining Convention ” means the mining investment
convention signed by High River and the Minister for Energy and
Mines on behalf of the Republic of Burkina Faso on December 15,
1995.
“ Taparko
Permit ” means Decree
No. 2004-329/PRES/PM/MCE/MFB/MEDE/MECV issued by the
Government of the Republic of Burkina Faso on August 6,
2004.
“ Taparko
Processing Facility ” means the CIL processing facility
to be constructed by Grantor on or adjacent to the Taparko Lands,
capable of milling and processing at least 1,000,000 tonnes of ore
per year.
2.
Completion Guarantee . High River unconditionally and
absolutely guarantees to Royal Gold the due and punctual
performance and observance by Somita, Shareholder and International
of all of the terms, covenants, provisions and agreements contained
in the Funding Agreement and the other Funding Documents executed
in connection therewith or contemplated thereby pertaining to the
obligations of Somita, Shareholder and International with respect
to Project Completion of the Taparko — Bouroum Project.
Without limiting the generality of the foregoing, High River
agrees:
(a) to
perform, complete, and pay for the construction of the Taparko
— Bouroum Project in accordance with the Funding Agreement
and the Development Plan, as the Development Plan has been or may
be modified or amended from time to time, within the time period
allotted therefor and to pay all costs of said construction and all
costs associated therewith, if Somita shall fail to perform or
complete such work;
(b) to
reimburse Royal Gold for all costs and expenses incurred by Royal
Gold in exercising any and all of its rights and remedies in
connection with a default by Somita in failing to achieve Project
Completion as set forth in the Funding Agreement and the
Development Plan;
(c) to
reimburse Royal Gold for any and all of the Funding that is not
applied by Somita as required to be applied pursuant to the Funding
Agreement and the other Funding Documents;
(d) if
Project Completion is not achieved by September 30, 2007, to
reimburse any and all of the Funding made by Royal Gold prior to
such date, unless Royal Gold shall have elected to foreclose on the
shares of Somita or Shareholder prior to such date;
(e) if
any mechanic’s or materialman’s or similar liens should
be filed, or should attach, with respect to any of the property
included in the Taparko — Bouroum Project by reason of the
construction undertaken pursuant to the Funding Agreement, cause
the removal of such liens within 30 days after the filing or
recording thereof;
(f) to
pay the legitimate costs and fees of all contractors, engineers and
others employed by Somita if said costs and fees are not paid by
Somita; and
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(g) to
pay all of Royal Gold’s costs and expenses, including,
without limitation, attorneys’ fees, incurred in the
enforcement of this Agreement and the provisions of the Funding
Documents covered by this Agreement.
Notwithstanding
the foregoing and for greater certainty, High River’s
obligations as set forth in this provision, other than accrued and
unpaid or unperformed obligations, shall automatically terminate
and be of no further force and effect immediately upon Project
Completion. Project Completion shall be determined in accordance
with the Funding Agreement.
3.
Agreement to Contribute to Capital or Arrange Additional
Financing . High River unconditionally and absolutely
guarantees that Somita will have sufficient funds, in addition to
the Funding, to achieve Project Completion on the schedule set
forth in the Funding Agreement, and in support thereof, High River
shall, if at any time prior to Project Completion there is a
reasonable likelihood of a shortfall in the capital of Somita that
could result in the failure of Somita to achieve Project Completion
for whatever reason on the time schedule set forth in the Funding
Agreement, High River shall promptly cause Shareholder to
contribute equity to Somita, or shall arrange other funding or
financing for Somita, sufficient in amount to cover any such
perceived shortfall. Notwithstanding the foregoing and for greater
certainty, High River’s obligations as set forth in this
provision, other than accrued and unpaid or unperformed
obligations, shall automatically terminate and be of no further
force and effect immediately upon Project Completion. Project
Completion shall be determined in accordance with the Funding
Agreement.
4.
Guaranty of Payments Under the Conveyances . High River
unconditionally and absolutely guarantees the full and prompt
payment when due, in lawful money of the United States, all amounts
earned and payable under the Conveyances, except to the extent
(a) a refiner under a Refining Contract has expressly agreed
to make such payments directly to Royal Gold, or (b) payment
is rendered impossible due to an event or action by the Government
of the Republic of Burkina Faso beyond Somita’s control. The
obligations of High River set forth in this paragraph shall
continue after Project Completion.
5.
Obligations Absolute . The obligations of High River
hereunder are primary, absolute and unconditional and are intended
as a continuing guaranty of payment and performance by High River.
The right of recovery against High River shall exist
notwithstanding any right or power of Somita or anyone else to
assert any claim or defense as to the genuineness, regularity,
validity or enforceability of any of the Obligations, any
collateral security therefor, any guaranty thereof or the Funding
Agreement, the Conveyances or the Pledge. This is a guaranty of
payment and not of collection, and Royal Gold shall not be required
to take any action against Somita or resort to any other security
given for the performance of Somita’s obligations as a
precondition to the obligations of High River hereunder.
6. No
Impairment of Liability . High River agrees that its liability
hereunder will not be released, reduced, impaired or affected by
any one or more of the following events:
(a) Royal
Gold’s obtaining collateral from Somita or any other person
to secure payment or performance of the Funding Agreement or the
Conveyances;
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(b) the
assumption of liability by any other person (whether as guarantor
or otherwise) for payment or performance under the Funding
Agreement or the Conveyances;
(c) the
release, surrender, exchange, loss, termination, waiver or other
discharge of any collateral securing payment or performance under
the Funding Agreement or the Conveyances;
(d) the
subordination, relinquishment or discharge of Royal Gold’s
rights relating to the Funding Agreement, the Conveyances or the
Pledge Agreement or any collateral described therein;
(e) the
foreclosure upon any collateral given to secure any liability of
Somita by judicial or non-judicial sale;
(f) the loss
or impairment of any right of subrogation of the High
River;
(g) the full
or partial release from liability of Somita or any other person now
or hereafter liable for payment or performance under the Funding
Agreement or the Conveyances;
(h) the
insolvency, bankruptcy, reorganization, discharge, waiver or other
exoneration of Somita or any other person now or hereafter liable
for payment or performance under the Funding Agreement or the
Conveyances;
(i) the
modification or amendment from time to time of the Funding
Agreement or the Conveyances or of the terms of the Funding
Agreement or the Conveyances;
(j) the
failure, delay, waiver or refusal by Royal Gold to exercise any
right or remedy held by Royal Gold under the Funding Agreement, the
Conveyances or the Pledge Agreement;
(k) the sale,
encumbrance, transfer or other modification of the ownership of
Somita or Somita’s assets, or the change in the financial
condition or management of the Somita;
(l) the
invalidity, unenforceability or insufficiency of the Funding
Agreement, the Conveyances or the Pledge Agreement or any
collateral securing payment or performance thereunder;
or
(m) the
failure of the High River to receive notice of any one or more of
the foregoing actions or events.
High River
specifically acknowledges and agrees that Royal Gold
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