Exhibit 10.1

 
 

 
 
 
 
 
 
Effective as of January 20, 2012
 
by and
between
 
GOLDSANDS DEVELOPMENT COMPANY
 
as Optionor
 
and
 
MINEROS S.A.
 
as Optionee
 
 
 
 
_________________________________
 
 
MINERAL RIGHT OPTION
and
JOINT VENTURE AGREEMENT
 
__________________________________
 
 
 
 
 
 
 
 
 

 
 

--------------------------------------------------------------------------------

 
 
 
MINERAL RIGHT OPTION AND JOINT VENTURE AGREEMENT
 
 
THIS BINDING AGREEMENT (hereinafter the “Agreement”) made effective as of the
20th day of January, 2012 (hereinafter the “Effective Date”) is executed by and
between:
 
GOLDSANDS DEVELOPMENT COMPANY, a company duly incorporated and organized under
the laws of Delaware, USA with address for delivery and notice located at Juan
Fanning #219, Miraflores, Peru.
 
(hereinafter the "Optionor" or “GOLDSANDS”) of the first part; and
 
MINEROS S.A., a company organized under the laws of Colombia, with address for
delivery and notice located at Carrera 43ª No. 14-109, Edificio Nova Tempo,
Medellin, Colombia,
 
(hereinafter the “Optionee” or “MINEROS”), of the second part.
 
Optionor and Optionee collectively referred to as the Parties, and individually
and indistinctively referred to as the Party.
 
WHEREAS
 
(i)           Both Parties are mining companies with experience in the
identification and development of mining projects, particularly in the region of
South America.
 
(ii)           MINEROS is interested in acquiring majority ownership and title
of certain concessions,  claim applications, claims, and assorted mining rights,
including all obligations arisen therefrom, with respect to certain areas
located in Peru into a Joint Venture as detailed in Annex I hereto (hereinafter
the “Mineral Rights” or “Concessions”) that are of the property and title of
Goldsands and/or its subsidiaries.
 
(iii)           GOLDSANDS controls ownership of 100% interest in 50 Mineral
Rights Concessions located in Peru through the direct and indirect control of
various wholly owned subsidiaries.
 
(iv)           The Optionor has agreed to grant two (2) exclusive options
(hereinafter, collectively referred to as the “Options”, and each individually
referred to as the “Option”) to the Optionee, and the Optionee has agreed to
receive the Options, each such Option entitling the Optionee access to the
concessions and/or to acquire an interest in and to the Mineral Rights in the
manner hereto described, for an aggregate interest of a maximum of Eighty Five
(85%) undivided interest in a Joint Venture if both Options are exercised, as
detailed herein.
 
(v)           The Concessions are subject to a 2.5% Net Returns Royalty as
described herein.
 
(vi)           Upon the satisfactory completion of diligence by Mineros
(described below), the parties shall negotiate the terms of the final Joint
Venture Agreement, acting reasonably and in good faith, with a view to
completing the Agreement during the 90 day due diligence period.
 
 
 

 
Page 1 of 12

--------------------------------------------------------------------------------

 

 
(vii)           Neither party will make any announcement, issue any press
release or otherwise disclose the existence of this agreement, without the prior
notification of the other party.
Both parties acknowledge that, as reporting companies, the parties may be
required to give public disclosure about the Transaction in accordance with the
applicable securities laws. In addition, the Optionee acknowledges that this
agreement will be deemed a significant transaction for the Optionor under US
securities laws and will require timely disclosure and applicable filings on a
mandatory basis. The parties each agree that they will not make public
statements regarding the transactions contemplated by this Agreement without
first consulting the other party hereto in order that any such public statement
is jointly issued by the parties, except to the extent required by law or any
securities exchange.  Mineros is aware that GoldSands is a reporting company in
the United States and will desire to make periodic news releases as to the
progress of the due diligence and potential joint venture. Where a request is
made for permission under this Article to disclose confidential information or
issue a press release or other public statement, a reply thereto will be made as
soon as possible and in any event within two Business Days after receipt of such
request, failing which the Party requesting will be entitled to disclose such
information in the limited circumstances specified in such request as if such
consent had been given.
 
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants
and agreements hereinafter set forth the parties agree that:
 
REPRESENTATIONS, WARRANTIES AND COVENANTS
 
1.1           The Optionor represents, warrants and covenants (representation,
warrants and covenants that are extensive, when applicable, to the situation of
its subsidiaries to and with the Optionee that:
 
a)      it has been duly incorporated and validly exists as a corporation in
good standing under its laws of origin;
 
b)      it is qualified to do business in those jurisdictions where it is
necessary to fulfil its obligations under this Agreement, and it has the full
power and authority to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
 
c)      it has the requisite power, authority and capacity to fulfil its
obligations under this Agreement;
 
d)      the execution and delivery of this Agreement and the agreements
contemplated hereby have been duly authorized by all necessary action on its
part;
 
e)      prior to the Effective Date, it has obtained all authorizations,
approvals, including regulatory approval, or waivers that may be necessary or
desirable in connection with the transactions contemplated in this Agreement;
 
f)       there are no other consents, approvals or conditions precedent to the
performance of this Agreement which have not been obtained;
 
g)       it is not in breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which is subject or which apply to it;
 
 
 

 
Page 2 of 12

--------------------------------------------------------------------------------

 

 
 
h)     the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms hereof
does not and will not conflict with or result in a breach of or violate any of
the terms, conditions or provisions of any law, judgment, order, injunction,
decree, regulation or ruling of any court or governmental authority, domestic or
foreign, to which the Optionor is subject;
 
i)       it is now, and will also be thereafter at the time of legal transfer of
interests in the Mineral Rights when any of the Options are exercised, the
registered and beneficial owner of the Mineral Rights free and clear of all
liens, charges and claims of others and no taxes, royalties or lease payments or
like amounts are due in respect of any of the mineral claims that comprised the
Mineral Rights;
 
j)       there is no adverse claim or challenge against or to the ownership of
or title to the interest it has on the Mineral Rights, nor to its knowledge is
there any basis therefore, and there are no outstanding agreements or options to
acquire or purchase any shares in the GoldSands subsidiary companies and on the
Mineral Rights or any portion thereof, and no person other than the Optionor
pursuant to the provisions hereof, has any interest whatsoever in the subsidiary
companies and in the production from any of the mineral claims comprising the
Mineral Rights;
 
k)      the Mineral Rights have been duly and validly located and recorded in a
good and miner-like manner pursuant to applicable mining laws in Peru;
 
l)       all permits and licenses covering the Mineral Rights as they currently
stand have been duly and validly issued pursuant to applicable mining laws in
Peru and are in good standing by the proper doing and filing of assessment work
and the payment of all fees, taxes and rentals in accordance with the
requirements of applicable mining laws in Peru and the performance of all other
actions necessary in that regard; and
 
m)     it requires no third party consent of any kind to enter into this
Agreement and grant the Options contemplated hereby.
 
1.2           The Optionee represents, warrants and covenants to and with the
Optionor that:
 
a)      it has been duly incorporated and validly exists as a corporation in
good standing under its laws of origin;
 
b)     neither the execution and delivery of this Agreement by the Optionee nor
the performance by the Optionee of its obligations hereunder conflicts with the
Optionee’s constating documents or any agreement to which it is bound;
 
c)      the execution, delivery and performance by the Optionee of this
Agreement and any other agreement or instrument to be executed and delivered by
it hereunder and the consummation by it of all the transactions contemplated
hereby and thereby have been duly authorised by all necessary corporate action
on the part of the Optionee; and
 
d)      excepting only as otherwise disclosed herein, the Optionee is not
subject to, or a party to, any charter or by-law restriction, any law, any
claim, any encumbrance or any other restriction of any kind or character which
would prevent the execution of its obligations as hereof or the consummation of
the transaction contemplated by this Agreement or any other agreement or
instrument to be executed and delivered by the Optionee hereunder.
 
 
 

 
Page 3 of 12

--------------------------------------------------------------------------------

 

 
 
 
The representations and warranties contained hereof are provided for the
exclusive benefit of the other Party and a breach of any one or more thereof may
be waived by the non-breaching Party in whole or in part at any time without
prejudice to its rights in respect of any other breach of the same or any other
representation or warranty.
 
GRANT AND EXERCISE OF OPTIONS
 
2.1           The Optionor hereby grants to the Optionee the sole and exclusive
right and option to acquire up to a eighty five percent (85%) undivided interest
in a Joint Venture which will own the Mineral Rights, such 85% interest to be
free and clear of all liens, charges, encumbrances, security interests and
adverse claims except for a 2.5% Net Returns Royalty described in Annex II.
 
2.2           The Parties agreed that the Optionee may exercise the Options in
two separate  increments, as described below, each such increment being its own
Option.
 
2.3           On execution of this Mineral Right Option Agreement. The Optionee
has the right to a 90 day due diligence period from February 1, 2012. During
which time the Optionor will grant access to all 50 Mining Concessions covered
by this agreement as listed in Annex I as well as to supply any and all relevant
documentation necessary for the Optionee to decide if it elects to proceed with
Option 1 below. Mineros may commence due diligence investigations on GoldSands
and the Claims, respectively, and shall continue to have access to due diligence
materials up to 90 days from February 1, 2012 (“Due Diligence Period”).  During
the Due Diligence Period Optionee and its subsidiaries will give the Optionee
full access to the:
 
1.1.1.    
books, records, business plans, financial and operating data and all other
information;

 
1.1.2.    
assets and operations; and

 
1.1.3.    
personnel, relating to the Claims.

 
During this period, the Optionee, will be entitled to collect samples. The due
diligence period  will commence on February 1st 2012.
 
All costs related to this Due Diligence period, including the services performed
by the Optionor and approved by  the Optionee are the responsibility of the
Optionee.
 
(a)           Option 1 : 24 month Standstill Agreement
 
Within 10 days of the  completion of the due diligence period, the Optionee may
exercise Option 1 to choose and hold the 50 concessions in  a Joint Venture.
(hereinafter, the 24 month standstill Option 1) for a payment of US $ 200.000
(USD two hundred thousand) per  4 month period for a maximum of 24 months at the
beginning of each  4 month period.
 
The Optionee shall have the right to  terminate its involvement in the project
at any time, with no liability whatsoever,  during this period giving 1 month
notice to the Optionor.
 
 
 

 
Page 4 of 12

--------------------------------------------------------------------------------

 

 
 
 
During the Option 1 period, the Optionor will standstill and will not enter into
any kind of negotiation, relating to the Mining Rights set in Annex I hereto or
make any further efforts to seek other potential optionee’s, purchasers or
business arrangements with any  potential    purchasers or partners concerning
the chosen concessions.
 
(b)           Option 2 : Form 85/15 Joint Venture by formation of a Special
Purpose Entity
 
Subject to the prior and due and complete exercise by the Optionee of the Option
1 in accordance with the paragraph before, the Optionee may within  27 months
from February 1, 2012 exercise the option to acquire an eighty five percent
(85%) interest in a new joint venture through the formation of a Special Purpose
Entity (“SPE”) , with GoldSands owning the remaining fifteen percent (15%) of
the SPE and in the Mineral Rights, in accordance with the terms set out below
(hereinafter, the “Option 2”). GoldSands 15% net profit interest would be on a
carried no capital costs basis, meaning that all capital equipment costs related
to the development of the concessions would be born by the 85% partner. This new
85/15 SPE would be transferred ownership of the concessions chosen in Option 1
above.
 
In order to exercise the Option 2 to form the  SPE the Optionee, within27 months
as from February 1, 2012 ( 90 day due diligence period plus 24 months), shall:
 
(i)     have exercised and completed the Option 1; and
 
(ii)    pay US$  200.000 (US Dollars  Two hundred thousand) per  4 month period
to the order and the direction of the Optionor as an Advance Profit, to be
credited towards payment of amounts owing related to GoldSands 15% carried
ownership in the Joint Venture.; and
 
(iii)   Expend a minimum of US$ 3´500.000 (US Dollars Three Million Five Hundred
Thousand on exploration and development of the concessions. Such cost are to be
the sole responsibility of the Optionee and not be a part of the Joint Venture .
 
For the purposes of this Agreement the Optionee is deemed to have fully
exercised the Option 2 only once both obligations described above in points (i)
and (ii) have been completed.
 
On completion of the Option 2 the Optionee shall be the owner of eighty-five
percent (85%) undivided interest in the SPE and its Mineral Rights through the
direct ownership of 85% of the SPE.
 
The Optionee shall have the right to terminate its involvement in the project at
any time during this period giving 1 month notice to the Optionor.
 
 
NET RETURNS ROYALTY
 
3.1           Upon completion by Optionee of Option 2 , the Optionee recognizes
that the concessions in the SPE are subject to an existing 2.5% Net Returns
Royalty (“NRR”), where Net Returns Royalty payable to the existing NRR owner has
the meaning set out in Annex II (hereinafter the “NET RETURN ROYALTY”). The NET
RETURN ROYALTY will be calculated and paid to the NRR owner or to its appointed
nominees in accordance with the Annex II.
 
 
 

 
Page 5 of 12

--------------------------------------------------------------------------------

 

 
 
JOINT VENTURE DEVELOPMENT
 
4.1           Following the due and complete acquisition by the Optionee of 85%
interest under Option 2 in the Mineral Rights under this Agreement the Optionor
and the Optionee will thereby be deemed to form a Joint Venture by way of the
formation of a SPE (85/15 interests) for the purpose of carrying out further
development work and production on the Mineral Rights and will, in good faith,
negotiate and execute a Joint Venture Agreement, under which the Optionee will
be the operator of the mining project to be developed. The interest of the
Parties in the Mineral Rights shall be the interest of the Parties under the
Joint Venture Agreement where the Optionor has a no capital cost carried net
profit interest for 15% (hereinafter the “Joint Venture Development”).
 
4.2           Under the Joint Venture Development, the Optionee shall have the
whole responsibility for developing a feasible mining project and all necessary
facilities for the extraction, crushing, processing and beneficiation of
commercially valuable minerals, including all necessary facilities for
compliance with the applicable laws, including environmental laws governing
mining activity in Peru (hereinafter the “Feasible Project”). All necessary
costs and investment required for the developing of a Feasible Project shall be
supported exclusively by the Optionee. Optionor shall have a capital cost
carried net profit interest in the Mineral Rights.
 
4.3           Under the Joint Venture, as the operator, Mineros shall maintain a
true and correct set of records pertaining to the exploration and evaluation of
the concessions and any resulting mining operation and provide written monthly
reports to GoldSands. GoldSands may, upon request, audit any and all records of
Mineros relating to the joint venture operations. GoldSands shall have the right
to monitor, at its own expense, all activities related to the Joint Venture
Agreement that are performed by Mineros or its subcontractors. This shall
include, but not be limited to, the right to make site inspections at any time;
to bring experts and consultants on site to examine or evaluate completed work
or work in progress; to examine the books, ledgers, documents, papers, and
records pertinent to the Agreement; and, to observe personnel in every phase of
performance of the related work.
 
4.4           Under the Joint Venture Development the Optionee shall pay to the
Optionor an advance minimum mining profit interest per 4 month period of
$200,000 (United States Dollars Two hundred thousand), that will be deducted
from the Optionor 15% NET PROFIT INTEREST  (hereinafter the “Advance Minimum
Annual Profit Interest”).
 
 
4.5           If, under the joint venture agreement, Mineros proposes to
surrender or abandon any Concessions or Mineral Rights comprised in and of the
Joint Venture Properties, then it will notify GoldSands of its
intent.  Following a surrender, abandonment or transfer made pursuant to such
consent then the Mineral Rights so surrendered, abandoned or transferred will
thereafter cease to form part of the Joint Venture Properties and will no longer
be subject to this Agreement, save and except with respect to such obligations
or liabilities of the Parties as have accrued to the date of such surrender,
abandonment or transfer.
 
 
 
 

 
Page 6 of 12

--------------------------------------------------------------------------------

 

 
 
OBLIGATIONS OF OPTIONOR DURING OPTION PERIOD
 
5.1           During the 90 day period  from February 1, 2012 and prior to the
establishment of the Joint Venture formed under Option 1, the Optionor will:
 
a)    maintain in good standing the Mineral Rights that are in good standing on
the date hereof by the performance of all actions (except for those economic
obligations arisen as from the Effective Date of this Agreement, which shall be
of the responsibility of the Optionee) which may be necessary under Peruvian law
in that regard and in order to keep such Mineral Rights free and clear of all
liens and other charges arising from the Optionee’s activities thereon except
those at the time contested in good faith by the Optionee;
 
b)    maintain in good standing its subsidiary companies which own the
concessions, and the shareholding of both companies free and clear of all liens;
 
c)   restrain from issuing any additional shares or cause to issue any
additional shares in these subsidiary companies;
 
d)    restrain from transferring any of its subsidiary companies to any other
third party;
 
e)    permit the directors, officers, employees and designated consultants of
the Optionee, at their own risk, access to the Mineral Rights at all reasonable
times, and providing the Optionee agrees to indemnify the Optionor against and
to save the Optionor harmless from all costs, claims, liabilities and expenses
that the Optionor may incur or suffer as a result of any injury (including
injury causing death) to any director, officer, employee or designated
consultant of the Optionee while on the Mineral Rights;
 
5.2           During the 24 month period  from May 1, 2012 and prior to the
establishment of the Joint Venture formed under Option 2, the Optionor will:
 
a)     maintain in good standing its subsidiary companies which own the
concessions, and the shareholding of both companies free and clear of all liens;
 
b)     restrain from issuing any additional shares or cause to issue any
additional shares in these subsidiary companies;
 
c)     restrain from transferring any of its subsidiary companies to any other
third party;
 
d)     permit the directors, officers, employees and designated consultants of
the Optionee, at their own risk, access to the Mineral Rights at all reasonable
times, and providing the Optionee agrees to indemnify the Optionor against and
to save the Optionor harmless from all costs, claims, liabilities and expenses
that the Optionor may incur or suffer as a result of any injury (including
injury causing death) to any director, officer, employee or designated
consultant of the Optionee while on the Mineral Rights;
 
 

 
Page 7 of 12

--------------------------------------------------------------------------------

 

 
 
 
OBLIGATIONS OF OPTIONEE DURING OPTION PERIOD
 
6.1           During the 27 months  from February 1, 2012, the Optionee will:
 
a)    do all work on the Mineral Rights in a good and workmanlike fashion and in
accordance with all applicable laws, regulations, orders and ordinances of any
governmental authority; and
 
b)    indemnify and save the Optionor harmless in respect of any and all costs,
claims, liabilities and expenses arising out of the Optionee’s activities
through its subsidiary company’s and/or on the Mineral Rights.
 
6.2           During the 24 months  from May 1, 2012, the Optionee will:
 
Provided that Option 1 is exercised the Optionee shall maintain in good standing
the Mineral Rights that are in good standing on the date hereof by the
performance of all actions  which may be necessary under Peruvian law in that
regard and in order to keep such Mineral Rights free and clear of all liens and
other charges arising from the Optionee’s activities thereon except those at the
time contested in good faith by the Optionee;
 
 
ARBITRATION
 
7.1           All questions or matters in dispute with respect to the
interpretation of this Agreement will, insofar as lawfully possible, be
submitted to arbitration pursuant to the terms hereof using “final offer”
arbitration procedures.
 
7.2           It will be a condition precedent to the right of any party to
submit any matter to arbitration pursuant to the provisions hereof, that any
party intending to refer any matter to arbitration will have given not less than
10 days’ prior written notice of its intention so to do to the other party
together with particulars of the matter in dispute.
 
7.3           On the expiration of such 10 days, the party who gave such notice
may proceed to commence procedure in furtherance of arbitration as provided in
this Section.
 
7.4           The party desiring arbitration (the “First Party”) will nominate
in writing three proposed arbitrators, and will notify the other party (the
“Second Party”) of such nominees, and the other party will, within 10 calendar
days after receiving such notice, either choose one of the three or recommend
three nominees of its own. All nominees of either party must hold accreditation
as either a lawyer, accountant or mining engineer. If the First Party fails to
choose one of the Second Party’s nominees then all six names shall be placed
into a hat and one name shall be randomly chosen by the president of the First
Party and that person if he/she is prepared to act shall be the nominee. Except
as specifically otherwise provided in this Section the arbitration herein
provided for will be conducted in accordance with the UNCITRAL Arbitration Rules
and the place of arbitration shall be Peru, South America ,. The parties shall
thereupon each be obligated to offer to the Arbitrator within 21 calendar days
of his/her appointment a proposed written solution to the dispute and the
arbitrator shall within 10 calendar days of receiving such proposals choose one
of them without altering it except with the consent of both parties.
 
 
 
 
 
Page 8 of 12

--------------------------------------------------------------------------------

 

 
7.5           The expense of the arbitration will be paid as specified in the
award.
 
7.6           The parties agree that the award of the arbitrator will be final
and binding upon each of them.
 
 
DEFAULT AND TERMINATION
 
8.1           If at any time during the term of this Agreement either party
fails to perform any obligation hereunder or any representation or warranty
given by it proves to be untrue, then the other party may terminate this
Agreement (without prejudice to any other rights it may have) providing:
 
(i)     
it first gives to the party allegedly in default a notice of default containing
particulars of the obligation which such has not performed, or the warranty
breached;

 
 (ii)    
the other party does not dispute the default, then if it is reasonably possible
to cure the default without irreparable harm to the non-defaulting party, the
defaulting party does not, within 30 calendar days after delivery of such notice
of default, cure such default by appropriate payment or commence to correct such
default and diligently prosecute the matter until it is corrected.

 
 
CONFIDENTIALITY
 
9.1          Each party will agree to keep the existence and the terms of this
Agreement confidential and will not make any disclosure except where disclosure
is required by law.  In addition, each party agrees that any information
provided to the other in connection with the negotiation and entering into of
the definitive agreements for the Transaction will be maintained in confidence,
will not be disclosed to any other party, other than each party’s respective
professional advisors, except where disclosure is compelled by applicable law
and will not be used by the party for any purpose other than the evaluation and
completion of the Transaction.  Each party will ensure that its respective
officers, directors, employees and consultants will agree to maintain all
information in connection with this Letter of Intent and the business
combination transactions confidential.  All obligations regarding
confidentiality will survive termination of this Letter of Intent.
 
 
COUNTERPARTS
 
10.1        This Memorandum may be executed in counterparts, each of which shall
be deemed an original, but which when taken together will constitute one and the
same document.
 
 
 

 
Page 9 of 12

--------------------------------------------------------------------------------

 

 
 
ENTIRE AGREEMENT
 
11.1           It is agreed that this agreement is intended to be legally
binding (“Binding Provisions”), on the parties hereto, however a definitive
agreement can replace this Agreement if both parties agree to any additions,
clarifications or modifications hereto. This is the entire agreement between
them pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions whether oral or written of the
Parties. There are no representations, warranties or other agreements between
the Parties in connection with the subject matter hereof, except as set forth
herein. No amendment or termination of this Agreement shall be binding unless
executed in writing by the Party to be bound thereby. No waiver of any other
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provisions nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided. If any provision of this Agreement is or becomes
illegal, invalid or unenforceable, in whole or in part, the remaining provisions
will nevertheless be and remain valid and subsisting and the said remaining
provisions will be construed as if this Agreement had been executed without the
illegal, invalid or unenforceable portion.
 
NOTICES
 
12.1           All notices and other communications in connection with this
Agreement must be in writing and given by (i) hand delivery (ii) through a major
international courier service, or (iii) facsimile transmissions, in each case
addressed as specified below or in any subsequent notice from the intended
recipient to the party sending the notice. Such notices and communications will
be effective upon delivery if delivered by hand, upon receipt if sent by
international courier service, or upon receipt if sent by facsimile
transmission. Notices shall be addressed as follows:
 
 
GOLDSANDS DEVELOPMENT COMPANY
Juan Fanning #219
Miraflores, Peru
 
Attention: Dr. Michael Stocker
Telephone: +51-1-446-6807
Email: mstocker@goldsandsco.com
 
With a copy to:
 
Quarles & Brady, LLP
411 East Wisconsin Avenue, Suite 2040
Milwaukee, Wisconsin  53202
Attention:  Chad J. Wiener
Fax: 414-978-8198
Email: chad.wiener@quarles.com
 
 
 
 
 
Page 10 of 12

--------------------------------------------------------------------------------

 

 
MINEROS S.A.
Carrera 43A No. 14-109
Edificio Nova Tempo
Medellin, Colombia
 
Attention: Gonzalo Gomez Vargas
Telephone: 574 2665757
Email: gonzalo.gomez@mineros.com.co

 
With a copy to:
 
Ana Isabel Gaviria A
Telephone: 574 2665757
Email: ana.gaviria@mineros.com.co
 
or to such addresses as each Party may from time to time specify by notice.  Any
notice will be deemed to have been given and received:
 
(a)     
if personally delivered, then on the day of personal service to the recipient
Party, provided that if such date is a day other than a Business Day such notice
will be deemed to have been given and received on the first Business Day
following the date of personal service;

 
(b)     
if sent by facsimile transmission and successfully transmitted prior to 4:00 pm
on a Business Day (recipient Party time), then on that Business Day, and if
transmitted after 4:00 pm on that day then on the first Business Day following
the date of transmission.

 
GOVERNING LAW
 
13.1           This assignment agreement and any dispute arising hereunder will
be governed by the laws of Peru, South America, without giving effect to the
conflict of laws provisions thereof. Each of the Optionor and the Optionee
hereby irrevocable submits to the exclusive jurisdiction of the courts of Peru,
in respect of any action or proceeding brought against it by the Optionor or the
Optionee, respectively, arising under this Agreement.
 
 
ENTIRE AGREEMENT
 
14.1           This Agreement represents the final agreement between the Parties
with respect to the subject matter hereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the Parties.
 
 
 
TIME OF THE ESSENCE
 
15.1           Time is of the essence in the performance of each obligation
under this Agreement.
 
 
 

 
Page 11 of 12

--------------------------------------------------------------------------------

 

 
 
EXECUTION IN COUNTERPARTS
 
16.1        This Agreement is executed in two (2) counterparts and by the
Parties hereto in separate counterparts, each of which when so executed will be
deemed to be an original and both of which when taken together will constitute
one and the same agreement.
 
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date first above written.
 
GOLDSANDS DEVELOPMENT COMPANY
MINEROS S.A.
 
 
By: /s/ Michael Stocker                                                 
             Michael Stocker
             Chief Executive Officer
 
 
By: /s/ Beatriz Uribe Restrepo                                       
             Beatriz Uribe Restrepo
             President

 
 
 
 
 
 
 
 
 
 
Page 12 of 12

--------------------------------------------------------------------------------

 
 

 
ANNEX I
 
(Insert: List of 50 Mining Concessions)

 
Name
Area
(hectares)
Dept.
Province
District
Observation
Aixa 2
1000
Loreto
Datem del Marañon
Manseriche
 
Alana 10
900
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 11
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 12
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 13
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 14
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 15
800
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 16
800
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 17
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 18
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 19
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 4
900
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 5
700
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 6
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 7
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 8
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Alana 9
1000
Loreto
Datem del Marañon
Manseriche
Fully overlap Zona de Amortiguamiento ANP
Bianka 5
1000
Loreto
Datem del Marañon
Manseriche
 
Castalia 1
1000
Loreto
Datem del Marañon
Manseriche
 
Castalia 2
1000
Loreto
Datem del Marañon
Manseriche
 
Castalia 3
500
Loreto
Datem del Marañon
Manseriche
 
Delfina 1
900
Amazonas
Condorcanqui
Nieva
Partially overlap Zona de Amortiguamiento ANP
Delfina 2
900
Amazonas
Condorcanqui
Nieva
Partially overlap Zona de Amortiguamiento ANP
Delfina 3
1000
Amazonas
Condorcanqui
Nieva
Partially overlap Zona de Amortiguamiento ANP
Delfina 4
700
Amazonas
Condorcanqui
Nieva
Partially overlap Zona de Amortiguamiento ANP
Delfina 5
1000
Amazonas
Condorcanqui
Nieva
Partially overlap Zona de Amortiguamiento ANP
Mika 1
600
Loreto
Datem del Marañon
Manseriche
 

Mika 10
900
Loreto
Datem del Marañon
Manseriche
Partially overlap Zona de Amortiguamiento ANP
Mika 2
1000
Loreto
Datem del Marañon
Manseriche
 
Mika 3
900
Loreto
Datem del Marañon
Manseriche
 
Mika 4
1000
Loreto
Datem del Marañon
Manseriche
 
Mika 5
1000
Loreto
Datem del Marañon
Manseriche
 
Mika 6
1000
Loreto
Datem del Marañon
Manseriche
 
Mika 7
900
Loreto
Datem del Marañon
Manseriche
 
Mika 8
1000
Loreto
Datem del Marañon
Manseriche
Partially overlap Zona de Amortiguamiento ANP
Mika 9
1000
Loreto
Datem del Marañon
Manseriche
 
Rosalba 1
900
Loreto
Datem del Marañon
Manseriche
 
Rosalba 2
900
Loreto
Datem del Marañon
Manseriche
 
Rosalba 3
1000
Loreto
Datem del Marañon
Manseriche
 
Rosalba 4
1000
Loreto
Datem del Marañon
Manseriche
 
Rosalba 5
1000
Loreto
Datem del Marañon
Manseriche - Barranca
 

 
 
 
 
 
 
AI - 1

--------------------------------------------------------------------------------

 
 
 
 
 
Name
Area
(ha)
Department
Province
District
Observation
Aixa 1
1000
Loreto
Datem del Marañon
Manseriche
 
Alana 1
600
Loreto
Datem del Marañon
Manseriche-Morona
Overlaps
010188704, 010188604, 010188504
Alana 2
600
Loreto
Datem del Marañon
Manseriche- Morona
 
Alana 3
800
Loreto
Datem del Marañon
Manseriche
Overlaps 010045107
Casandra 1
1000
Loreto
Datem del Marañon
Barranca-Manseriche
 
Casandra 2
1000
Loreto
Datem del Marañon
Barranca- Morona
 
Casandra 3
900
Loreto
Datem del Marañon
Barranca- Morona
 
Casandra 4
1000
Loreto
Datem del Marañon
Barranca
 
Casandra 5
1000
Loreto
Datem del Marañon
Barranca
 

 
 
 
 
 
 
 

 
AI - 2

--------------------------------------------------------------------------------

 

 
 
 
ANNEX II
 
NET RETURNS ROYALTY
 
Pursuant to the Agreement to which this Exhibit is attached, NRR owner (for the
purposes herein the “Payee”) will be entitled to a royalty equal to 2.5% of net
returns (the “Net Returns Royalty”) payable by the Joint Venture (“Payor”) as
set forth below.
 
Net Returns Royalty
 
A.           “Net Returns Royalty” means the aggregate of:
 
 
1.
all revenues from the sale or other disposition of ores, concentrates or
minerals produced from the mineral properties arisen as from the Mineral Rights
(the “Properties”); and

 
2.
all revenues from the operation, sale or other disposition of any facilities the
cost of which is included in the definition of “Operating Expenses”, “Capital
Expenses” or “Exploration Expenses”; less (without duplication) Working Capital,
Operating Expenses, Capital Expenses and Exploration Expenses.

 
B.           “Working Capital” means the amount reasonably necessary to provide
for the operation of the mining operation on the Properties and for the
operation and maintenance of the Facilities for a period of six months.
 
C.           “Operating Expenses” means all costs, expenses, obligations,
liabilities and charges of whatsoever nature or kind incurred or chargeable
directly or indirectly in connection with Commercial Production from the
Properties and in connection with the maintenance and operation of the
Facilities, all in accordance with generally accepted accounting principles,
consistently applied, including, without limiting the generality of the
foregoing, all amounts payable in connection with mining, handling, processing,
refining, transporting and marketing of ore, concentrates, metals, minerals and
other products produced from the Property, all amounts payable for the operation
and maintenance of the Facilities including the replacement of items which by
their nature require periodic replacement, all taxes (other than income taxes),
royalties and other imposts and all amounts payable or chargeable in respect of
reasonable overhead and administrative services.
 
D.             “Capital Expenses” means all expenses, obligations and
liabilities of whatsoever kind (being of a capital nature in accordance with
generally accepted accounting principles) incurred or chargeable, directly or
indirectly, with respect to the development, acquisition, redevelopment,
modernization and expansion of the Properties and the Facilities, including,
without limiting the generality of the foregoing, interest thereon from the time
so incurred or chargeable at a rate per annum from time to time equal to prime
rate established by the Bank of America, New York Branch, New York, plus 2
percent per annum, but does not include Operating Expenses nor Exploration
Expenses.
 
 
 
 

 
AII - 1

--------------------------------------------------------------------------------

 
 

 
 
E.            “Exploration Expenses” means all costs, expenses, obligations,
liabilities and charges of whatsoever nature or kind incurred or chargeable,
directly or indirectly, in connection with the exploration and development of
the Properties including, without limiting the generality of the foregoing, all
costs reasonably attributable, in accordance with generally accepted accounting
principles, to the design, planning, testing, financing, administration,
marketing, engineering, legal, accounting, transportation and other incidental
functions associated with the exploration and mining operation contemplated by
this agreement and with the Facilities, but does not include Operating Expenses
nor Capital Expenses.
 
F.            “Facilities” means all plant, equipment, structures, roads, rail
lines, storage and transport facilities, housing and service structures, real
property or interest therein, whether on the Properties or not, acquired or
constructed exclusively for the mining operation on the Properties contemplated
by this Agreement (all commonly referred to as “infrastructure”).
 
G.            “Commercial Production” means the operation of the Properties or
any portion thereof as a producing mine and the production of mineral products
therefrom (but does not include bulk sampling, pilot plant or test operations).
 
Payment
 
       Net Returns shall be calculated for each calendar quarter in which Net
Returns are realized, and payment as due hereunder shall be made within 30 days
following the end of each such calendar quarter. Such payments shall be
accompanied by a statement summarizing the computation of Net Returns and copies
of all relevant settlement sheets. Such quarterly payments are provisional and
subject to adjustment within 90 days following the end of each calendar
year.  Within ninety days after the end of each calendar year, Payor shall
deliver to Payee an unaudited statement of royalties paid to Payee during the
year and the calculation thereof. All year end statements shall be deemed true
and correct six months after presentation, unless within that period Payee
delivers notice to Payor specifying with particularity the grounds for each
exception.  Payee shall be entitled, at Payees’s expense, to an annual
independent audit of the statement by a national firm of chartered accountants,
only if Payee delivers a demand for an audit to Payor within four months after
presentation of the related year-end statement.
 
 
 
 

 
 
AII - 2

--------------------------------------------------------------------------------