Agreement

BETWEEN

 

NORANDA MINING AND EXPLORATION INC.

 

AND

 

BOOKER GOLD EXPLORATIONS LIMITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective October 22, 1997

1.

DEFINITIONS

 

1.1

For the purpose of this Agreement:

 

(a)

"Accounting Procedure" means the accounting procedure prescribed from time t,) time by the Management Committee, which shall initially be the accounting procedure forming part of this Agreement and set out in Schedule "C" hereto;

 

(b)

"Aggregate" means in respect of Expenditures, on any date, the cumulative total of all Expenditures made to that date;

 

(c)

"Aggregate Property" means the combination of the Hearne Property and Morrison Property;

 

(d)

"Aggregate Property Joint Venture" means a joint venture formed pursuant to the terms of this Agreement between Noranda and Booker with respect to both the Morrison Property and the Hearne Property in the event Noranda elects to create such a joint venture pursuant to paragraph 9.2(c) of this Agreement;

 

(e)

"Assets" means the machinery, equipment, Property, Other Tenements, Facilities, Mineral Products, Supplies, and all other assets acquired or held by the Participants with respect thereto or pursuant to this Agreement as the same may exist from time to time;

 

(f)

"Associated Company" means:

 

(i)

any corporation which owns directly or through any other means not less than 30% of the outstanding capital stock of a party hereto,

 

(ii)

any corporation of which a party hereto owns directly or through any other means not less than 30% of the outstanding capital stock, and

 

(iii)

any corporation of which either of the corporations referred to in paragraphs (i) and (ii) owns directly or through any other means not less than 30% of the outstanding capital stock;

 

(g)

"Bankable Feasibility Study" means a detailed report prepared by an independent mining engineering firm of good international repute demonstrating that it is commercially viable to place all or any part of the Morrison Property alone or in combination with all or any part of the Hearne Property into Commercial Production at an acceptable rate of return on capital, in such form and detail as is customarily required by institutional lenders of major financing for mining projects, and shall include a reasonable assessment of the mineable ore reserves and their amenability to metallurgical treatment, a complete description of the work, equipment and supplies required to bring such part of the Morrison Property or Hearne Property into Commercial Production, including the requirements for permitting. Environmental

 

 

 

 

 

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protection and reclamation, and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations supported by at least the following information:

(i)

a description of that part of the Morrison Property and\cr Hearne Property to be covered by the proposed mine,

(ii)

the estimated recoverable reserves of minerals and the estimated composition and content thereof,

 

(iii)

the costs and time estimate for permitting,

(iv)

the proposed procedure for development, mining and production,

(v)

results of ore amenability tests (if any),

 

(vi)

the nature and extent of the Facilities proposed to be acquired for the purposes of producing and marketing ore, concentrates or precipitates, which may include mill or beneficiation facilities for processing such ore if the size, extent and location of the mineral body makes such mill or beneficiation facilities feasible, in which event the study shall also include a preliminary design for such mill or beneficiation facilities,

(vii)

the total costs, including capital budget, which are reasonably required to permit, purchase, construct and install all structures, machinery and equipment required for the proposed mine, including a schedule of timing of such requirements,

 

(viii)

all environmental impact studies and costs and all costs of reclamation,

(ix)

the period in which it is proposed that the Morrison Property and\or the Hearne Property shall be brought to Commercial Production,

(x)

such other data and information as are reasonably necessary to substantiate the existence of an ore deposit of sufficient size and grade to justify development of a mine, taking into account all relevant business, tax and other economic considerations; and

(xi)

working capital requirements for the initial four months operations of the Property as a mine or such longer period as may be reasonably justified in the circumstances;

and which will include consideration that the milling of any Mineral Products mined from the Morrison Property will take place off-site in determining whether the Morrison Property is commercially viable on its own;

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(h)

"Bankable Feasibility Study Costs" means the costs to conduct and complete the Bankable Feasibility Study on the Morrison Property or the Hearne Property and Morrison Property combined, as the case may be, from the effective date of this Agreement to the date of the delivery of the Bankabl.: Feasibility Study to Noranda;

 

(i)

"Booker Option" means the sole and exclusive right and option granted by Noranda to Booker to earn an undivided 50% right, title and interest in and to the Morrison Property as more particularly set forth in subsection 4.1 and subject to subsection 4.2;

 

(j)

  "Booker Option Period" means the period commencing on the date hereof and terminating on the earlier of the termination of the Booker Option or the exercise of the Booker Option;

 

(k)

"Commercial Production" means the commercial exploitation of Mineral Products from the Property or any part as a mine, but does not include milling for the purpose of testing or milling by a pilot plant. Commercial Production shall be deemed to have commenced on the earliest of:

 

(i)

if a plant is located on the Property, the last day of a period of 60 consecutive days in which Mineral Products have been processed through such plant at an average rate not less than 75% of the initial design rated capacity of such plant, or

 

(ii)

if no plant is located on the Property, the first day of the month following the first period of 30 consecutive days during which Mineral Products have been shipped from the Property on a regular basis for the purpose of processing and earning revenue;

 

(1)

"Cost Share" means the respective shares of Costs and other liabilities to be borne by _, each Participant and for any particular cost or liability shall be equal to the respective Interests of each Participant as determined at the time the cost or liability is incurred;

 

(m)

"Costs" means Expenditures, Program Overruns, Production Program Costs, Production Program Overruns, Operating Costs wad Reclamation and Remediation Costs (as defined in subsection 19.9), as applicable;

 

(n)

"Encumbrances" means mortgages, charges, pledges, security interests, liens, actions, claims, demands, third party interests and equities of any nature;

 

(o)

"Expansion" means:

 

(i)

any increase of 20% or more in mining capacity from the Property,

 

(ii)

any increase of 20% or more in the capacity or throughput of any concentrating mill or processing or beneficiation facility to facilitate increased production from the Property whether from an existing mine or

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in connection with the opening and equipping of an additional mine or mines on the Property; and

 

(iii)

any development work to be ;ompleted in one calendar year (A) if such work is not required in tit: ordinary course to continue mining as contemplated in the Bankable Feasibility Study and (B) Costs therefor are reasonably estimated by the Operator to exceed $5,000,000;

 

(p)

"Expenditures" means, without duplication, all costs, expenses, obligations and liabilities of whatever kind or nature directly or indirectly incurred by Booker up to the Participation Date and by the Participants from the date of exercise of the Booker Option up to the implementation of the Production Program in connection with the exploration and development of the Property, including without limiting the generality of the foregoing, monies expended in maintaining the Property in good standing by doing and filing assessment work, in doing geophysical, geochemical and geological surveys, drilling, drifting and other underground work, assaying and metallurgical testing and engineering, in acquiring Facilities, in paying the fees, wages, salaries, travelling expenses, and fringe benefits (whether or not required by law) of all persons engaged in work with respect to and for the benefit of the Property, in paying for the food, lodging and other reasonable needs of such persons and including all costs at prevailing charge out rates for any personnel or officers of the Operator who from time to time are engaged directly or indirectly in work on the Property and an overhead fee equal to 15% of all other Expenditures but excluding any construction or development contracts, to which a 3% management fee shall apply;

 

(q)

”Facilities" means all mines, plants and facilities including without limitation, all pits, haulageways, and other underground workings, and all buildings, plants, facilities and other structures, fixtures and improvements, and all other property, whether fixed or moveable, as the same may exist at any time in, or on the Property and relating to the operation of the Property as a mine or outside the Property if for the exclusive benefit of the Property only;

 

(r)

"Hearne Property" means the 22 located mineral claims described in Schedule "B" to this Agreement together with the surface rights, mineral rights, personal property and permits associated therewith (but excluding all timber rights), and shall include any renewal thereof and any other form of successor or substitute title thereto;

 

(s)

"Interest" means the undivided beneficial percentage interest of the Participants in the Assets and shall be equal to its Interest in the Property as determined pursuant to this Agreement;

 

(t)

"Joint Venture" means either the Morrison Property Joint Venture or the Aggregate Property Joint Venture, as the case may be, which will be created between Noranda and Booker following the exercise of the Booker Option and subject to exercise of the Noranda Option;

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(u)

"KCC Agreement" means that agreement dated July 4, 1995 between Booker and KCC 167 Holdings Ltd. ("KCC") with respect to the Copper 100 and Copper 200 located mineral claims forming part of the Hearne Property under which a 3% net smelter return royalty is payable l:)y Booker to Spence, subject to a total 2% buy-back right for $1,000,000, a true and complete copy of which is attached as Schedule "D" hereto;

 

(v)

"Management Conunittef:" means a committee formed pursuant to Section 17;

 

(w)

"Mineral Products" means minerals mined within the area which comprises the Property, to which has been applied the least number of treatments or processes necessary to render the minerals into a substance or state for which there is a commercially significant market, either within or outside North America, of arm's length sales or purchases between unrelated parties;

 

(x)

"Morrison Property" means the 32 located mineral claims described in Schedule "A" to this Agreement together with the surface rights, mineral rights, personal property and permits associated therewith (but excluding all timber rights), and shall include any renewal thereof and any other form of successor or substitute title thereto;

 

(y)

"Morrison Property Joint Venture" means a joint venture formed pursuant to the terms of this Agreement between Noranda and Booker with respect to the Morrison Property in the event Noranda elects to create such a joint venture pursuant to paragraph 9.1(a) of this Agreement;

 

(z)

"Noranda Option" means the option granted by Booker to Noranda under subsection 11.4 of this_ Agreement to increase Noranda's initial Interest in the Aggregate Property Joint Venture to 50%;

 

(aa)

"Operating Costs" means, for any period after commencement of Commercial Production, all costs, expenses, obligations, liabilities and charges of whatsoever kind or nature actually incurred or chargeable, pursuant to an approved Operating Plan in connection with the operation of the Property as a mine during such period, which costs, expenses, obligations, liabilities and charges include, without duplication and without limiting the generality of the foregoing, the following:

 

(i)

all costs of or related to the mining of ores or other products and the operation of the Facilities and all costs of or related to marketing of Mineral Products including transportation, commissions and/or discounts,

 

(ii)

all costs of maintaining in good standing or renewing from time to time the Property and Other Tenements or any interest therein including payment of all government royalties and taxes of any nature whatsoever in connection therewith, other than income taxes of the parties,

 

(iii)

such amount of cash for working capital as, in the opinion of the Operator, is required for the operation of the Property as a mine,

(i)

 

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(iv)

all costs of or related to operating employee facilities, including housing,

 

(v)

all duties, charges, levies, royalties, taxes (excluding taxes levied on the in:ome of the parties) and other payments imposed by any government or municipality or department or agency thereof upon or in connection with operating the Property as a mine,

 

(vi)

a free made by the Operator in accordance with subsection 13.1(0 of this Agreement,

 

(vii)

fees, wages, salaries, travelling expenses, fringe benefits and severance costs (whether or not required by law) of all persons directly engaged in respect of and for the benefit of the property and all costs involved in paying for the food, lodging and other reasonable needs of such persons,

 

(viii)

all costs of consulting, legal, accounting, insurance and other services,

 

(ix)

all exploration expenditures incurred after commencement of Commercial Production,

 

(x)

all capital costs of operating the Property as a mine including all costs of construction, equipment and mine development including maintenance, repairs and replacements, and any capital expenditures relating to an improvement, expansion, modernization or replacement of the Facilities,

 

(xi)

all costs for pollution control, reclamation costs and any other related costs incurred or to be incurred in connection with the operation of the Property as a mine,

 

(xii)

any costs or expenses incurred or to be incurred relating to the termination of the operation of the Property as a mine,

 

(xiii)

uninsured losses on the Facilities,

 

and except where specific provision is made otherwise, all Operating Costs shall be determined in accordance with generally accepted accounting principles applied consistently from year to year but such costs shall not include any amount in respect of amortization of Costs, depletion or depreciation;

 

(bb)

"Operating Plan" means a plan presented by the Operator pursuant to subsection 19.2;

 

(cc)

"operating the Property as a mine" or "operation of the Property as a mine" means any or all of the mining, milling, leaching, smelting, and refining of ores, minerals, metals or concentrates derived from the Property;

 

(dd)

"Operating Year" means the period described in subsection 19.1:

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(ee)

"Operator" means the party acting as operator pursuant to this Agreement;

 

(ff)

"Other Tenements" means all surface rights of and to any lands within or outside the Property including surface rights held in fee or under lease, licence, easement, right of way or other rights of any kind (and all renewals, extensions and amendments thereof or substitutions therefor) acquired by or on behalf of the parties with respect to the Property but excluding timber rights;

 

(gg)

"Participant" means, after the Participation Date, Noranda or Booker, as the context requires, and its successors and permitted assigns and "Participants" means collectively Noranda and Booker, and their successors and permitted assigns;

 

(hh)

"Participation Date" means that date on which Booker exercises the Booker Option and Noranda elects to form a Joint Venture;

 

(ii)

"Prime Rate" means, for any month, the annual rate of interest charged by the main branch in Vancouver, British Columbia, of The Canadian Imperial Bank of Commerce as the reference rate of interest for determining Canadian dollar loans in Canada at noon on its first business day in that month;

 

"Production Program" means as the context requires:

 

(i)

any production program and budget to carry out work and incur Production Program Costs contemplating achievement of Commercial Production pursuant to a Bankable Feasibility Study; and

 

(ii)

a document wherein there is specified in detail all work proposed to be carried out during such program, the estimated Production Program Costs to be incurred and the area of the Property on which such work is to be undertaken;

 

(kk)

"Production Program Costs" means all cash, outlays and expenses, obligations and liabilities of whatever kind or nature spent or incurred directly or indirectly by the Participants in connection with a Production Program in order to equip the Property for and commence Commercial Production including working capital required for the initial four months of operation of the Property as a mine and including the fee charged by the Operator under subsection 13. 1(f);

 

(11)

"Production Program Overruns" means all Production Program Costs which exceed those estimated under a Production Program;

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(mm)

"Program" means as the context requires:

 

(i)

any program and budget to carry out work and incur Expenditures on the Property;

 

(ii)

a document wherein there is specified in reasonable detail an outline of any and all research, prospecting and exploration and development work proposed to be carried out during such Program, the estimated Expenditures to be incurred in carrying out such work and the area of the Property on which such work is to be undertaken; and

 

(iii)

the preparation of any Bankable Feasibility Study and the preparation of any Production Program;

 

(nn)

"Program Overruns" means all Expenditures which exceed those estimated under a Program;

 

(oo)

"Property" means either:

 

(i)

the Morrison Property if Noranda elects to form the Morrison Property Joint Venture; or

 

(ii)

the Aggregate Property if Noranda elects to form the Aggregate Property Joint Venture;

 

(pp)

"Royalty Holder" means a party which holds a Royalty Interest under this Agreement;

 

(qq)

“Royalty Interest" means the three (3%) percent net smelter returns royalty which may be payable to a party in accordance with the terms of this Agreement, calculated and paid in accordance with Schedule "G" hereto;

 

(rr)

”Spence Agreement" means that agreement dated December 5, 1992 between Booker and Lome Spence ("Spence") as amended by an agreement dated January 28, 1999 with respect to the Hearne 1 through Hearne 13 located mineral claims inclusive and the BB1 through BB4 located mineral claims inclusive forming part of the Hearne Property under which, in order to maintain such agreement in good standing, Booker must issue a total of 200.000 shares to Spence, a true and complete copy of which is attached as Schedule "E" hereto;

 

(ss)

"Supplies" means all tangible personal property of a non-capital nature (other than Mineral Products or Facilities) acquired or held by the parties with respect to the Property;

 

(tt)

"Underlying Agreements" means, collectively, the Spence Agreement, the Winbourne Agreement and the KCC Agreement; and

 

 

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(uu)

"Winbourne Agreement" means that agreement dated June 15, 1995 between Booker and Winbourne International Capital Management Ltd. ("Winbourne") with respect to the CUB 100, CUB 200 and CUB 300 located mineral claims forming part of the Hearne Property under which a 3% net smelter return royalty is payable by Booker to Winboume, subject to a total 2% buy-back right for $1,000,000, a true and complete copy of which is attached as Schedule "F" hereto.

 

2.

REPRESENTATIONS AND WARRANTIES

 

2.1

Each of the parties represents and warrants to each other that:

 

(a)

it is a company duly incorporated, organized and validly subsisting and in good standing under the laws of its incorporating jurisdiction and that it is qualified to do business in those jurisdictions where it is necessary to fulfil its obligations under this Agreement;

 

(b)

it has full power and authority to carry on its business and to enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement;

 

(c)

neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by, any agreement to which it is a party;

 

(d)

the execution and delivery of this Agreement and the agreements contemplated hereby have been duly authorized by all necessary corporate action on its part and will not violate or result in the breach of the laws of any jurisdiction applicable or pertaining thereto or of its constating documents;

 

(e)

it is unaware of any material facts or circumstances which have not been disclosed in this Agreement, which should be disclosed to the other parties in order to prevent the statements in this Section 2 from being materially misleading; and

 

(f)

except for the acceptance of this Agreement by the Vancouver Stock Exchange on the part of Booker, there are no consents, approvals or conditions precedent to its performance under this Agreement which have not been obtained.

 

2.2

Noranda hereby represents and warrants to Booker that:

 

(a)

Noranda has the exclusive right to enter into this Agreement and all necessary authority to dispose of an interest in and to the Morrison Property in accordance with the terms of this Agreement;

 

(b)

no person, firm or corporation has any proprietary or possessory interest in the Morrison Property other than Noranda and no person is entitled to any royalty or other

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payment in the nature of rent or royalty on any minerals, ores, metals or concentrates, or any such other products removed from the Morrison Property;

 

(c)

there are no actual, pending or threatened actions, suits, claims or proceedings regarding the Morrison Property or any basis therefor of which it is aware;

 

(d)

the Morrison Property is legally and beneficially owned by Noranda and consists of 32 located mineral claims located in the Omineca Mining Division of the Babine District, British Columbia, is accurately described in Schedule "A" to this Agreement and is free and clear of all Encumbrances and third party interests whatsoever;

 

(e)

the located mineral claims comprising the Morrison Property have been duly and validly located and recorded pursuant to the laws of British Columbia and are in good standing by the proper payments of all fees, taxes and rentals in accordance with the requirements of the laws of British Columbia and the Regulations thereto, and the performance of all other actions necessary in that regard until the dates set out on Schedule "A";

 

(f)

to the best of Noranda's knowledge, information and belief:

 

(i)

conditions on and relating to the Morrison Property and operations thereon are in compliance with all applicable laws, regulations and orders relating to environmental matters including, without limitation, waste disposal and storage, and

 

(ii)

there are no outstanding orders or directions relating to environmental matters requiring any work, repairs, construction or capital expenditures with respect to the Morrison Property and the conduct of operations related thereto, none of them has received any notice of the same and none is aware of any basis on which any such order or direction could be made, and

 

(iii)

there is presently no restoration or reclamation work required to be done on or with respect to the Morrison Property other than the possibility of minor work with respect to certain exploration trenches and roads of which Booker is aware; and

 

(g)

Noranda is not aware of any material fact or circumstance which has not been disclosed to Booker in respect to the Morrison Property which should be disclosed in order to prevent the representations and warranties in this subsection from being misleading or which may be material to Booker's decision to enter into this Agreement and acquire an interest in the Morrison Property.

 

2.3

Booker hereby represents and warrants to Noranda that:

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(a)

Booker has the exclusive right to enter into this Agreement and all necessary authority to dispose of an interest in and to the Hearne Property in accordance with the terms of this Agreement;

(b)

no person, firm or corporation has any proprietary or possessory interest in the Hearne Property other than Booker and the parties to the Underlying Agreements and, except for the parties to the Underlying Agreements, no person is entitled to any royalty or other payment in the nature of rent or royalty on any minerals, ores, metals or concentrates, or any such other products removed from the Hearne Property except as set out in the Underlying Agreements;

 

(c)

there are no actual, pending or threatened actions, suits, claims or proceedings regarding the Hearne Property or any basis therefor of which it is aware;

 

(d)

the Hearne Property is 100% legally and beneficially owned by Booker and consists of 22 located mineral claims located in the Omineca Mining Division of the Babine District, British Columbia, is accurately described in Schedule "A" to this Agreement and is free and clear of all Encumbrances and third party interests whatsoever except for the parties to the Underlying Agreements;

 

(e)

the located mineral claims comprising the Hearne Property have been duly and validly located and recorded pursuant to the laws of British Columbia and are in good standing by the proper payments of all fees, taxes and rentals in accordance with the requirements of the laws of British Columbia and the Regulations thereto, and the performance of all other actions necessary in that regard until the dates set out on Schedule "B";

 

(f)

each of the Underlying Agreements has been accepted for filing by the Vancouver Stock Exchange on behalf of Booker which is a party thereto and is in good standing and is in full force and effect and each party thereto has fully and timely performed each and every obligation of such party as presently set forth therein, no defaults under any of such agreements are alleged and Booker does not know of any reason why such default may be alleged;

 

(g)

attached as Schedule "H" hereto is a true copy of the written acknowledgement and agreement of Spence that the Morrison Property does not form part of the Spence Agreement claims pursuant to Section 15 of the Spence Agreement and that Spence. or the underlying optionors to the Spence Agreement in no way acquire any right or interest in the Morrison Property as a result of this Agreement and the grant of the Booker Option;

 

(h)

to the best of Booker's knowledge, information and belief:

 

(i)

conditions on and relating to the Hearne Property and operations thereon are in compliance with all applicable laws, regulations and orders relating

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to environmental matters including, without limitation, waste disposal and storage, and

 

(ii)

there are no outstanding orders or directions relating to environmental matters requiring any work, repairs, construction or capital expenditures with respect to the Hearne Property and the conduct of operations related thereto, none of them has received any notice of the same and none is aware of any basis on which any such order or direction could be made, and

 

(iii)

there is presently no restoration or reclamation work required to be done on or with respect to the Hearne Property; and

 

(i)

Booker is not aware of any material fact or circumstance which has not been disclosed to Noranda in respect to the Hearne Property which should be disclosed in order to prevent the representations and warranties in this subsection from being misleading or which may be material to Noranda's decision to enter into this Agreement and acquire an interest in the Hearne Property.

 

2.4

The representations and warranties hereinbefore set out are conditions on which the parties have relied in entering into this Agreement and shall survive the exercise of the Booker Option and the Noranda Option and each of the parties will indemnify and save the other harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation, warranty, covenant, agreement or condition made by them and contained in this Agreement.

 

3.

COVENANTS

 

3.1

During the Booker Option Period Noranda hereby covenants and agrees with Booker that Noranda:

 

(a)

shall not do or permit or suffer to be done any act or thing which would or might in any way adversely affect the rights of Booker in respect of the Booker Option so long as Booker is not in default of the terms of this Agreement;

 

(b)

will make available to Booker and its representatives all information in its possession or control relating to work done on or with respect to the Morrison Property and will permit Booker and its representatives at their own expense to take abstracts therefrom and make copies thereof;

 

(c)

shall promptly provide Booker with any and all notices and correspondence from government agencies in respect of the Morrison Property;

 

(d)

shall transfer recorded title to the Morrison Property to Booker to be held in trust on behalf of Noranda and Booker, it being understood that such transfer is for administrative convenience only and that Booker will only acquire an interest in the Morrison Property by exercising the Booker Option:

(a)

 

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(e)

shall immediately notify Booker of any claims, actions, demands of a civil, legal or juridical nature, filed against Noranda in respect of the Morrison Property.

3.2

During the Booker Option Period Booker hereby covenants and agrees with Noranda that Booker:

(a)

shall not do or permit or suffer to be done any act or thing which would or might in any way adversely affect the rights of Noranda hereunder in respect of the Hearne Property so long as Noranda is not in default of the terms of this Agreement;

 

(b)

will make available to Noranda and its representatives all information in its possession or control relating to work done on or with respect to the Hearne Property and will permit Noranda and its representatives at its own expense to take abstracts therefrom and make copies thereof;

(c)

shall promptly provide Noranda with any and all notices and correspondence from government agencies in respect of the Hearne Property;

 

(d)

shall hold title to the Hearne Property in trust on behalf of Noranda and Booker, it being understood that such transfer is for administrative convenience only and that Noranda will only acquire an interest in the Hearne Property in accordance with the terms of this Agreement;

(e)

shall immediately notify Noranda of any claims, actions, demands of a civil, legal or juridical nature, filed against Booker in respect of the Hearne Property.

 

4.

BOOKER OPTION

4.1

For good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by Noranda) and the covenants and agreements of Booker set out in this Agreement, Noranda hereby grants to Booker the sole and exclusive right and option to acquire an undivided 50% right, title and interest in and to the Morrison Property subject to the terms of this Agreement.

 

4.2

In order to maintain in force the Booker Option granted to Booker and to exercise the Booker Option and subject to Sections 37 and 38, Booker must:

(a)

incur at least $250,000 in Expenditures on the Morrison Property on or before October 31, 1999;

(b)

incur an Aggregate of $600,000 in Expenditures on the Morrison Property on or before October 31, 2000;

(c)

incur an Aggregate of $1,000,000 in Expenditures on the Morrison Property on or before October 31, 2001;

(a)

 

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(d)

incur an Aggregate of $1,700,000 in Expenditures on the Morrison Property on or before October 31, 2002;

(e)

incur an Aggregate of $2,600,000 in Expenditures on the Morrison Property on or before October 31, 2003;

(f)

complete and deliver to Noranda on or before October 31, 2003 a Bankable Feasibility Study together with all other information respecting the Hearne Property in Booker's possession or control and not previously delivered by Booker to Noranda;

 

provided however that if Booker fails to complete and deliver to Noranda a Bankable Feasibility Study prior to October 31, 2003 then, provided that Booker has on that date incurred at least an aggregate of $2,600,000 in Expenditures on the Morrison Property in accordance with paragraphs 4.2(a) to (e) Noranda may in its sole and absolute discretion, not to be unreasonably withheld, upon receipt of the written request of Booker to do so delivered to Noranda on or before October 31, 2003 together with the written notice described in Section 4.5, extend the time for completion and delivery of the Bankable Feasibility Study under paragraph 4.2(f) for a maximum period of two years from the date of receipt of such written request. If the Bankable Feasibility Study determines that the Hearne Property is commercially viable on its own, Booker is not obliged to deliver the Bankable Feasibility Study to Noranda nor to request a combination of the Morrison Property and the Hearne Property pursuant to paragraph 9.2(b), and in that event the Booker Option will terminate and subsection 7.1 will apply.

4.3

The Booker Option will terminate in any of the following events:

 

(a)

subject to Sections 37 and 38, if any Expenditure required to be made by Booker to maintain the Booker Option in good standing is not incurred on the date set out in subsection 4.2 or if the Bankable Feasibility Study is not delivered within the time required by subsection 4.2; or

(b)

upon Booker giving notice to Noranda that it has abandoned the Booker Option herein.

 

4.4

Any excess in the amount of incremental Expenditures required to be incurred by Booker in the Booker Option Period to maintain the Booker Option under subsection 4.2 will be applied as a credit against Expenditures which Booker elects to incur during any subsequent period of time under subsection 4.2.

4.5

A written notice by Booker to Noranda accompanied by:

 

(a)

a statement of Booker to the effect that Booker has incurred the amount of Expenditures for the period specified in subsection 4.2; and

 

(b)

an itemized statement of such Expenditures;

 

shall be conclusive evidence of the making thereof unless Noranda delivers to Booker a notice in writing questioning the accuracy of such statement within 30 days of receipt. Upon delivery by

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Noranda of a notice questioning the accuracy of such statement, the matter shall be referred to the auditor of Booker for final determination. If Booker's auditor determines that Booker has not spent the required Expenditures within the time specified in subsection 4.2, Booker shall not lose any of its rights hereunder and the Booker Option will not terminate if Booker pays to Noranda within 30 days of receipt of the auditor's determination 100% of the deficiency in such Expenditures. The written notice and itemized statement of Expenditures will be delivered to Noranda by Booker not later than three months from the expiration of the period set out in subsection 4.2.

5.

RIGHT OF ENTRY AND OPTION ONLY

 

5.1

During the Booker Option Period, Booker, its employees, agents and independent contractors shall have the sole and exclusive right and option to:

 

(a)

enter the Morrison Property;

 

(b)

have exclusive and quiet possession thereof subject to the right of Noranda, or its duly authorized representatives, at their own risk and expense, to have access to the Morrison Property at all reasonable times for the purpose of inspecting work on the Morrison Property;

 

(c)

do such prospecting, exploration, development or other mining work thereon and thereunder as Booker, with the consent of Noranda, may deem advisable;

 

(d)

bring and erect upon the Morrison Property such equipment as Booker, with the consent of Noranda, deems advisable; and

 

(e)

remove from the Morrison Property Mineral Products for the purpose of testing only.

 

5.2

The Booker Option is an option only and nothing in this Agreement shall be construed as obligating Booker to do any acts or make any payments hereunder before the Participation Date, and any acts or payments made by Booker hereunder shall not be construed as obligating Booker to do any further act or make any further payment, except that Booker shall be liable to perform or pay for the performance of any reclamation work required as a result of activities carried out on the Morrison Property during the Booker Option Period.

 

6.

COVENANTS OF BOOKER

 

6.1

During the Booker Option Period, Booker will:

 

(a)

keep the Morrison Property free and clear of all Encumbrances arising from its operations hereunder (except liens for taxes, which are the responsibility of Noranda, inchoate liens or liens contested in good faith by Booker) and in good standing with respect to the doing and filing of all necessary assessment work at least 20 business days before such filing is required and provide evidence in writing to Noranda of such filing at least 10 business days before such filing is required and proceed with all diligence to contest or discharge any lien that is filed;

- 17 -

(b)

permit Noranda, or its representatives duly authorized by Noranda in writing, at their own risk and expense, access to the Morrison Property and the Hearne Property at all reasonable times and to Booker's offices in order to review all records prepared by or on behalf of Booker in connection with work done on or with respect to the Morris )n Property and the Hearne Property and Noranda will hold Booker blameless in respE;ct of any loss or injury resulting to representatives of Noranda during such visits;

(c)

promptly furnish Noranda on or before March 31 of each year with an annual report with respect to the work carried out by Booker on or with respect to the Morrison Property and the Hearne Property during the preceding calendar year and results and interpretations obtained or received in connection with such work, together with monthly reports and information with respect to work done on the Morrison Property in the preceding month during periods of active field work, such monthly reports to be delivered within fifteen (15) days of the end of each month and with any significant results to be reported forthwith;

(d)

conduct all work on or with respect to the Morrison Property and the Hearne Property in a careful and minerlike manner and in compliance with all applicable federal, provincial and local laws, rules, orders and regulations, and indemnify and save Noranda harmless from any and all claims, suits or actions including, without limitation, with respect to environmental problems, made or brought against it as a result of work done by Booker on or with respect to the Morrison Property;

(e)

obtain and maintain, and ensure that any of its contractors and agents obtain and maintain, at its or their own expense, the following:

 

(i)

statutory motor vehicle liability insurance covering their owned and/or leased vehicles with minimum limits of $2,000,000 inclusive per occurrence;

 

(ii)

"all risks" insurance covering their owned and/or leased equipment and temporary structures and Booker and its permitted contractors shall arrange for such insurance policy to contain a waiver of subrogation (by all insurers) against Noranda;

 

(iii)

commercial general liability insurance, including Noranda as a named insured, covering bodily injury, property damage and sudden and accidental pollution liability, such policy or policies not to contain any "XCU" exclusion provision, with minimum limits of $10,000,000 inclusive per occurrence, including but not limited to the following:

 

A.

contingent liability with respect to contractors and suppliers;

B.

blanket written contractors coverage;

C.

non-owned automobile coverage;

A.

 

- 18 -

 

 

D.

personal injury coverage;

E.

occurrence property damage coverage;

 

F.

employer's liability coverage;

 

G.

cross liability clause; and

 

H.

liability arising out of unlicensed equipment.

 

and all coverages in this section are to be primary and any coverages of Noranda are not to be considered contributory and Booker shall provide to Noranda to its satisfaction, certificates of insurance for all coverages noted in this section showing Booker and Noranda as insureds where required and showing required waivers of subrogation and coverages. Such certificates will either show all Booker's contractors as insureds or Booker will obtain certificates for the required insurance from its contractors and provide same to Noranda prior to the commencing of the contractor's services. All certificates will provide that all insurers shall give Booker ninety (90) days prior written notice of any cancellation, non-renewal, or amendment affecting any of the required coverage, including any reduction of insurance below the required limits;

 

(f)

record all work performed by Booker with respect to the Morrison Property as required for assessment purposes with the appropriate government offices;

 

(g)

indemnify and save Noranda harmless of and from any and all costs, liabilities and obligations incurred by Noranda as a result of the actions of Booker on or in connection with the Morrison Property or the Hearne Property;

 

(h)

continue to be solely responsible for all obligations arising pursuant to the Underlying Agreements; and

 

(i)

pay annual rentals, obtain all exploration and/or environmental bonds and otherwise maintain the Morrison Property and the Hearne Property in good standing.

 

7.

OBLIGATIONS OF BOOKER AFTER TERMINATION

 

7.1

In the event of termination of the Booker Option for any reason other than through the exercise thereof, Booker will have earned no interest or royalty right in the Morrison Property whatsoever and will:

(a)

immediately retransfer title to the Morrison Property to Noranda and leave the Morrison Property:

 

(i)

in good standing with respect to annual assessment for not less than 12 months from the date of termination;

-19-

 

 

(ii)

free and clear of all Encumbrances arising from its operations hereunder; and

 

(iii)

in a safe and orderly condition with respect to the work carried out by Booker and in compliance with all reclamation and remediation requirements of applicable laws and reguhtions;

 

(b)

deliver to Noranda within 60 days of termination a comprehensive report on all work carried out by Booker on the Morrison Property (limited to factual matters only) together with all information in Booker's possession or control with respect to such work including copies of all maps, drill logs, assay results and other technical data compiled by Booker with respect to the Morrison Property; and

 

(c)

remove from the Morrison Property, within 60 days of the effective date of termination, all Facilities erected, installed or brought upon the Morrison Property by or at the instance of Booker.

 

8.

EXERCISE OF BOOKER OPTION

 

8.1

Once Booker has satisfied the requirements of subsection 4.2 and has delivered a notice in writing pursuant to subsection 4.5, Booker will, subject to the results of any audit pursuant to subsection 4.5, be deemed to have exercised the Booker Option and to have acquired an undivided 50% right, title and interest in and to the Morrison Property for its own use absolutely, subject to the terms of this. Agreement.

 

9.

ELECTIONS BY NORANDA

 

9.1

If the Bankable Feasibility Study determines that the Morrison Property is commercially viable on its own and is not required to be combined with the Hearne Property in order to be commercially viable, whether or not the Hearne Property is commercially viable on its own, Noranda will have the right, exercisable within six months from the date of exercise of the Booker Option to either:

 

(a)

create the Morrison Property Joint Venture; or

 

(b)

assign its rights to this Agreement, including its right to elect under this subsection 9.1, to a third party pursuant to Section 24; or

 

(c)

to become a Royalty Holder in respect of the Morrison Property.

 

9.2

If the Bankable Feasibility Study determines that:

 

(a)

the Morrison Property is not commercially viable as a stand alone property but that it is commercially viable only if combined with the Hearne Property; or

- 20 -

 

 

(b)

the _. Morrison Property is commercially viable as a stand alone property and that the combination of the Hearne Property and the Morrison Property is also commercially viable, regardless of whether the Hearne Property is viable as a stand alone property, and Booker elects in writing upon its delivery of the Bankable Feasibility Study to Noranda that it wishes to combine the Morrison Property and the Hearne Property;

 

then Noranda will have the option exercisable within six months of the exercise of the Booker Option by notice in writing to Booker to elect;

 

(c)

to create an Aggregate Property Joint Venture; or

 

(d)

assign its rights to this Agreement, including its right to elect under this subsection 9.2, to a third party pursuant to Section 24; or

 

(e)

to become a Royalty Holder in respect of the Morrison Property; or

 

(f)

in the case of paragraph 9.2(b), to refuse to combine the Morrison Property and the Hearne Property in which event Noranda will also deliver its election pursuant to subsection 9.1.

 

9.3

If Noranda elects to form an Aggregate Property Joint Venture pursuant to paragraph 9.2(c) then, within 30 days of Booker's receipt of such election by Noranda, the parties will appoint an independent third party to calculate the net present value of each of the Morrison Property and the Hearne Property using the information contained in the Bankable Feasibility Study together with such assumptions as to precious and base metal prices and discount rates as is mutually acceptable to Booker and Noranda and, failing agreement between them on such prices, as is acceptable to such independent third party (the "Morrison NPV" and the "Hearne NPV"). Upon delivery of the Morrison NPV and the Hearne NPV to Booker and Noranda:

 

(a)

in the case where the parties are acting pursuant to paragraph 9.2(a), Noranda will have three months to confirm in writing to Booker that Noranda is continuing with its election to form an Aggregate Property Joint Venture pursuant to paragraph 9.2(c), or whether Noranda is changing its election to the alternatives set out in paragraphs 9.2(d) or (e); or

 

(b)

in the case where the parties are acting pursuant to paragraph 9.2(b), Booker will have 30 days from the date of delivery of the Morrison NPV and the Hearne NPV to confirm in writing to Noranda that Booker wishes to proceed with a combination of the Morrison Property and the Hearne Property pursuant to paragraph 9.2(b) and, upon receipt by Noranda of such confirmation, Noranda will have three months to confirm in writing to Booker that Noranda is continuing with its election to form an Aggregate Property Joint Venture pursuant to paragraph 9.2(c), or whether Noranda is changing its election to the alternatives set out in paragraphs 9.2(d), (e) or (O.

 

9.4

If Noranda elects to become a Royalty Holder with respect to the Morrison Property in accordance with paragraphs 9.1(c), 9.2(e). 9.3(a) or 9.3(b) then Noranda shall have no further

 

 

-21 -

 

 

Interest in either the Morrison Property or the Booker Property except for the Royalty Interest with respect to the Morrison Property and any decision thereafter to place the Morrison Property into Commercial Production shall be at the sole discretion of Booker and Booker shall be under no obligation and nothing in this Agreement shall be construed as creating an obligation upon Booker to place the Morrison Property into Comnercial Production and if Booker commences the operation of the Morrison Property as a mine, Booker shall have the unfettered right to suspend or curtail any such operation from time to time as it in its :;tole discretion may deem advisable. Booker will have the right, exercisable at any time thereafter by notice in writing to Noranda, to purchase and, on receipt of such notice and payment therefor, Noranda will sell, up to one-half of the Royalty Interest for $1,500,000 ($500,000 for each 0.5% Royalty Interest). Booker shall be solely responsible for all prior, present and future liabilities, costs and obligations relating to the Morrison Property.

 

9.5

If, the Bankable Feasibility Study indicates, or Noranda reasonably determines based on the Bankable Feasibility Study that, it would be only marginally economic to place the Morrison Property alone or in combination with the Hearne Property into Commercial Production by reason of factors such as metals prices or market conditions for Mineral Products, governmental regulations or requirements or events of force majeure as described in section 37 of this Agreement, or the mineralization on the Morrison Property or the Hearne Property is of insufficient size or grade to be of interest to Noranda at that time, Noranda may elect by notice in writing to Booker to defer its elections under subsections 9.1 or 9.2 for up to 12 months from the date when such elections would otherwise be required to be made by paying all costs required to keep the Morrison Property and the Hearne Property in good standing during that 12 month period and Noranda may proceed to make such elections at any time within such additional 12 month period.

 

10.

ASSOCIATION OF PARTICIPANTS

 

10.1

If Noranda elects pursuant to:

 

(a)

paragraph 9.1 (a) to create the Morrison Property Joint Venture; or

 

(b)

paragraphs 9.2(c) or 9.3 to create the Aggregate Property Joint Venture;

 

then, on the Participation Date, Noranda and Booker shall associate as joint venturers for the following limited functions and purposes:

 

(c)

to further explore and, if deemed warranted as herein provided, to develop the Property and equip it for Commercial Production;

 

(d)

to operate the Property as a mine: and

 

(e)

to engage in such other activity with respect to the Property as may be considered by the parties to be necessary or desirable in connection with the foregoing.

 

10.2

After the Participation Date, all transactions, contracts, employments, purchases, operations, negotiations with third parties and any other matter or act undertaken on behalf of the Participants in connection with the. Assets shall be done, transacted, undertaken or performed in the

 

 

 

 

 

 

- 22 -

 

 

name of the Operator only, and no party shall do, transact, perform or undertake anything in the name of the other parties or in the joint names of the Participants.

 

10.3

After the Participation Date, the rights and obligations of the Participants shall be, in each case, several, and shall not be or be construed to be either joint or joint and several. Nothing contained in this Agreement shall, except to the extent specifically authorized hereunder, be deemed to constitute a Participant: a partner, an agent or legal representative of any other party. It is intended that this Agreement shall' not create the relationship of a partnership between the Participants and that no act done by any Participant pursuant to the provisions hereof shall operate to create such a relationship.

 

10.4

After the Participation Date, each Participant:

 

(a)

shall, subject to the exercise of the Noranda Option under subsection 11.4, be liable for its Cost Share of Costs and any other costs associated with the exploration, development or operation of the Property as a mine at such time as the liability is incurred by the Operator pursuant to an approved Production Program or Operating Plan;

 

(b)

shall, subject to the exercise of the Noranda Option under subsection 11.4, be liable for its Cost Share of any debts, liabilities or obligations arising from operations hereunder; and

 

(c)

in proportion to its Interest, shall indemnify and hold harmless the other Participants and the Operator from any claim of or liability to any third person asserted upon the ground that any action taken under this Agreement has resulted in or will result in any loss or damage to such third person, to the extent, but only to the extent that such claim or liability is paid by such other Participant or the Operator pursuant to an order of the Courts or an agreement in writing of both Participants.

 

10.5

Each Participant shall devote such time as may be required to fulfil any obligation assumed by it hereunder but, except for the parties' respective obligations hereunder in relation to the Property:

 

(a)

each Participant shall be at liberty to engage in any other business or activity outside the joint venture constituted hereby, including the ownership and operation of any other mining permits, licenses, claims and leases,

 

(b)

neither Participant shall be under any fiduciary or other obligation to the other Participant which shall prevent or impede such Participant from participating in, or enjoying the benefits of, competing endeavours of a nature similar to the business or activity undertaken by the Participants hereunder; and

 

(c)

the legal doctrines of "corporate opportunity" or "business opportunity" sometimes applied to persons occupying a relationship similar to that of the Participants shall not apply with respect to participation by either Participant in any business activity or

- 23 -

 

 

endeavour outside the joint venture constituted hereby and, without implied limitation, a Participant shall not be accountable to the other for participation in any such business activity or endeavour outside the joint venture constituted hereby which is in direct competition with the business or activity undertaken by the joint venture except as aforesaid.

 

11.

INTEREST OF PARTICIPANTS AND DEEMED EXPENDITURES

 

11.1

The Participants shall have such Interest as is determined from time to time in accordance with subsections 11.3, 11.4, 11.5 and 11.6.

 

11.2

If the Participants form the Morrison Property Joint Venture, then each of the Participants will be deemed to have an initial 50% Interest in the Morrison Property and to have each incurred an amount of Expenditures which is equal to the total amount of Expenditures incurred by Booker on the Morrison Property up to the Participation Date.

 

11.3

If the Participants form the Aggregate Property Joint Venture, then each Participant's initial Interest in the Aggregate Property Joint Venture will be calculated as follows:

Booker's Interest =	NPV Hearne + 50% NPV Morrison	x 100
	NPV Hearne + NPV Morrison
Noranda's Interest =	50% NPV Morrison	x 100
	NPV Hearne + NPV Morrison

11.4

Noranda will have the option, exercisable by notice in writing delivered to Booker within 60 days following the formation of the Aggregate Property Joint Venture to increase its initial Interest in the Aggregate Property Joint Venture to 50%, including a 50% Interest in the Hearne Property. If Noranda elects to exercise the Noranda Option, Noranda will elect at the same time to either:

 

(a)

contribute Booker's share of Costs up to a maximum amount equal to 50% of the NPV Hearne; or

 

(b)

contribute 100% of Costs up to a maximum amount equal to the NPV Hearne;

 

provided that if the total Costs required to achieve Commercial Production on the Property in accordance with the terms of the Bankable Feasibility Study is less than the NPV Hearne, then Noranda shall not be responsible for any further contributions to Costs on behalf of Booker, or for any further sole contributions to Costs, as the case may be, nor will Noranda be liable for any other payment in respect of the Noranda Option. Subject to subsection 11.6, if Noranda elects to exercise the Noranda Option, Noranda and Booker will each be deemed to hold a 50% Interest in the Property.

 

11.5

If Noranda elects to form the Aggregate Property Joint Venture pursuant to paragraph 9.2(c) then upon formation of the Aggregate Property Joint Venture and subject to

adjustment in the event Noranda exercises the Noranda Option, each of the Participants will be deemed to have incurred an amount of Expenditures in respect of the Aggregate Property Joint Venture as follows:

 

Booker - $(Booker Interest x Bankable Feasibility Study Costs)

Noranda - $(Noranda Interest x Bankable Feasibility Study Costs)

 

If, after exercising the Noranda Option, Noranda fails to make any required contributions under subsection 11.4, then, unless such failure is because the total Costs required to achieve Commercial Production on the Property in accordance with the terms of the Bankable Feasibility Study is less than the NPV Hearne, Noranda shall be deemed not to have increased its Interest pursuant to the Noranda Option, Noranda's Interest will be reduced to its initial Interest calculated pursuant to subsection 11.3 and any and all contributions to Costs so made by Noranda to that date pursuant to subsection 11.4 shall be credited to Noranda's required contributions to Costs in respect of its Interest.

 

11.6

For the purposes of subsections 15.8, 16.4 and 16.5, the percentage level of each Participant's Interest shall be determined from time to time as being equal to the product obtained by multiplying 100% by a fraction of which the numerator is the amount of such Participant's contributions or deemed contributions to Costs and the denominator of which is the amount of all contributions or deemed contributions to Costs by all Participants.

 

11.7

The percentage level of the respective Interests of the Participants shall not change so long as each Participant contributes its respective Cost Share of every Program and any Production Program as set out in Sections 15 and 16. At any time and from time to time after a Participant has first elected or is deemed to have elected not to contribute its Cost Share to a Program or Production Program or loses its right to contribute to Programs or any Production Program, the percentage level of such Participant's Interest shall be adjusted in accordance with the formula set out in subsection 11.6. If as a result of adjustment pursuant to subsection 11.6 a Participant's Interest is reduced to 10% or less, the Interest of such Participant shall be deemed to be transferred to the other Participant and thereafter the Participant whose Interest has been transferred shall be deemed not to be a Participant but shall be entitled to receive, and the remaining Participant shall pay to it a Royalty Interest determined and payable in accordance with the provisions of Schedule "G" hereto. The remaining Participant shall not transfer any of its interest in the Property without first causing the transferee to assume its proportionate share of the Net Smelter Returns Royalty.

 

11.8

If the Interest of either Participant is converted to a Royalty Interest pursuant to subsection 11.7:

 

(a)

any decision thereafter to place the Property into Commercial Production shall be at the sole discretion of the remaining Participant and the remaining Participant shall be under no obligation and nothing in this Agreement shall be construed as creating an obligation upon the remaining Participant to place the Property into Commercial Production and if the remaining Participant commences the operation of the Property as a mine, the remaining Participant shall have the unfettered right to suspend or

curtail any such operation from time to time as they in their sole discretion may deem advisable;

(b)

the Royalty Holder shall remain liable for its Cost Share of all amounts chargeable to it as of the date of such conversion as well as all liabilities and obligations relating to the Assets in an amount equal to its Interest at the time the events giving rise to such liabilities and obligations occurred including, without limitation, Reclamation and Remediation Costs under subsection 19.9. If the remaining Participant requires it to do so, the Royalty Holder shall secure to the reasonable satisfaction of the remaining Participant the Royalty Holder's Cost Share of the Reclamation and Remediation Costs as may be required, including the right of the remaining Participant to set off such amounts against any Net Smelter Returns Royalty which may otherwise be subsequently due to the Royalty Holder, such Cost Share to be determined on the basis of the Interest of the Royalty Holder at the time the events giving rise to such liabilities occurs; and

(c)

the remaining Participant may elect at any time by notice in writing to the Royalty Holder to purchase up to one half of the Royalty Interest for $1,500,000 ($500,000 for 0.5% Royalty Interest) and, on receipt of such notice and payment therefor, the Royalty Holder will sell such portion of its Royalty Interest to the remaining Participant for cancellation on such terms.

 

12.

OPERATOR

12.1

Noranda will be entitled to act as the Operator under this Agreement after exercise of the Booker Option so long as Noranda holds or represents at least a 50% Interest. The party acting as Operator may resign as Operator at any time by giving 120 days prior written notice to the other Participants and within such 120 day period the Management Committee shall appoint another party who covenants to act as the Operator and upon the terms set out in this Agreement.

 

12.2

The Operator will hold title to the Property in trust for the Participants. Title to any of the other Assets which is held by the Operator, or a Participant, shall be held by the Operator, or such Participant in trust for the Participants, subject to the terms of this Agreement. Any party may require any other party to transfer any of the Assets so held to a mutually acceptable escrow holder on terms to be agreed upon.

12.3

After the Participation Date, either Participant holding for its own account an Interest greater than 50% may, if not the Operator, terminate the appointment of the Operator at any time upon not less than 60 days' prior notice in writing to the Operator.

 

12.4

If following the Participation Date the Operator fails to perform in a manner consistent with its powers and duties under this Agreement then any Participant may give to the Operator written notice setting forth particulars of the Operator's default. The Operator shall within 30 days of receipt of such notice either dispute the occurrence of such default, or commence to remedy the default within the time limit aforesaid (and thereafter, in the latter case, shall proceed continuously and diligently to complete all required remedial action). The Operator may take action to remedy an alleged default

-26-

 

 

without prejudice to its right to dispute the occurrence of the default and to claim recovery of expenses incurred in remedial work not occasioned by its default.

 

12.5

If after the Participation Date any of the following occur, the Operator will be deemed to have offered to resign, which offer shall be accepted by the other Participants, if at all, within 90 days following such deemed offer:

(a)

if an attachment in respect to any material liability of the Operator is made on the Property which is not related to the business of the Joint Venture;

 

(b)

if the Operator:

(i)

admits in writing its inability to pay its debts as they become due other than indebtedness ("non-recourse financing") for money borrowed or guaranteed where the recourse of the holder thereof is restricted to realization upon specific assets none of which consist of any Interest, and where failure to pay the indebtedness does not result in the creation of an unsecured obligation of the Operator; or

 

(ii)

makes an assignment for the benefit of creditors; or

 

(iii)

consents to the appointment of a receiver (other than a receiver appointed under non-recourse financing) for all or a substantial part of its assets; or

 

(iv)

files a petition in bankruptcy or for a reorganization or an arrangement under applicable bankruptcy, insolvency or creditors' relief laws, or otherwise seeks the relief therein provided; or

 

(v)

is adjudicated bankrupt or insolvent; or

 

(c)

if a Court order is pronounced in respect to the Operator appointing a receiver or trustee for all or a substantial part of its property (other than property securing non-recourse financing), or approving a petition in bankruptcy or for a reorganization under applicable bankruptcy, insolvency or creditors' relief laws or for any other judicial modification or alteration of the rights of creditors; or

 

(d)

the Interest of the Operator is reduced to less than 50% for 90 consecutive days.

 

12.6

Upon ceasing to be Operator, the former Operator shall forthwith deliver to its successor all Assets, books, records and other property both real and personal relating to this Agreement or its role as Operator under this Agreement. The former Operator shall use its best efforts to transfer to its successor, as of the effective date of the former Operator's resignation or removal, its rights and obligations, if any, as Operator under all contracts relating to the Assets, and pending such transfer and in relation to all other contracts relating to the Assets, the former Operator shall hold its right and interest as Operator from the date of resignation or removal for the account and to the order of the new Operator.

- 27 -

 

 

12.7

All costs of termination of employment of employees of the Operator arising from any removal (but not resignation) of the Operator shall be deemed to be Expenditures and the former Operator shall be reimbursed therefor by the Participants promptly after submission of invoices to the successor Operator. The successor Operator shall be under no obligation to provide alternative employment to any employee engaged or primarily engaged by the former Operator.

 

12.8

As soon as practicable after the effective date of resignation or removal of the Operator the Management Committee shall have the accounts of the Operator relating to the Assets audited by an independent auditor (who may be the auditor of a Participant), and shall conduct an inventory of all Assets and such inventory shall be used in the return of and the accounting for the Assets by the Operator who has resigned or has been removed. All costs and expenses incurred in connection with such audit and inventory shall be deemed to be Expenditures.

12.9

The Operator shall not act or hold itself out as agent for any of the parties nor make any commitments on their individual behalf unless specifically permitted by this Agreement or directed in writing by a party.

13.

POWER AND AUTHORITY OF OPERATOR

 

13.1

After the Participation Date and subject to the control and direction of the Management Committee, the Operator shall have full right, power and authority to do everything necessary or desirable in accordance with good mining practice in connection with the exploration and development of the Property and to determine the manner of operation of the Property as a mine, including and without limiting the generality of the foregoing, the right, power and authority to:

 

(a)

prepare and present to the Management Committee proposed Programs and Production Programs in respect of the Property, as applicable;

 

(b)

implement any Program in accordance with Section 15 and any Production Program , in accordance with the Bankable Feasibility Study delivered by Booker in order to exercise the Option;

(c)

regulate access to the Property subject only to the right of the Participants to have access to the Property at all reasonable times for the purpose of inspecting work being done thereon but at their own risk and expense;

 

(d)

employ and engage such employees, agents, and independent contractors as it may consider necessary or advisable to carry out its duties and obligations hereunder and in this connection to delegate any of its powers and rights to perform its duties and obligations hereunder, but the Operator shall not enter into contractual relationships with an Associated Company except on terms which are commercially competitive and only when such Associated Company has comparable experience and skills as the independent competition, other than the agreements contemplated hereby between Booker and Noranda for the processing of Mineral Products;

(a)

 

- 28 -

 

 

(e)

exclude any part of the Property from this Agreement provided it shall give 60 days prior notice to the Participants of its intention to do so and if any of the Participants notifies the Operator within such 60 day period of its desire to hold such part of the Property the Operator shall deliver to such Participants, duly executed transfers of the Property in registrable form in favour of such Participants transferring such part of the Property to such Participants, and any such part of the Property so transferred shall no longer be subject to this Agreement;

(f)

charge the Participants an overhead fee equal to 15% of all Costs up to the date of commencement of Commercial Production excluding any construction or development contracts in excess of $100,000 to which a 3% management fee shall apply and following commencement of Commercial Production the management fee shall be renegotiated to be based upon usual business practices for an operating mine on the basis that the Operator should neither profit nor lose for acting as such, to be payable monthly in arrears for the Costs incurred in that month, which charge shall be in an amount sufficient to reimburse the Operator fully for its services as Operator, but not sufficient to enable the Operator to profit thereby and such fees will be reviewed and if proven to be excessive or insufficient shall be adjusted by the Management Committee on the basis that the Operator should neither profit nor lose by acting as such; and

(g)

prescribe the administrative and accounting procedure governing the conduct of Programs or Production Programs or the operation of the Property as a mine, including the basis for charges and credits related thereto, except where any such procedure is in conflict with the provisions of this Agreement, in which event the provisions of this Agreement shall prevail. The initial Accounting Procedure, subject to change from time to time by the Management Committee, is attached hereto as Schedule "C".

 

14.

DUTIES AND OBLIGATIONS OF THE OPERATOR

 

14.1

The Operator shall have such duties and obligations as the Management Committee may from time to time determine including, without limiting the generality of the foregoing, the following duties and obligations, subject to contribution of Costs by the Participants:

 

(a)

to propose to the Participants and, if approved, to implement Programs and the Production Program;

(b)

to manage, direct and control all exploration, development and producing operations in and under the Property, in a prudent and workmanlike manner, and in compliance with all applicable laws, rules, orders and regulations;

 

(c)

during the course of implementation of any Program and the Production Program, to submit to the Participants within 21 days after the end of each month statements for the month just ended detailing:

 

(i)

actual Costs compared to the Costs as budgeted;

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(ii)

estimated Costs for the remainder of the Production Program;

 

(iii)

any other financial or accounting statements that a Participant may reasonably require from the Operator;

 

(d)

to prepare and deliver to the Participants the following written technical or other reports by the dates indicated:

(i)

a monthly status report covering the progress of the implementation of any Program and the Production Program or Operating Plan during each month, within 21 days after the end of each month;

 

(ii)

for the first three quarters of a year, a quarterly status report covering the overall progress of the implementation of any Program, the Production Program or Operating Plan during such quarter within 21 days after the end of each quarter; and

 

(iii)

for the fourth quarter of a year, a quarterly status report as provided above together with an annual review of all operations conducted by the Operator during the year, including an evaluation thereof and recommendations with respect thereto, an unaudited financial statement setting forth the Costs incurred and receipts, if any, received during such year and such other information as may be reasonably requested by the Participants, by March 1 of each next succeeding year;

 

(e)

subject to the terms and conditions of this Agreement, to keep the Property in good standing free of liens, charges and Encumbrances of every character arising from operations (except liens for taxes not yet due, other inchoate liens and liens contested in good faith by the Operator), and to proceed with all diligence to contest or discharge any lien that is filed;

 

(f)

to account to the Participants for all contributions to Costs and to use all reasonable efforts to limit or curtail Program Overruns or Production Program Overruns;

 

(g)

to maintain true and correct books, accounts and records of operations hereunder;

 

(h)

to permit the Participants, at their own expense, to inspect, have access to, take abstracts from or audit all maps, drill logs, core tests, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, including any or all of the records and accounts referred to in subsection 14.1(f), during normal business hours;

 

(i)

to obtain and maintain, or cause any contractor engaged hereunder to obtain and maintain, during any period in which active work is carried out hereunder, adequate insurance coverage with a bodily injury, death and property damage limit of not less than $10,000,000 per occurrence;

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(j)

to permit the Participants or their representatives so appointed, at their own expense and risk, access to the Property and all data derived from carrying out work thereon;

 

(k)

to arrange for and maintain Workers' Compensation or equivalent coverage for all eligible employees engaged by the Operator in accordance with local statutory requirements;

 

(l)

to perform its duties and obligations in a manner consistent with good exploration and mining practices;

 

(m)

to pay all Goods and Services taxes on behalf of the Participants;

 

(n)

to keep and maintain the Facilities in good condition and repair and in efficient operating condition and to make or contract for, on behalf of the Participants, such alterations, improvements and additions thereto and replacements thereof as the Operator may deem necessary or advisable in the interest of economy and efficiency of operation, all in accordance with good mining and engineering practice;

 

(o)

to obtain by purchase, lease, lease-purchase or sale and lease-back arrangement or such other acquisition method as it shall determine is necessary or desirable and incur in connection therewith such obligations as it deems reasonable, such machinery, equipment, material, supplies and other facilities as may be required for the implementation of the Production Program and the operation of the Property as a mine;

 

(p)

to take such action in an emergency affecting the environment, the safety of life or of the Facilities as the Operator may deem necessary or desirable to prevent threatened loss of life, damage or injury and to take all reasonable precautions in connection with the Facilities for the safety of employees, the environment and the public including making reasonable expenditures in addition to budgeted Costs (without the prior approval of the Participants) provided that the Operator shall promptly notify the Participants of such expenditures; and

 

(q)

to transact, undertake and perform all transactions, contracts, employments, purchases, operations, negotiations with third parties and any other matter or thing undertaken on behalf of the parties in the Operator's name.

 

15.

PROGRAMS

 

15.1

After the Participation Date, Costs shall only be incurred under and pursuant to Programs prepared by the Operator and approved by the Management Committee as provided in this section.

 

15.2

Forthwith after the Participation Date and subject to the rights of the non-Operator and on or before the earlier of 90 days after the completion of the last Program or November 15 each year, if no Program has been approved or completed in that year, the Operator shall prepare and submit to the Management Committee a Program proposed by the Operator. If in any year the Operator fails

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Operator shall not require payment of any funds more than one month in advance of the period during which the same are to be expended. Monthly Expenditure projections will be delivered by the Operator to the Participants once each calendar quarter for the next succeeding three months.

 

15.7

If it appears that Costs will exceed by greater than 15% those estimated under a Program, the Operator shall immediately give written notice to the Participants outlining the nature and extent of the Program Overruns. If such Program Overruns are accepted by the Participants then, within 30 days after the receipt of a written request from the Operator, each Participant shall pay to the Operator its Cost Share of such Program Overruns. If either Participant does not accept such Program Overruns, or fails to pay the same, the Operator shall be entitled to curtail or abandon such Program.

 

15.8

If a Participant at any time fails to pay such amount of Costs as is requested by the Operator in accordance with subsection 15.6 after having elected to do so or accepted Program Overruns in accordance with subsection 15.7 the Operator may give written notice to such Participant demanding payment, and if such Participant has not paid such amount within 30 days after receipt of such notice, such Participant shall be deemed to:

 

(a)

be in default under subsection 15.6 or 15.7, as applicable; and

 

(b)

have lost its right to contribute to such Program,

 

and thereafter the other Participant shall have the right to contribute all Costs to be incurred under or pursuant to that Program and the Participants' respective Interests shall be adjusted in accordance with subsection 11.6. The Operator shall have the right to curtail or abandon any Program which is not fully subscribed.

16.

PRODUCTION PROGRAMS

16.1

Within:

(a)

60 days of the approval by the Management Committee of a Production Program contemplating Costs of $10,000,000 or less; or

(b)

120 days of the approval by the Management Committee of a Production Program contemplating Costs of more than $10,000,000;

each Participant shall give written notice to the Operator stating whether it elects to contribute its Cost Share of the Production Program. Failure to give such notice within such six month period shall be deemed to be an election not to contribute to such Production Program and the provisions of subsection 16.5 shall apply. If both Participants elect to contribute their respective Cost Shares of the Production Program the Operator shall implement the Production Program. The Operator will not proceed with any Production Program which is not fully subscribed.

 

16.2

An election to fund a Production Program shall make a Participant liable to pay its Cost Share of:

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(a)

all of the Production Program Costs actually incurred under or pursuant to such Production Program, including Production Program Overruns up to but not exceeding 15% of estimated Production Program Costs,

 

(b)

Operating Costs and any other costs associated with establishing and operating the Property as a mine at such time as the liability is incurred by the Oprator; and

 

(c)

any debts, liabilities or obligations arising from operations hereunder, except financing costs incurred by the other Participant in connection with such other Participants' contributions to the Production Program.

 

16.3

Commencing 90 days after having elected to fund a Production Program which is proceeded with, each Participant shall, within 30 days after being requested in writing to do so by the Operator, pay such amount of Production Program Costs incurred or to be incurred under or pursuant to such Production P