EXHIBIT
10.21
Form of
NET SMELTER
RETURN
ROYALTY AGREEMENT
This Agreement (the " Agreement ")
is entered into on _________ __, 2008, by and among Minera Milenium
S.A. de C.V., a corporation duly organized under the laws of the
Republic of Mexico (hereinafter referred to as " Minera "),
[NEWCO], a corporation incorporated under the laws of _________ ("
NewCo ") and AURELIO RESOURCE CORPORATION, a Nevada
corporation (hereinafter referred to as " Aurelio "). Each
of Minera, NewCo and Aurelio are referred to herein as "Party", and
collectively herein as the " Parties ".
NewCo acquired all of the
outstanding capital stock of Bolsa Resources, Inc., an Arizona
corporation, 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, Aurelio agreed to cause Minera to grant to
NewCo in exchange for a cash consideration payable to Aurelio a net
smelter return royalty from the minerals product derived form
certain real property assets owned and/or leased by
Minera.
This Agreement contemplates
the transaction and terms and conditions by which and the
circumstances in which Minera grants to NewCo in exchange for a
cash consideration payable to Aurelio the net smelter return
royalty from the minerals product derived form certain real
property assets owned and/or leased by Minera and in which Minera,
Aurelio and NewCo have the right to convert the net smelter return
royalty granted hereunder into shares of Minera or Aurelio, as the
case may be, 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 2 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 Minera either (A) mines, extracts,
or otherwise recovers (including by in situ methods) from the
Gavilanes Property and sells or delivers to a processing plant for
physical or chemical treatment, or (B) treats in place on the
Gavilanes Property by chemical, solution, or other methods; said
term shall also include all Mineral-bearing solutions, natural or
introduced, recovered by Minera from the Gavilanes Property and
sold or delivered for processing by Minera, 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.
" Gavilanes Property " 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, substitutions or replacements of the concessions
on the referenced real property in which Minera or any Affiliate of
Minera 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 Minera
during each calendar quarter from for the sale of Crude Ore or
Concentrates produced from the Gavilanes Property during each
calendar quarter.
" Processing Costs " means either (a) the amounts
actually incurred by Minera 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 Minera and including assaying and sampling costs
and including penalties, if any incurred, or (b) if such operations
are carried out by Minera, the charges, cost and penalties, if any
incurred, for such operations, including transportation, which
Minera would have incurred if such operations were carried out in
facilities not owned or controlled by Minera and then offering
comparable custom services for comparable products or on comparable
terms; provided, however, that in all cases "Processing Costs"
shall not include Transportation Costs
" Transportation Costs " means the expenses and charges
actually incurred by Minera in transporting the Crude Ore or
Concentrates from mine to mill, 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, for a
cash consideration of $2,000,000 (in words: US Dollars Two
Million), payable by NewCo to Aurelio at the closing of the
transaction contemplated by the Stock Purchase Agreement by wire
transfer or delivery of other immediately available funds (the "
Cash Consideration "), Minera does hereby remise, release,
and forever quitclaim unto Newco its successors and assigns, a
production royalty (the ea" Minera 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 Gavilanes Property. The Net Smelter Return on
Crude Ore or Concentrates derived and sold by Minera from the
Gavilanes Property shall be determined as follows:
(a)
Sale of Crude Ore or Concentrate to Third Party . If Crude
Ore or Concentrates are sold by Minera to a third party that is not
an Affiliate of Minera, the Net Smelter Returns shall mean the
Proceeds received from such sale by Minera, less, to the extent
borne by Minera, 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 Minera.
(b)
Sale of Crude Ore or Concentrate to Affiliate . If Crude Ore
or Concentrates are sold or transferred by Minera to an Affiliate,
they shall be deemed sold by Minera 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 Minera 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 Minera.
(c)
Retainage of Crude Ore or Concentrate . If Concentrates are
retained by Minera for further smelting, refining, precipitation or
other additional processing by a third party that is not an
Affiliate of Minera at a site that is not located or adjacent to or
on the Gavilanes Property, such Concentrates shall be deemed sold
by Minera 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 be deemed to be an amount equal to that which
would have been received by Minera 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 Minera.
3.
Payment of Royalty . The obligation to pay the Minera NSR
royalty shall accrue upon the actual or deemed sale of the Crude
Ores or Concentrates subject thereto. Payment of the Minera 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
Gavilanes Property 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 Minera under this Agreement, Minera may deposit any
amount otherwise due to Newco in escrow until the dispute is
finally resolved. Minera 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 Newco only in the
event Minera 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
Gavilanes Property shall be the property of Minera subject to the
Minera NSR as provided herein. Minera shall not be liable for
mineral values lost in mining or processing employing sound
practices. The Minera NSR shall be payable on all mineral
substances recovered both prior to and after the time
