EXHIBIT
10.20
Form of
NET SMELTER
RETURN
ROYALTY AGREEMENT
This Agreement (the " Agreement ")
is entered into on _________ __, 2008, by and among BOLSA
RESOURCES, INC., a corporation duly organized under the laws of the
State of Arizona (hereinafter referred to as " Bolsa "),
AURELIO RESOURCE CORPORATION, a Nevada corporation (hereinafter
referred to as " Aurelio ") and [NEWCO], a corporation
incorporated under the laws of _________ (" NewCo "). Bolsa,
Aurelio and NewCo are referred to herein as a 'Party" and
collectively herein as the " Parties ".
NewCo acquired all of the
outstanding capital stock of Bolsa from Aurelio under a certain
Stock Purchase Agreement between Aurelio and the NewCo, dated
September __, 2008 (the " Stock Purchase Agreement "). Under
the terms of the Stock Purchase Agreement, NewCo agreed to cause
Bolsa, its wholly owned subsidiary, to grant to Aurelio a net
smelter return royalty from the minerals product derived form
certain real property assets owned and/or leased by
Bolsa.
This Agreement contemplates
the transaction and terms and conditions by which and the
circumstances in which Bolsa grants to Aurelio the net smelter
return royalty from the minerals product derived form certain real
property assets owned and/or leased by Bolsa and in which Bolsa,
NewCo and Aurelio have the right to convert the net smelter return
royalty granted hereunder into shares of Bolsa or NewCo, as the
case may be, and Aurelio has the right to purchase all of the
shares of common and preferred stock of Bolsa, all in accordance
with the term of this Agreement.
Now, therefore, in
consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as
follows.
1.
Definitions . The following terms shall have the following
meaning for purposes of this Agreement:
" Affiliate " has the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities Exchange Act of
1934, as amended.
" Cash Consideration " shall have the meaning set forth
in Section 9(a) below.
" Concentrates " means the product derived from Crude Ore
after waste materials have been removed through leaching, milling
or other beneficiation.
" Crude Ores ," whether singular or plural, shall mean
all ores, metals, Minerals which Bolsa either (A) mines, extracts,
or otherwise recovers (including by in situ methods) from the
Initial Bolsa Real Property Assets and sells or delivers to a
processing plant for physical or chemical treatment, or (B) treats
in place on the Initial Bolsa Real Property Assets by chemical,
solution, or other methods; said term shall also include all
Mineral-bearing solutions, natural or introduced, recovered by
Bolsa from the Initial Bolsa Real Property Assets and sold or
delivered for processing by Bolsa, and all Mineral and non-mineral
components of all such materials and solutions.
" Extraction Taxes " means sales, use, gross receipts, ad
valorem, severance, any taxation on the net proceeds of mining
operations and other taxes payable in respect to severance,
production, removal, sale or disposition of the Crude Ore or
Concentrates, but excluding any taxes on net income.
" Initial Bolsa Real Property Assets " shall mean the
real property rights and interests described in
Annex 1 attached hereto and incorporated herein
by this reference, and any and all amendment, relocations,
substitutions or replacements of the mining claims on the
referenced real property in which Bolsa or any Affiliate of Bolsa
has any right, title or interest..
" Minerals ," whether singular or plural, shall mean any
and all mineral substances of any nature, metallic or non-metallic.
The term "Minerals" shall not include oil, gas, or other liquid or
gaseous hydrocarbon or geothermal substances.
" Proceeds " means the sum actually received by Bolsa
during each calendar quarter from the sale of Crude Ore or
Concentrates produced from the Initial Bolsa Real Property during
each calendar quarter.
" Processing Costs " means either (a) the amounts
actually incurred by Bolsa for leaching, milling, treating,
processing or other beneficiation, including transporting, sizing
and crushing of the ores, where such services are performed by a
party other than Bolsa and including assaying and sampling costs
and including penalties, if any incurred, or (b) if such operations
are carried out by Bolsa, the charges, cost and penalties, if any
incurred, for such operations, including transportation, which
Bolsa would have incurred if such operations were carried out in
facilities not owned or controlled by Bolsa and then offering
comparable custom services for comparable products or on comparable
terms; provided, however, that in all cases "Processing Costs"
shall not include the Transportation Costs..
" Transportation Costs " means the expenses and charges
actually incurred by Bolsa in transporting the Crude Ore or
Concentrates from mine to smelter, refinery or other place of sale.
Such expenses shall include, but not be limited to, freight,
shipment insurance, handling, port, delay, demurrage, lighterage,
tug, forwarding costs and transportation taxes.
Reference to dollar amounts in this agreement shall refer to
United States dollars.
2.
Net Smelter Return Royalty . As of the date hereof, Bolsa
does hereby grant convey, remise, release, and forever quitclaim
unto Aurelio, its successors and assigns, a production royalty (the
" Bolsa NSR ") of three percent (3%) of the Net Smelter
Returns (as herein defined) from all Crude Ores and Concentrates
mined or otherwise recovered and removed from mineral claims on the
Initial Bolsa Real Property Assets. The "Net Smelter Return" on
Crude Ore or Concentrates derived and sold by Bolsa from the
Initial Bolsa Real Property Assets shall be determined as
follows:
(a)
Sale of Crude Ore or Concentrate to Third Party . If Crude
Ore or Concentrates are sold by Bolsa to a third party that is not
an Affiliate of Bolsa, , the Net Smelter Returns shall mean the
Proceeds received from such sale by Bolsa, less, to the extent
borne by Bolsa, sales and brokerage costs, Transportation Costs,
Processing Costs and Extraction Taxes. Such Crude Ore or
Concentrates shall be deemed sold at the time the Proceeds are
received by Bolsa.
(b)
Sale of Crude Ore or Concentrate to Affiliate . If Crude Ore
or Concentrates are sold or transferred by Bolsa to an Affiliate,
they shall be deemed sold by Bolsa at the time of delivery to the
Affiliate, and the Net Smelter Returns shall mean an amount equal
to that which would have been received by Bolsa from a bona fide
third party purchaser in an arms-length transaction for an
identical product less Transportation Costs, Processing Costs and
Extraction Taxes incurred by Bolsa.
(c)
Retainage of Crude Ore or Concentrate . If Concentrates are
retained by Bolsa for further smelting, refining, precipitation or
other additional processing by a third party that is not an
Affiliate of Bolsa at a site that is not located or adjacent to or
on the Initial Bolsa Real Property Assets, such Concentrates shall
be deemed sold by Bolsa at the time such Concentrates are delivered
to the smelter, precipitation plant or other facility for further
processing or refining, and the Net Smelter Returns from such
Concentrates shall mean an amount equal to that which would have
been received by Bolsa from a bona fide third party purchaser in an
arms-length transaction for an identical product less
Transportation Costs, Processing Costs and Extraction Taxes
incurred by Bolsa.
3.
Payment of Royalty . The obligation to pay the Bolsa NSR
royalty shall accrue upon the actual or deemed sale of the Crude
Ores or Concentrates subject thereto.. Payment of the Bolsa NSR
shall be made on or before the last day of April, July, October,
and January (" Payment Dates ") of each year for royalty
obligations that accrued during the preceding calendar quarter of
Crude Ore or Concentrates actually produced during that calendar
quarter. Payment for any deemed sale (i.e., through forward sale,
loans, futures trading, etc.) of any Crude Ore or Concentrates
during a calendar quarter shall be made on the Payment Date
following the calendar quarter during which production of Crude Ore
or Concentrates actually occurs. Each Payment shall be accompanied
by a statement showing weights and values of mineral substances
recovered from the Crude Ore and Concentrates produced from the
Initial Bolsa Real Property Assets during the period for which
payment is made, the Proceeds received or the value of the deemed
sale of such Crude Ore and Concentrates and the amount of the
charges, costs and taxes deductible therefrom. If no written
objection is made by Aurelio to the correctness of the statement
within sixty (60) days from the date thereof, such statement shall
be deemed conclusively to be correct and such royalty payment
sufficient and complete.
4.
Disputes . In case of any dispute or question as to the
ownership of any royalty interest, payment of any part thereof to
be made by Bolsa under this Agreement, Bolsa may deposit any amount
otherwise due to Aurelio in escrow until the dispute is finally
resolved. Bolsa may credit all costs and expenses, including
attorney's fees, it incurs by reason of such dispute or question
against all amounts otherwise due to Aurelio only in the event
Bolsa prevails.
5.
Waste Rock, Spoil and Tailings . The ore, mine waters,
leachates, pregnant liquors, pregnant slurries, or other products
or compounds of Mineral Substances mined or extracted from the
Initial Bolsa Real Property Assets shall be the property of Bolsa
subject to the Bolsa NSR as provided herein. Bolsa shall not be
liable for mineral values lost in mining or processing employing
sound practices. The Bolsa NSR shall be payable on all mineral
substances recovered both prior to and after the time waste rock,
spoil, tailings, or other mine wastes and residue are first
disposed of as such, and such waste rock, spoil, tailings or other
mine wastes and residue shall be the sole property of Bolsa. Bolsa
shall have the sole right to dump, deposit, sell, dispose of, or
reprocess such waste rock, spoil, tailings, or other mine wastes
and residues, and Aurelio shall have no claim or interest therein
or to proceeds or minerals values recovered therefrom.
6.
Weighing, Measuring and Sampling . Bolsa shall at all times
production is occurring upon the Initial Bolsa Real Property Assets
accurately weigh, measure and sample in accordance with customary
industry practices for precious metals mines, all Crude Ore or
other material including products developed from ore or other
material, and all Concentrates,to the end that accurate and
complete records and reports are made and retained to ascertain the
quantity of ores and minerals recovered and removed from the
Initial Bolsa Real Property Assets. In determining whether
"customary industry practice" is being employed, consideration
shall be given to whether the ore body from which production is
occurring is a placer deposit or other type of deposit. If
production is from a placer deposit, then the grade and weight of
concentrate developed at the gravity separation faci
