Bullion Monarch
Mining, Inc.
299 East 950 South
Orem, UT 84058
(801) 426-8111
(801) 426-8555 (fax)
CONFIDENTIAL
JOINT
VENTURE WITH DOURAVE MINING AND EXPLORATION INC.
TERMS
OF THE JOINT VENTURE (THE “TERM SHEET”)
:
Formation
of JV Agreement :
A
joint venture agreement (the “JV”), would be entered
into among Dourave Mining and Exploration Inc., a corporation
formed under the laws of Canada (“Dourave Canada”),
Dourave Mineracao e Exploracao Mineral Ltda., a corporation
organized and existing under the laws of Brazil (“Dourave
Brazil”) and Bullion Monarch Mining, Inc., a Utah corporation
(“Bullion”). The purpose of the JV would be to
contribute jointly to the development and exploitation of the
mineral rights owned or controlled by Dourave Brazil and described
below. The parties agree to work towards establishing, on a
tax-effective and exchange-control compliant basis, one or more
entities and arrangements that permit them to establish a
jointly-owned entity in Brazil that directly owns such rights.
1/3
Interest :
Bullion
would contribute to the JV $250,000 USD as a nonrefundable capital
contribution (less $75,000 USD previously given to Dourave Canada
for a total of $175,000 USD). In exchange for this capital
contribution, Bullion would acquire a one-third interest in the
economic rights of the mine properties generally known as Bom
Jardim and Bom Jesus (or other substitute mine properties as
described below), which are situated in Para, Brazil (the
“Properties”).
Dourave
Brazil owns or controls the subsurface and hard rock mineral rights
in the Bom Jesus and Bom Jardim properties. Dourave Brazil is
99.9% owned by Dourave Canada and is exclusively controlled Dourave
Canada.
Required
Capital Contributions :
In addition to its initial, nonrefundable capital contribution,
Bullion would be required to
contribute
an additional 1.75 million USD to be used by the JV in the
exploration of the Bom Jesus and Bom Jardim Properties (the
“Capital Funds”). At a minimum, Bullion would be
required to contribute $80,000 each month (for 22 months) until the
entire Capital Funds will have been contributed, but it could
contribute more - should circumstances warrant. The $75,000
already given to Dourave Canada and Dourave Brazil through that
certain Promissory Note and Advance, executed on or about March 25,
2009, would be treated as an advance of the first $250,000 capital
contribution and the Promissory Note and Advance would be
cancelled. No contribution would be made for the month
following the month in which the initial capital contribution is
made (month 1 = $175,000, skip next month, then $80,000 for the
next 22 months).
Progress
Reports :
If
Bullion is unsatisfied with progress on the Bom Jardim and Bom
Jesus properties, it may stop its capital contributions, but
Bullion shall be required to give Dourave Canada and Dourave Brazil
90-days advance written notice prior to stopping its capital
contributions. If Bullion elects to stop capital
contributions for the Properties, then both parties will attempt to
negotiate in good faith to negotiate joint venture terms for a
similar arrangement on other properties held by Dourave Brazil.
Security
for Contributed Funds :
Bullion’s commitment to contribute the Capital Funds would be
secured by a one-third interest in a mine property owned by Bullion
in Nevada, which is commonly known as the “North Pipeline
(440) Property.” In the event that satisfactory
progress is being made with the exploration efforts, and Bullion
fails to make a required payment of the Capital Funds, then Dourave
Canada would be allowed to execute on its security interest and
acquire a one-third interest in the 440 Property.
Allocations
:
All
of the expenses paid by the Capital Funds are to be specially
allocated to Bullion by the JV for U.S. tax purposes. As to
the allocation of Profit, Bullion shall be entitled to one-third of
the profit realized by the JV and the remaining two-thirds shall be
allocated to Dourave Canada/Dourave Brazil.
Management
:
Dourave
Canada shall primarily manage the JV, except that Bullion shall
have certain basic veto rights as well as the right to receive
quarterly
financial
reports. In addition, Bullion shall have the right to receive
proposed budgets at least quarterly. Bullion shall be
permitted to inspect the books and records of the JV and meet with
management. The veto rights would be:
·
Any
proposed sale of the Properties;
·
Any
proposed partnership involving the Properties with another third
party;
·
The
dissolution of the JV;
·
The
stopping of exploration by the JV;
·
Any
additional borrowings secured in any manner by the Properties or by
the interest held in the JV;
·
Any
liens or encumbrances on the Properties;
·
Any
change to the agreements with the underlying
prospectors;
·
Any
confession of a judgment by the JV;
·
Any
litigation regarding the Properties;
·
Any
single expenditure exceeding $250,000 on the Properties;
·
Any
loans by the JV; or
·
The
lending of money by the JV to any person.
Development
:
In
the event the JV is successful with its exploration efforts, the JV
parties agree to negotiate in good faith as to how to best develop
the mine properties or how to “partner” with a larger
mining company. At the development stage, Bullion shall have
a one-third interest in the JV and Dourave Canada/Dourave Brazil
shall have a two-thirds interest.
No
other JV Partners :
No
other members of the JV may be admitted without the consent of both
Bullion and Dourave Canada.
Right
of First Offer :
Subject
to any existing options, or options to be granted to officers,
directors, employees or consultants of Dourave Canada or any
subsidiary thereof pursuant to a share incentive plan adopted or to
be adopted by Dourave Canada, rights, other convertible securities
or warrants and the availability of exemptions from Canadian
prospectus and registration requirements as well as any U.S.
registration requirements and any other equivalent requirements
under applicable securities law, Bullion shall, during the currency
of the JV, be entitled to a right of first offer on
future
issuances
of the equity securities of Dourave Canada or the JV.
Restriction
on Sale:
Neither
Bullion nor Dourave Canada would be able to sell their interest in
the JV to an unrelated party without the permission of the other
party, such permission not to be unreasonably withheld.
Exclusive
Negotiations :
From
the date of this Term Sheet until the earlier of May 15, 2009 or
the mutual termination of our negotiations (in writing and signed
by all parties hereto) (the “Exclusivity Period”),
neither Dourave Canada nor Dourave Brazil, nor any of its
directors, officers, employees or representatives will solicit or
participate in negotiations or discussions with any person or
entity other than Bullion with respect to any investment in,
financing of or acquisition, sale and/or exchange of all or any
portion of Bom Jesus and Bom Jardim. Dourave Canada or
Dourave Brazil will provide prompt notice to Bullion of any written
or oral communications received by them regarding any such
investment or acquisition. During the Exclusivity Period, no
party will take any action that could frustrate the exclusivity
provisions set forth above.
The
parties agree that during the Exclusivity Period, each of them will
fully cooperate with each other in accommodating the reasonable due
diligence requests of the other party.
Area
of Interest:
(a)
If, during the existence of the JV, either party or a
representative or affiliate of either party (the “Acquiring
Party”) acquires lands, mining claims, leases, water rights,
contracts, prospecting or exploration or mining rights
(collectively “Mineral Rights”) within the area that
extends 0.5 miles from the nearest boundary of the any of the
Properties, such Mineral Rights shall be subject to the JV and the
JV shall reimburse the Acquiring Party for its costs of acquiring
such Mineral Rights.
(b)
If, during the existence of the JV, an Acquiring Party acquires
Mineral Rights within the area that extends between 0.5 miles and
3.0 miles from the nearest boundary of the Properties, the
Acquiring Party shall offer such Mineral Rights to the JV on the
same terms as it has agreed with the vendor of the Mineral Rights.
The party that is not the Acquiring Party
may
decide whether or not the JV shall accept the offer of the Mineral
Rights.
Expenses
:
Each
party will be responsible for their own transaction expenses.
Governing
Law :
Utah
Assignment
and Amendment :
This Term Sheet may not be assigned by any party and may not be
amended unless in writing by all parties thereto.
Binding
Effect and Liability :
The
parties understand and acknowledge that, except for the obligations
set forth in the provisions entitled “Exclusive
Negotiations,” “Expenses,” “Governing
Law,” and “Assignment and Amendment,” which are
intended to be legally binding regardless of whether this Term
Sheet is terminated, (i) this Term Sheet is not a legally binding
agreement, (ii) this Term Sheet represents only the current
thinking of the parties with respect to certain of the major issues
relating to the proposed investment, and (iii) the failure for any
reason to execute and deliver definitive documentation will impose
no liability on Bullion, Dourave Canada or Dourave
Brazil.
Very
truly yours,
Bullion
Monarch Mining, Inc.
By:
/s/
R. Don Morris
R.
Don Morris, Chairman
Dated:
5/10/09
Accepted
and Agreed:
Dourave
Mining and Exploration Inc.
By:
/s/
Name:
________________________________
Date:
5/5/09
Dourave
Mineracao e Exploracao Mineral Ltda.
By:
/s/
Name:
________________________________
Date:
5/5/09
Schedule
A
Bom
Jesus
The project
area covers 9150 Ha and includes 262 PLG’s (prospector
leases).
