Exhibit 10.27
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 "),
Telifonda (Cayman) Ltd., a Cayman Islands corporation, or its
designee (" NewCo ") and Aurelio Resource Corporation, a
Nevada corporation (" 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 30, 2008, as amended
(the " Stock Purchase Agreement "). Under the terms of the
Stock Purchase Agreement, Aurelio agreed to cause Minera to grant
to NewCo a net smelter return royalty from the minerals product
derived form certain real property assets owned and/or optioned by
Minera in exchange for a payment by NewCo of US $50,000.
This Agreement sets forth
the terms and conditions under which (a) Minera grants to NewCo a
net smelter return royalty from the minerals product derived from
certain real property assets owned and/or optioned by Minera, and
(b) 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.
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.
" 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, value added, 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 A
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 the sale, including forward
sales, of Crude Ore or Concentrates produced from the Gavilanes
Property. "Proceeds" does not include any profits or losses
incurred by Minera or any of its Affiliates in any hedging, price
protection, commodities trading or similar activities.
" 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, in
connection with the transactions contemplated under the Stock
Purchase Agreement, Minera does hereby remise, release, and forever
quitclaim unto NewCo its successors and assigns, a production
royalty 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 the Gavilanes Property (the " Minera
NSR "). The Minera NSR 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. For purposes of this
Agreement, such Crude Ore or Concentrates shall be deemed sold at
the time the Proceeds are received by Minera.
(b)
Sale of Crude Ore or Concentrates to Affiliate . If Crude
Ore or Concentrates are sold or transferred by Minera to an
Affiliate, 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. For purposes of this
Agreement, such Crude Ore or Concentrates shall be deemed sold at
the time they are delivered to the Affiliate.
(c)
Retainage of Crude Ore or Concentrates . 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 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,
refinery, precipitation plant or other facility, and the "Net
Smelter Returns" from such Concentrates 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.
3.
Payment of Royalty . The obligation to pay the Minera NSR
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 January, April, July, and October
(" Payment Dates ") of each year for royalty obligations
that accrued during the preceding calendar quarter. 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 amounts deductible
therefrom to determine Net Smelter Returns as set forth in Section
2 of this Agreement. If no written objection is made by NewCo 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 all or any portion of the Minera NSR, or the amount of
payment 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 Minerals
recovered and sold or deemed sold 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 Minera.
Minera 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 NewCo shall have no claim or interest
therein or to proceeds or minerals values recovered therefrom.
6.
Weighing, Measuring, Sampling and Inspections .
(a)
Minera shall at all times while production is occurring upon the
Gavilanes Property 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 Gavilanes Property. NewCo shall have the right, at its
sole cost and risk, upon reasonable notice at all reasonable times,
to inspect all records and reports mentioned herein, and the
operations being conducted on the Gavilanes Property, so long as
such inspections do not unreasonably interfere with Minera's
business or operations and comply fully with its safety rules and
procedures. NewCo shall indemnify and hold harmless Minera and its
Affiliates and their respective directors, officers, shareholders,
employees, agents and attorneys, from and against any liabilities
which may be imposed upon, asserted against or incurred by any of
them by reason of injury to Minera, its Affiliates, or NewCo or any
of their respective agents or representatives caused by NewCo's
exercise of its inspection rights under this Agreement.
(b)
Minera shall have the right of mixing or commingling, at any
location and either underground or at the surface, any ores,
metals, minerals or mineral products from the Galvines Property
with any ores, metals, minerals, or mineral products from other
lands, provided that Minera shall determine the weight and volume
of, sample and analyze all such ores, metals, minerals and mineral
products before the same are so mixed or commingled. Any such
determining of weight or volume,
