Exhibit 10.4

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (this “Agreement”) is made as of May 28, 2004, by
and between Wits Basin Precious Minerals Inc., a Minnesota corporation ("Wits
Basin"), and Pandora Select Partners L.P., a British Virgin Islands limited
partnership ("Pandora”).

RECITALS

     A. Wits Basin and Pandora have entered into a Purchase Agreement dated as
of this date (the “Purchase Agreement”), pursuant to which Pandora is initially
purchasing a $650,000 face amount promissory note (the “Initial Note”) from Wits
Basin in consideration of a $650,000 loan (the “Initial Loan”) by Pandora to
Wits Basin. Pandora is referred to herein as the “Secured Party.”

     B. Pursuant to the Purchase Agreement, and conditioned on Wits Basin’s
timely satisfaction of particular milestones and conditions, Secured Party has
agreed to purchase, and Wits Basin has agreed to sell, an additional secured
convertible promissory note (the “Supplemental Note”) of at least $350,000 face
amount (which, at Secured Party’s option, may be for up to $850,000 face amount
inclusive of the foregoing $350,000) in consideration of a like supplemental
loan (the “Supplemental Loan;” and together with the Initial Loan, the “Loans”);

     C. As a condition to making the Loans, Wits Basin has agreed to pledge to
Secured Party all of Wits Basin’s assets (including the shares of capital stock
and membership interests it owns in its subsidiaries), subject to no other
security interest.

     NOW, THEREFORE, in consideration of the agreements herein and in reliance
upon the representations and warranties set forth herein and therein, the
parties agree as follows:

ARTICLE 1.
DEFINED TERMS

     1.1      DEFINITIONS. Unless otherwise defined herein or unless the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Uniform Commercial Code in effect in
the State of Minnesota (the “UCC”). In addition, the following terms when used
in this Agreement, including its preamble and recitals, shall have the following
meanings:

          “Loan Documents” means (a) this Agreement, (b) the Note and, if
issued, (c) the Supplemental Note, (d) a Warrant of this date being issued, and
(e) a Supplemental Warrant that may be issued in the future in connection with
the Supplemental Note, each by Wits Basin to Secured Party to purchase
particular shares of Wits Basin’s Common Stock, $0.01 par value, and (f) a
Registration Rights Agreement and (g) a Call and Option Agreement, each of this
date, between Wits Basin and Secured Party and the Purchase Agreement.

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          "Obligations” means the payment and other performance obligations
under the Loan Documents.

ARTICLE 2.
SECURITY INTEREST

     2.1      GRANT OF SECURITY INTEREST. To secure the timely payment and
performance in full of the Obligations, Wits Basin does hereby assign, grant and
pledge to Secured Party, subject to no other secured rights, all of the estate,
right, title and interest of Wits Basin in and to the Collateral as more fully
described on Exhibit A hereto, whether now owned or later acquired or created,
and including all proceeds of the Collateral, whether cash or non-cash (the
“Collateral”).

     2.2      FINANCING STATEMENTS.

          (a) Wits Basin hereby authorizes Secured Party to file all financing
statements, continuation statements, assignments, certificates, and other
documents and instruments with respect to the Collateral pursuant to the UCC and
otherwise as may be necessary or reasonably requested by Secured Party to
perfect or from time to time to publish notice of, or continue or renew the
security interests granted hereby (including, such financing statements,
continuation statements, certificates, and other documents as may be necessary
or reasonably requested to perfect a security interest in any additional
property rights hereafter acquired by Wits Basin or in any replacements,
products or proceeds thereof), in each case in form and substance satisfactory
to Secured Party.

          (b) Secured Party will pay the cost of filing the same in all public
offices where filing is necessary or reasonably requested by Secured Party and
will pay any and all recording, transfer or filing taxes that may due in
connection with any such filing. Wits Basin grants Secured Party the right, at
any time and at Secured Party’s option, to file any or all such financing
statements, continuation statements, and other documents pursuant to the UCC and
otherwise as Secured Party reasonably may deem necessary or desirable.

          (c) Wits Basin hereby authorizes the filing of any financing
statements or continuation statements, and amendments to financing statements,
or any similar document in any jurisdictions and with any filing offices as
Secured Party may reasonably determine are necessary or advisable to perfect the
security interests granted to Secured Party. Such financing statements may
describe the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as Secured Party may reasonably determine is necessary, advisable
or prudent to ensure the perfection of the security interest in the Collateral
granted to Secured Party herein.

     2.3      DEBTOR REMAINS LIABLE.

          (a) Anything herein contained to the contrary notwithstanding, Wits
Basin shall remain liable under its articles of incorporation, bylaws or other
constituent documents (together, the "Constituent Documents”), to perform all of
the obligations undertaken by it thereunder, all in accordance with and pursuant
to the terms and provisions thereof, and Secured Party shall have no obligations
or liabilities under the Constituent Documents by reason of or arising out of
this Agreement, nor shall Secured Party be required or obligated in any manner
to perform or fulfill any obligations of Wits Basin thereunder or to make any
payment, or to make any inquiry as to the nature or sufficiency of any payment
received by their or present or file any claim, or take any action to collect or
enforce the payment of any amounts which may have been assigned to them or to
which they may be entitled at any time or times.

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     (b) If any default by Wits Basin under any of the Constituent Documents
shall occur, Secured Party shall, at its option, be permitted (but shall not be
obligated) to remedy any such default by giving written notice of such intent to
Wits Basin and to the parties to such agreement. Any cure by Secured Party of
Wits Basin’s default under a Constituent Document shall not be construed as an
assumption by Secured Party of any obligations, covenants or agreements of Wits
Basin under the Constituent Documents, and Secured Party shall not incur any
liability to Wits Basin or any other person as a result of any actions
undertaken by Secured Party in curing or attempting to cure any such default.
This Agreement shall not be deemed to release or to affect in any way the
obligations of Wits Basin under any of the Constituent Documents.

ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF DEBTOR

     Wits Basin makes the following representations and warranties to and in
favor of Secured Party as of the date hereof. All of these representations and
warranties shall survive the execution and delivery of this Agreement:

     3.1      ORGANIZATION. Wits Basin:

          (a) is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of Minnesota;

          (b) is duly qualified, authorized to do business as a foreign
corporation in each U.S. and foreign jurisdiction where the character of its
properties or the nature of its activities makes such qualification necessary;
and

          (c) has the corporate power (A) to enter into the Loan Documents and
to perform its obligations thereunder and to consummate the transactions
contemplated thereby, (B) to carry on its business as now being conducted and as
proposed to be conducted by it, (C) to execute, deliver and perform this
Agreement, (D) to take all action as may be necessary to consummate the
transactions contemplated hereunder, and (E) to grant the liens and security
interests provided for in this Agreement.

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     3.2      OFFICES, LOCATION OF COLLATERAL. The chief executive office or
chief place of business of Wits Basin is located at 520 Marquette Avenue, Suite
900, Minneapolis, Minnesota 55402.

     3.3      TITLE AND LIENS. Wits Basin has good, valid, and marketable title
to the Collateral, free from all liens and encumbrances of any kind. As a result
of this Agreement, Secured Party will have a security interest in the
Collateral, subordinate to no other security interest.

     3.4      AUTHORIZATION; NO CONFLICT. Wits Basin has duly authorized,
executed and delivered this Agreement, and Wits Basin’s execution and delivery
hereof and its consummation of the transactions contemplated hereby and the
compliance with the terms thereof:

          (a) does not or will not contravene any legal requirements applicable
to or binding on Wits Basin which could reasonably be expected to have a
material adverse effect upon the Collateral or Secured Party’s rights therein;

          (b) does not or will not contravene or result in any breach of or
constitute any default, or result in or require the creation of any lien upon
any of Wits Basin’s property, under any agreement or instrument to which Wits
Basin is a party or by which it or any of its properties may be bound or
affected; and

          (c) does not or will not require the consent or approval of any third
party which has not already been obtained.

     3.5      ENFORCEABILITY. This Agreement is a legal, valid and binding
obligation of Secured Party, enforceable against Wits Basin in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors’ rights or by the effect of general
equitable principles.

     3.6     UCC ARTICLE 8. All membership interests or shares in each Wits
Basin subsidiary, including Active Hawk Minerals, LLC, a Minnesota limited
liability company, and Brazmin Ltda., a Brazilian limited liability company,
that are part of the Collateral are securities governed by Article 8 of the UCC.

ARTICLE 4.
COVENANTS OF DEBTOR

     Wits Basin covenants to and in favor of Secured Party as follows:

     4.1      COMPLIANCE WITH OBLIGATIONS. Wits Basin shall perform and comply
in all material respects with all obligations and conditions on its part to be
performed with respect to the Collateral.

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     4.2      INFORMATION CONCERNING COLLATERAL. Wits Basin shall, promptly upon
request, provide to Secured Party all information and evidence they it
reasonably request concerning the Collateral to enable Secured Party to enforce
the provisions of this Agreement.

     4.3      DEFENSE OF COLLATERAL. Wits Basin shall defend its title to the
Collateral and the interests of Secured Party in the Collateral pledged
hereunder against the claims and demands of all third parties whomsoever.

     4.4      MAINTENANCE OF COLLATERAL. Wits Basin shall not (i) fail to
deliver to Secured Party a copy of each demand or notice received or given by it
relating to any Constituent Document of Wits Basin or to any other Collateral
which could reasonably be expected to have a material adverse effect upon the
Collateral or Secured Party’s rights therein, or (ii) sell, contract to sell,
assign, transfer or dispose of any of the Collateral, except in the ordinary
course of business, or with the consent of Secured Party, which consent will not
be unreasonably withheld.

     4.5      EVENTS OF DEFAULT. Wits Basin shall give to Secured Party prompt
notice of any material default with respect to the Collateral of which Wits
Basin has knowledge or has received notice.

     4.6      PRESERVATION OF VALUE; LIMITATION OF LIENS. Wits Basin shall not
take any action in connection with the Collateral which would impair in any
material respect the interests or rights of Secured Party therein or with
respect thereto, except as expressly permitted hereby; provided, however, that
nothing in this Agreement shall prevent Wits Basin, prior to the exercise by
Secured Party of any rights pursuant to the terms hereof, from undertaking Wits
Basin’s operations in the ordinary course of business. Wits Basin shall not
directly or indirectly create, incur, assume or suffer to exist any liens on or
with respect to all or any part of the Collateral (other than the lien created
by this Agreement). Wits Basin shall at its own cost and expense promptly take
such action as may be necessary to discharge any such liens.

     4.7      NO OTHER FILINGS. Wits Basin shall not file or authorize to be
filed in any jurisdiction any financing statements under the UCC or any like
statement relating to the Collateral.

     4.8      MAINTENANCE OF RECORDS. Wits Basin shall, at all times, keep
accurate and complete records of the Collateral. Wits Basin shall permit
representatives of Secured Party, upon reasonable prior notice, at any time
during normal business hours of Wits Basin to inspect and make abstracts from
Wits Basin’s books and records pertaining to the Collateral. Upon the occurrence
and during the continuation of any Event of Default, at Secured Party’s request,
Wits Basin shall promptly deliver copies of any and all such records to Secured
Party.

     4.9      PAYMENT OF TAXES. Wits Basin shall pay or cause to be paid, before
any fine, penalty, interest or cost attaches thereto, all taxes, assessments and
other governmental or non-governmental charges or levies (other than those taxes
that it is contesting in good faith and by appropriate proceedings, and in
respect of which it has established adequate reserves for such taxes) now or
hereafter assessed or levied against the Collateral pledged by them hereunder
and shall retain copies of, and, upon request, permit Secured Party to examine
receipts showing payment of any of the foregoing.

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     4.10     NAME; JURISDICTION OF ORGANIZATION. Wits Basin shall give Secured
Party at least 30 days prior written notice before Wits Basin changes its name,
jurisdiction of organization or entity type and shall at the expense of Wits
Basin execute and deliver such instruments and documents as may be required by
Secured Party or applicable legal requirements to maintain a first perfected
security interest in the Collateral.

     4.11      PROCEEDS OF COLLATERAL. Wits Basin shall, at all times, keep
pledged to Secured Party pursuant hereto all Collateral and all dividends,
distributions, interest, principal and other proceeds received by Wits Basin
with respect thereto, and all other Collateral and other securities,
instruments, proceeds and rights from time to time received by or distributable
to Wits Basin in respect of any Collateral, and shall not permit any issuer of
such Collateral to issue any shares of stock or other equity interests which
shall not have been immediately duly pledged to Secured Party hereunder.

ARTICLE 5.
RIGHTS AND REMEDIES

     5.1      EVENT OF DEFAULT DEFINED. Any event of default under the Note or,
if issued, under the Supplemental Note (including events of non-compliance with
this Agreement, as described in the Note or, if issued, the Supplemental Note)
shall constitute an "Event of Default" hereunder.

     5.2      REMEDIES UPON EVENT OF DEFAULT.

          (a) During any period during which an Event of Default shall have
occurred and be continuing, Secured Party may (but shall be under no obligation
to), directly or by using agent or broker:

               (i) proceed to protect and enforce the rights vested in it by
this Agreement and under the UCC;

               (ii) cause all moneys and other property pledged as security to
be paid and/or delivered directly to it, and demand, sue for, collect and
receive any such moneys and property;

               (iii) cause any action at law or suit in equity or other
proceeding to be instituted and prosecuted to collect or enforce any Obligations
of Wits Basin or rights included in the Collateral, or for specific enforcement
of any covenant or agreement contained herein, or in aid of the exercise of any
power therein or herein granted, or for any foreclosure hereunder and sale under
a judgment or decree in any judicial proceeding, or to enforce any other legal
or equitable right vested in it by this Agreement or by law;

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               (iv) foreclose or enforce any other agreement or other instrument
by or under or pursuant to which the Obligations of Wits Basin are issued or
secured;

               (v) subject to Section 5.2(b), sell, lease or otherwise dispose
of any or all of the Collateral, in one or more transactions, at such prices as
Secured Party may deem best, and for cash or on credit or for future delivery,
without assumption of any credit risk, at any broker’s board or at public or
private sale, without demand of performance or notice of intention to sell,
lease or otherwise dispose of, or of time or place of disposition (except such
notice as is required by applicable statute and cannot be waived), it being
agreed that Secured Party may be purchasers or lessees on their own behalf at
any such sale and that Secured Party or anyone else who may be the purchaser,
lessee or recipient for value of any or all of the Collateral so disposed of
shall, upon such disposition, acquire all of Wits Basin’s rights therein.
Secured Party may adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
same, and such sale may, without further notice or publication, be made at any
time or place to which the same may be so adjourned. If Secured Party sell any
of the Collateral upon credit, after reasonable inquiry as to the credit
worthiness of the purchaser, Wits Basin will be credited only with payments
actually made by the purchaser, received by Secured Party and applied to the
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, Secured Party may resell the Collateral and Wits Basin shall be
credited with the proceeds of the sale;

               (vi) incur expenses, including reasonable attorneys’ fees,
consultants’ fees, and other costs appropriate to the exercise of any right or
power under this Agreement;

               (vii) perform any obligation of Wits Basin hereunder and make
payments, purchase, contest or compromise any encumbrance, charge, or lien, and
pay taxes and expenses;

               (viii) make any reasonable compromise or settlement deemed
desirable with respect to any or all of the Collateral and extend the time of
payment, arrange for payment installments, or otherwise modify the terms of, any
or all of the Collateral;

               (ix) secure the appointment of a receiver of any or all of the
Collateral;

               (x) exercise any other or additional rights or remedies granted
to Secured Party under any other provision of this Agreement or exercisable by a
secured party under the UCC, whether or not the UCC applies to the affected
Collateral, or under any other applicable law and take any other action which
Secured Party deem necessary or desirable to protect or realize upon their
security interests in the Collateral or any part thereof; and/or

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               (xi) appoint a third party (who may be an employee, officer or
other representative of Secured Party) to do any of the foregoing, or take any
other action permitted hereunder, on behalf of Secured Party.

          (b) If, pursuant to any law, prior notice of any action described in
Section 5.2(a) is required to be given to Wits Basin, Wits Basin hereby
acknowledges that the minimum time required by such law, or if no minimum is
specified, ten days, shall be deemed a reasonable notice period.

          (c) Any action or proceeding to enforce this Agreement may be taken by
Secured Party either in Wits Basin’s name or in Secured Party’s name, as Secured
Party may deem necessary.

          (d) All rights of marshalling of assets of Wits Basin, including any
such right with respect to the Collateral, are hereby waived by Wits Basin.

          (e) Secured Party shall incur no liability as a result of the sale of
any or all of the Collateral at any private sale pursuant to Section 5.2(a)
conducted in a commercially reasonable manner. Wits Basin hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any or all of the Collateral may have been sold at such a private sale was
less than the price that might have obtained at a public sale or was less than
the aggregate amount of the Obligations, even if Secured Party accept the first
offer received and does not offer the Collateral to more than one offeree.

     5.3      ATTORNEY-IN-FACT. Upon the occurrence and during the continuation
of an Event of Default, Wits Basin hereby irrevocably constitutes and appoints
Secured Party as its true and lawful attorney-in-fact to enforce all rights of
Wits Basin with respect to the Collateral, including the right to give
appropriate receipts, releases and satisfactions for and on behalf of and in the
name of Wits Basin or, at the option of Secured Party, in the name of Secured
Party, with the same force and effect as Wits Basin could do if this Agreement
had not been made. If Secured Party shall so elect after the occurrence and
during the continuation of an Event of Default hereunder, Secured Party shall
have the right at all times to settle, compromise, adjust, or liquidate all
claims or disputes directly with Wits Basin or any obligor of Wits Basin upon
such terms and conditions as Secured Party may determine in its sole discretion,
and to charge all costs and expenses thereof (including reasonable attorneys’
fees and charges) to Wits Basin’s account and to add them to the Obligations
whereupon such costs and expenses shall be and become part of the Obligations.
This power of attorney is a power coupled with an interest and shall be
irrevocable.

     5.4      EXPENSES; INTEREST. All costs and expenses (including reasonable
attorneys’ fees and expenses) incurred by Secured Party in connection with
exercising any actions taken under Article 5, together with interest thereon (to
the extent permitted by law) computed at a rate of 10% per annum (or if less,
the maximum rate permitted by law) from the date on which such costs or expenses
are invoiced to and become payable by Wits Basin, to the date of payment
thereof, shall constitute part of the Obligations secured by this Agreement and
shall be paid by Wits Basin to Secured Party within 10 days after written
demand.

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     5.5      NO IMPAIRMENT OF REMEDIES. If under applicable law, Secured Party
proceed by either judicial foreclosure or by non-judicial sale or enforcement,
Secured Party may, at its sole option, determine which of its remedies or rights
to pursue without affecting any of their rights and remedies under this
Agreement. If, by exercising any right and remedy, Secured Party forfeits any of
its other rights or remedies, including any right to enter a deficiency judgment
against Wits Basin or any third party (whether because of any applicable law
pertaining to “election of remedies” or the like), Wits Basin nevertheless
hereby consents to such action by Secured Party. To the extent permitted by
applicable law, Wits Basin also waives any claim based upon such action, even if
such action by Secured Party results in a full or partial loss of any rights of
subrogation, indemnification or reimbursement which Wits Basin might otherwise
have had but for such action by Secured Party or the terms herein. Any election
of remedies which results in the denial or impairment of the right of Secured
Party to seek a deficiency judgment against any third party shall not, to the
extent permitted by applicable law, impair Wits Basin’s obligations hereunder.
If Secured Party bids at any foreclosure or trustee’s sale or at any private
sale permitted by law or this Agreement, Secured Party may bid all or less than
the amount of the Obligations. To the extent permitted by applicable law, the
amount of the successful bid at any such sale, whether Secured Party or any
other party is the successful bidder, shall be conclusively deemed to be the
fair market value of the Collateral and the difference between such bid amount
and the remaining balance of the Obligations shall be conclusively deemed to be
the amount of the Obligations.

ARTICLE 6.
CERTAIN WAIVERS

     6.1      MODIFICATION OF OBLIGATIONS. Wits Basin’s liability hereunder
shall not be reduced, limited, impaired, discharged or terminated if Secured
Party at any time with Wits Basin’s consent (or, to the extent permissible by
the terms of the Loan Documents and law, without notice to or demand of Wits
Basin):

          (a) renews, extends, accelerates, increases the rate of interest on,
or otherwise changes the time, place, manner or terms, or otherwise modifies any
of the Obligations (including any payment terms);

          (b) extends or waives the time for Wits Basin’s performance of, or
compliance with, any term, covenant or agreement on its part to be performed or
observed under the Loan Documents, or waives such performance or compliance or
consents to a failure of, or departure from, such performance or compliance;

          (c) settles, compromises, releases or discharges, or accepts or
refuses any offer of performance with respect to, or substitutions for, any of
the Obligations or any agreement relating thereto and/or subordinates the
payment of the same to the payment of any other obligations;

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          (d) requests and accepts other guaranties of any of the Obligations
and takes and holds security for the payment hereof or any of the Obligations;

          (e) releases, surrenders, exchanges, substitutes, compromises,
settles, rescinds, waives, alters, subordinates or modifies, with or without
consideration, any security for payment of any of the Obligations, any other
guaranties of any of the Obligations, or any other obligation of any third party
with respect to any of the Obligations;

          (f) to the extent permitted by law, enforces and applies any security,
if any, now or hereafter held by or for the benefit of Secured Party in respect
hereof or any of the Obligations and directs the order or manner of sale
thereof, or exercises any other right or remedy that Secured Party may have
against any such security, in each case as Secured Party in its discretion may
determine, including foreclosure on any collateral pursuant to one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable; or

          (g) exercises any other rights available to it under any of the Loan
Documents, at law or in equity.

     6.2      SECURITY INTERESTS ABSOLUTE. All rights of Secured Party and the
security interests hereunder, and all obligations of Wits Basin hereunder, shall
be absolute and unconditional irrespective of:

          (a) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court,
by operation of law or otherwise, of the exercise or enforcement of, any claim
or demand or any right, power or remedy (whether arising under any Loan
Document, at law, in equity or otherwise) with respect to any of the Obligations
or any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of any of the Obligations;

          (b) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) hereof, in any other Loan Document or any
agreement or instrument executed pursuant thereto, or of any other guaranty or
security for any of the Obligations, in each case, whether or not in accordance
with the terms hereof or any other Loan Document or any agreement relating to
such other guaranty or security;

          (c) the application of payments received from any source (other than
payments received from the proceeds of any security for any of the Obligations,
except to the extent such security also serves as collateral for indebtedness
other than the Obligations) to the payment of indebtedness of Wits Basin to
Secured Party other than the Obligations, even though Secured Party might have
elected to apply such payment to any part or all of the Obligations;

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          (d) Secured Party’s consent to the change, reorganization or
termination of the corporate structure or existence of Wits Basin and to any
corresponding restructuring of any of the Obligations;

          (e) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk of
Wits Basin as an obligor in respect of any of the Obligations;

          (f) any Obligations or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect

          (g) any defenses, set-offs or counterclaims which Wits Basin may
allege or assert against Secured Party in respect of the Obligations; and

          (h) whether Secured Party makes, or does not or fails to make, any
Supplemental Loan to Wits Basin subsequent to the date hereof.

     6.3      CERTAIN WAIVERS. Except as provided in Section 7.16, Wits Basin
hereby waives any and all defenses afforded to a surety, including promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Agreement and any requirement that Secured Party protect,
secure, perfect or insure any security interest or lien, or any property subject
thereto, or exhaust any right or take any action against Wits Basin or any other
third party or entity or any collateral securing any of the Obligations, as the
case may be.

     6.4      POSTPONEMENT OF SUBROGATION. Wits Basin agrees that it will not
exercise any rights which it may acquire by way of rights of subrogation under
this Agreement, by any payment made hereunder or otherwise, while this Agreement
is in effect, unless such action is required to stay or prevent the running of
any applicable statute of limitations. Any amount paid to Wits Basin on account
of any such subrogation rights prior to such time shall be held in trust for
Secured Party and shall immediately be paid to Secured Party and credited and
applied against the Obligations. Any time after this Agreement has terminated
and if Wits Basin has made payment to Secured Party of all of the Obligations,
or if an action is required to stay or prevent the running of any applicable
statute of limitations, then, at Wits Basin’s request, Secured Party will
execute and deliver to Wits Basin appropriate documents (without recourse and
without representation or warranty) necessary to evidence the transfer by
subrogation to Wits Basin of an interest in the Obligations resulting from such
payment by Wits Basin.

ARTICLE 7.
MISCELLANEOUS

     7.1      NOTICES. Any communications, including notices and instructions,
between the parties hereto or notices provided herein to be given may be given
to the following addresses:

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  (a) if to Wits Basin, at:           Wits Basin Precious Minerals Inc.     520
Marquette Avenue, Suite 900     Minneapolis, Minnesota 55402     Attention: H.
Vance White, Chief Executive Officer     Facsimile: (612) 371-2077          
with a copy to:           Maslon Edelman Borman & Brand, LLP     90 South
Seventh Street, Suite 3300     Minneapolis, Minnesota 55402     Attention:
William M. Mower, Esq.     Facsimile: (612) 642-8358         (b) if to the
Secured Party, in care of:           Whitebox Advisors, LLC     3033 Excelsior
Boulevard, Suite 300     Minneapolis, Minnesota 55416     Attention: Jonathan
Wood, Chief Financial Officer     Facsimile: (612) 253-6151           with a
copy to:           Messerli & Kramer P.A.     150 South Fifth Street, Suite 1800
    Minneapolis, Minnesota 55402     Attention: Jeffrey C. Robbins, Esq.    
Facsimile: (612) 672-3777.

     All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be considered as properly given (a) on
the date received in person, (b) on the date received by overnight delivery
service (including Federal Express, UPS, ETA, Emery, DHL, AirBorne and other
similar overnight delivery services), (c) on the fourth business day following
the date mailed by first class United States mail, postage prepaid, registered
or certified with return receipt requested, (d) on the next business day after
being transmitted by telecopy or by other electronic means (including electronic
mail). Any party shall have the right to change its address for notice hereunder
to any other location within the continental United States by giving of notice
to the other parties in the manner set forth hereinabove.

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     7.2      DELAY AND WAIVER; REMEDIES CUMULATIVE. No failure or delay by
Secured Party in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. Any waiver, permit, consent or approval of any kind or
character on the part of Secured Party of any breach or default under the
Agreement or any waiver on the part of Secured Party of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent in such writing specifically set forth. No right, power or remedy
herein conferred upon or reserved to Secured Party hereunder is intended to be
exclusive of any other right, power or remedy, and every such right, power and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right, power and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Resort to any or all
security now or hereafter held by Secured Party may be taken concurrently or
successively and in one or several consolidated or independent judicial actions
or lawfully taken nonjudicial proceedings, or both.

     7.3      ENTIRE AGREEMENT. This Agreement and any agreement, document or
instrument referred to herein integrate all the terms and conditions mentioned
herein or incidental hereto and supersede all oral negotiations and prior
writings in respect of the subject matter hereof.

     7.4      GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota, exclusive of its conflict
of laws rules.

     7.5      SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

     7.6      HEADINGS. Paragraph headings have been inserted in this Agreement
as a matter of convenience for reference only and it is agreed that such
paragraph headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.

     7.7      WAIVER OF JURY TRIAL. WITS BASIN HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF SECURED PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR SECURED PARTY TO MAKE THE LOANS.

     7.8      CONSENT TO JURISDICTION. Each party hereto agrees that any legal
action or proceeding with respect to or arising out of this Agreement may be
brought in or removed to the federal or state courts located in Hennepin County,
Minnesota, as Secured Party may elect. By execution and delivery of this
Agreement, each party hereto accepts, for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably consents to the service of
process out of any of the aforementioned courts in any manner permitted by law.
Nothing herein shall affect the right of Secured Party to bring legal action or
proceedings in any other competent jurisdiction. Each party hereto hereby waives
any right to stay or dismiss any action or proceeding under or in connection
with this Agreement brought before the foregoing courts on the basis of forum
non-conveniens.

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     7.9      SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

     7.10      COUNTERPARTS. This Agreement may be executed in one or more
duplicate counterparts and when signed by all of the parties listed below, shall
constitute a single binding agreement. Delivery of an executed signature page of
this Agreement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart thereof.

     7.11      BENEFIT OF AGREEMENT. Nothing in this Agreement, express or
implied, shall give or be construed to give, any person other than the parties
hereto and their respective permitted successors, transferees and assigns any
legal or equitable right, remedy or claim under this Agreement, or under any
covenants and provisions of this Agreement, each such covenant and provision
being for the sole benefit of the parties hereto and their respective permitted
successors, transferees and assigns.

     7.12      AMENDMENTS AND WAIVERS. No amendment, modification, termination
or waiver of any provision of this Agreement or consent to any departure
therefrom shall be effective unless the same shall be in writing and signed by
each of the parties hereto. Each amendment, modification, termination or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given.

     7.13      SURVIVAL OF AGREEMENTS. The provisions regarding the payment of
expenses and indemnification obligations shall survive and remain in full force
and effect regardless of the termination of this Agreement pursuant to Section
7.14.

     7.14      RELEASE AND SATISFACTION. Upon the indefeasible payment (whether
in cash and/or other consideration which is satisfactory to Secured Party in
their sole discretion) and performance in full of the Obligations, (i) this
Agreement and the security interests created hereby shall terminate and Secured
Party will return the Collateral, including all documentation evidencing or
affecting the Collateral, and (ii) upon written request of Wits Basin, Secured
Party shall execute and deliver to Wits Basin, at Wits Basin’s expense and
without representation or warranty by or recourse to Secured Party, releases and
satisfactions of all financing statements, mortgages, notices of assignment and
other registrations of security.

     7.15      REINSTATEMENT. This Agreement shall continue to be effective or
be automatically reinstated, as the case may be, if at any time any payment
pursuant to this Agreement is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, reorganization, liquidation of Wits
Basin or upon the dissolution of, or appointment of any intervenor or
conservator of, or trustee or similar official for, Wits Basin or any
substantial part of Wits Basin’s assets, or otherwise, all as though such
payments had not been made.

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     7.16      LIMITATION ON DUTY OF SECURED PARTY WITH RESPECT TO THE
COLLATERAL. The powers conferred on Secured Party hereunder are solely to
protect its interest in the Collateral and shall not impose any duty on Secured
Party or any of its designated agents to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
monies actually received by it hereunder, Secured Party shall have no duty with
respect to any Collateral and no implied duties or obligations shall be read
into this Agreement against Secured Party. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment that is substantially
equivalent to that which Secured Party accords its own property, it being
expressly agreed, to the maximum extent permitted by applicable law, that
Secured Party shall have no responsibility for (a) taking any necessary steps to
preserve rights against any parties with respect to any Collateral or (b) taking
any action to protect against any diminution in value of the Collateral, but, in
each case, Secured Party may do so and all expenses reasonably incurred in
connection therewith shall be part of the Obligations.

IN WITNESS WHEREOF, the undersigned have hereunto affixed their signatures.

Wits Basin: Secured Party:           Wits Basin Precious Minerals Inc.   Pandora
Select Partners L.P.         By  /s/ Mark D. Dacko By    

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  Mark D. Dacko, Chief Financial Officer           Its      

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