Exhibit 10.12
17 March 2008

Besmer S.A. de C.V.
Francisco Sarabia No. 721 PTE.
Zona Centro
Durango, Durango, Mexico
RE: LETTER OF INTENT
Gentlemen:
The purpose of this Letter of Intent (“Letter”) is to set forth certain
non-binding understandings and certain binding commitments between Colorado
Goldfields, Inc., (“Acquirer”) and C.P. Victor Salas Gamero, Ing. Victor Salas
Martos, and Liliana Salas (“Sellers”) owners of 100% of the capital stock of
Besmer, S.A. de C.V. a mineral production company (the “Company”), with respect
to a proposed transaction in which Acquirer, or its successors or assigns, will
purchase a portion of the capital stock of the Company owned by Sellers. For
purposes of this Letter, Sellers, the Company and Acquirer are sometimes
collectively referred to as “parties” and individually as a “party.”
The terms of the acquisition will be more particularly set forth in a purchase
agreement and one or more definitive agreements (collectively “Definitive
Agreements”) to be mutually agreed upon by the parties. This Letter outlines the
proposed transaction based on each party’s present understanding of the current
condition of the assets and business operations of the Company. In particular,
Acquirer understands that the Company owns all of the land, buildings,
equipment, rolling stock, and other assets consisting of the facility at the
property locations in the States of Zacatecas and Durango and that Sellers
collectively own 100% of the outstanding shares of capital stock of the Company.
Sellers understand that Acquirer may assign its rights under this Letter.
The following numbered paragraphs 1 — 3 of Part One constitute a general outline
of the proposed transaction and important conditions. The provisions shall be
included in the Definitive Agreements, but in all instances shall be subject to
and contingent upon the parties reaching agreement on the Definitive Agreements
and the terms and conditions set forth in the Definitive Agreements. The
parties’ expressly state their intention that, unless otherwise indicated, this
Letter as a whole, and paragraphs 1 — 4 of Part One in particular, do not and
shall not constitute a legal and binding obligation, contract or agreement
between any of the parties, are not intended to be an extensive summary of all
of the terms and conditions of the proposed acquisition or the Definitive
Agreements, and are subject to the approval of Acquirer’s primary lender. The
parties do, however, expressly intend that paragraphs 5 – 8 of Part Two of this
Letter, upon acceptance by Sellers, and Acquirer, shall constitute the parties’
binding and

5

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

 

enforceable agreements with respect to the procedures for negotiation and
preparation of the Definitive Agreements.
PART ONE: NONBINDING STATEMENT OF UNDERSTANDING
1. MANAGEMENT AGREEMENT & NON-COMPETE. At closing, Sellers will enter into an
agreement to manage the day to day affairs of Besmer, S.A. de C.V. for a
mutually agreed upon period. Additionally, at closing, Sellers will execute and
enter into a non-compete agreement acceptable to the parties pursuant to which,
among other things, Sellers agree that they will not, during the term of the
management agreement and for a period of three years following the termination
thereof, undertake any activities, directly or indirectly, in competition with
the activities of the Company.
2. PREPARATION OF DEFINITIVE AGREEMENTS. The parties will negotiate the terms
and begin preparation of the Definitive Agreements that will govern the
Acquirer’s proposed acquisition of the Capital Stock. To the extent appropriate
for transactions of this type and size, the Definitive Agreements will contain
customary representations, warranties, covenants, indemnities and other
agreements of the parties, including but not limited to:

  (1)   representations and warranties related to each party’s power and
authority to enter into the Definitive Agreements and perform its obligations
thereunder;     (2)   representation and warranty by Sellers that the accounts
receivable plus cash, less accounts payable, of the Company will be equal to or
greater than a mutually agreed upon amount on the day prior to closing;     (3)
  ownership and title to the Capital Stock (and that such interest will be
conveyed free and clear of all encumbrances);     (4)   various representations
and warranties concerning the Company and Acquirer such as due organization,
good standing, the absence of violation of other agreements and laws, the
accuracy of financial information being relied upon, and other matters customary
for transactions of this sort;     (5)   indemnities from Sellers in favor of
Acquirer against all claims and liabilities with respect to breach of such
representations and warranties concerning their ownership interest in the
Capital Stock;     (6)   indemnities from Sellers in favor of Acquirer for
environmental liability occurring prior to the date of closing and/or caused
directly or indirectly by Sellers’ performance or lack of performance under the
management agreement contemplated by paragraph 2 above, and an indemnity from
Acquirer in favor of Sellers for environmental liability occurring after the
date of closing that was not caused directly or indirectly by Sellers’
performance or lack of performance under the management agreement contemplated
by paragraph 2 above; and     (7)   indemnities from Acquirer in favor of
Sellers against all claims and liabilities with respect to breach of Acquirer’s
representations and warranties

6

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

 

The Definitive Agreements are expected to include, without limitation: (1) a
purchase and sale agreement to govern Acquirer’s acquisition of the Capital
Stock; (2) a promissory note; (3) a management agreement; (4) a non-compete
agreement, and (5) any other agreements necessary or desirable in connection
with any of the foregoing arrangements or any transaction contemplated herein.
3. CONDITIONS PRECEDENT TO THE CLOSING OF PROPOSED ACQUISITION. The Definitive
Agreements shall include customary conditions precedent generally applicable to
an acquisition of the nature and size of the transactions contemplated by this
Letter, each of which must be satisfied prior to the consummation of the
transactions contemplated hereby. In general, the closing of the proposed
acquisition and the obligations of each party under the Definitive Agreements
will be subject to the satisfaction of the conditions precedent, which shall
include but not be limited to:

  (a)   Satisfactory Results of Due Diligence. The satisfactory completion of a
due diligence investigation and acquisition audit by Acquirer (as provided in
paragraph 5) showing that the assets of the Company and any actual or contingent
liabilities against those assets, and the prospective business operations by
Acquirer of the Company’s business are substantially the same as currently
understood by Acquirer as of the date of this Letter (determined without regard
to any documents which Sellers or any party may have previously delivered to
Acquirer).     (b)   Compliance. Satisfactory determination that the acquisition
and prospective business operations by Acquirer of the Company’s business will
comply with all applicable laws and regulations, including antitrust and
competition laws.     (c)   Consents and Approvals. The approval and consent of
the Definitive Agreements by the respective Boards of the Company and Acquirer
and the receipt of the consents and approvals from all governmental entities,
utility providers, railways, material vendors, lenders, landlords, customers,
and other parties which are necessary or appropriate to the acquisition of the
Capital Stock and for the prospective business operation by Acquirer, and the
receipt of all necessary governmental approvals including the expiration or
termination of all required waiting periods.     (d)   Absence of Material
Litigation or Adverse Change. There must be no pending or threatened material
claims or litigation involving Sellers or the Company, and no material adverse
change in the business prospects of Acquirer operating the Company’s business.  
  (e)   Delivery of Legal Opinions. Customary legal opinions must be delivered,
the content of which shall be mutually agreed upon.     (f)   Successful
Financing. Acquirer must secure the debt and equity financing necessary to
acquire the Capital Stock.

7

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

 

PART TWO: AGREEMENTS OF THE PARTIES REGARDING THE PROCEDURES FOR NEGOTIATION AND
PREPARATION OF THE DEFINITIVE AGREEMENTS.
In consideration of the costs to be borne by each party in pursuing the
acquisition and sale contemplated by this Letter and in consideration of the
mutual undertakings by the parties as to the matters described in this Letter,
upon execution of counterparts of this Letter by each party, the following
paragraphs 5 through 8 will constitute legally binding and enforceable
agreements of the parties regarding the procedures for the negotiation and
preparation of the Definitive Agreements.
4. DUE DILIGENCE. From the date of acceptance by the parties of the terms of
this Letter, until the negotiations are terminated as provided in paragraph 7 of
this Letter, Sellers will give Acquirer and Acquirer’s management personnel,
legal counsel, accountants, and technical and financial advisors, full access
and opportunity to inspect, investigate and audit the books, records, contracts,
and other documents of the Company as they relate to the Company’s business and
all of the Company’s assets and liabilities (actual or contingent), including,
without limitation, inspecting the Company’s property and conducting additional
environmental inspections of property and reviewing financial records,
contracts, operating plans, and other business records, for the purposes of
evaluating issues related to the operation of the Company’s business. Sellers
further agree to provide Acquirer with such additional information as may be
reasonably requested pertaining to the Company’s business and assets to the
extent reasonably necessary to complete the Definitive Agreements.
5. ACQUISITION OF THE STOCK (75%). According to this Letter, if the Acquirer,
during the term of this Letter of Intent (sixty calendar days from the date of
signature), after due diligence and inspection done to the Company and no legal
impediment or hidden vice, or any kind of material claim or litigation, pending
or threatened, the parties will proceed to the signing of the Definitive
Agreements, which must comply with all the legal requisites, given that for the
transfer of 75% of the Capital Stock from the Company to the Acquirer or any
person or company determined, the Acquirer will pay C.P. VICTOR SALAS GAMERO,
ING. VICTOR SALAS MARTOS and LIC. LILIANA SALAS MARTOS the sum of
US$3,000,000.00 (Three million dollars currency of the United States of
America), which will be distributed according to their percentage holding in the
Company.
6. The amount indicated above, US$3,000,000.00 (Three million dollars in
currency of the United States of America) will be paid by the Acquirer to the
Salas Family as per the following schedule:

  a)   US$750,000,000 (Seven hundred fifty thousand dollars currency of the
United States of America) upon signature of the Definitive Agreements.     b)  
The remaining balance, this is US$2,250,000.00 (Two million two hundred fifty
thousand dollars currency of the United States of America) paid in 16
(sixteen) equal installments

8

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

 

      of US$140,625 (One hundred forty thousand six hundred twenty five) each
plus a 6% (six) annual interest on the unpaid balance, as follows:

                                                                      CAPITAL
PLUS   CAPITAL   INTEREST   TOTAL No.   CAPITAL   INTEREST   INTEREST   PAYMENT
  PAYMENT   PAYMENT
1
    2,250,000.00       33,750.00       2,283,750.00       140,625.00      
33,750.00       174,375.00  
2
    2,109,375.00       31,640.63       2,141,015.63       140,625.00      
31,640.63       172,265.63  
3
    1,968,750.00       29,531.25       1,998,281.25       140,625.00      
29,531.25       170,156.25  
4
    1,828,125.00       27,421.88       1,855,546.88       140,625.00      
27,421.88       168,046.88  
5
    1,687,500.00       25,312.50       1,712,812.50       140,625.00      
25,312.50       165,937.50  
6
    1,546,875.00       23,203.13       1,570,078.13       140,625.00      
23,203.13       163,828.13  
7
    1,406,250.00       21,093.75       1,427,343.75       140,625.00      
21,093.75       161,718.75  
8
    1,265,625.00       18,984.38       1,284,609.38       140,625.00      
18,984.38       159,609.38  
9
    1,125,000.00       16,875.00       1,141,875.00       140,625.00      
16,875.00       157,500.00  
10
    984,375.00       14,765.63       999,140.63       140,625.00       14,765.63
      155,390.63  
11
    843,750.00       12,656.25       856,406.25       140,625.00       12,656.25
      153,281.25  
12
    703,125.00       10,546.88       713,671.88       140,625.00       10,546.88
      151,171.88  
13
    562,500.00       8,437.50       570,937.50       140,625.00       8,437.50  
    149,062.50  
14
    421,875.00       6,328.13       428,203.13       140,625.00       6,328.13  
    146,953.13  
15
    281,250.00       4,218.75       285,468.75       140,625.00       4,218.75  
    144,843.75  
16
    140,625.00       2,109.38       142,734.38       140,625.00       2,109.38  
    142,734.38                                                    
TOTAL
    2,250,000.00       286,875.00       2,536,875.00       2,250,000.00      
286,875.00       2,536,875.00  

  c)   A 2% Net Smelter Return Royalty (NSR) on the products sold or deemed as
sold that are extracted from any of the five mining concessions, which up to
this date are property of the Company. In the event the Acquirer decides to
purchase the royalty rights, it can do so through a payment of US$350,000.00
(three hundred and fifty thousand dollars currency of the United States of
America); in addition, the royalty can be partially purchased by the Acquirer as
follows: for the royalty rights in “La Zacatecana” and “La Virginia”,
US$115,500.00 (one hundred fifteen thousand and five hundred dollars currency of
the United States of America), for the royalty rights in “Remedios”,
US$105,000.00 (one hundred five thousand dollars currency of the United States
of America), for the royalty rights in “El Barreno”, US$105,000.00 (one hundred
five thousand dollars currency of the United States of America) and for the
royalty rights at “Los Angeles”, US$24,500.00 (twenty four thousand five hundred
dollars currency of the United States of America). The option to purchase the
royalty, either partially or as a whole, will have a 4 (four) year term. Once
this term has expired, if the Acquirer has not exercised its right to purchase
the NSR royalty, it will remain permanently for the benefit of the Salas Family.

  d)   Each and every one of the above payments will be paid at the Company’s
address, indicated at the beginning of this document.

9

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

 

  e)   As per the installment payment schedule (b) an annual interest of 6%
(six) will be paid. It is understood that if the Acquirer anticipates payment on
capital, the corresponding interests will be deducted.

  f)   In addition to the payments established above, once the Definitive
Agreements are signed, the Acquirer will grant a loan for up to
USD$5,000,000.00, subject to individual project economics acceptable to the
Acquirer; payable with operating profits generated in the future. The object of
this loan is to increase the mining properties, production capacity of the plant
and purchase the required machinery and equipment for a total capacity of up to
500 tons per day. The aforementioned loan will be provided by the Acquirer to
the Company, free of interest and expenses.

  g)   The parties agree that the long and short term liabilities in the
Company, amounting a total of USD$479,860.00: Señora Magdalena Blanco US$
53,645.00, FIFOMI USD$ 157,700.00, BANORTE USD$ 20,030.00 y CHRYSLER USD$
14,885.00 will remain in the Company to be paid through future production, and
regarding the long term liability in favor of VSG for USD$233,600.00 it will be
withdrawn from the accounting records of the Company by the Salas Family.

7. PAYMENT OF THE LETTER OF INTENT.- As a consequence of this Letter, the
parties agree that the Acquirer will pay C.P. VICTOR SALAS GAMERO the amount of
$50,000.00 (fifty thousand dollars currency of the United States of America),
which in the event the previsions of paragraph 7 take place, will be deducted
from the initial payment (7-a) and this amount will be deposited and/or
transferred by the first to C.P. VICTOR SALAS GAMERO at the financial
institution denominated “Banco Mercantil del Norte, S.A. Institución de Crédito
denominada “Banco Mercantil del Norte”, S.A. Institución de Banca Múltiple Grupo
Financiero BANORTE, Sucursal Número 0184, cuenta número 0900312197, ABA
021000018, SWIFT: MENOMXMT, on or before March 19, 2008. In the event that
material discrepancies in the financial, legal, regulatory, property titles and
environmental aspects or operating conditions of the Company, advised ore grades
or other material discrepancies are found, resulting in unsatisfactory result of
the due diligence, then the Acquirer shall have the option to terminate this
letter of intent and have the initial US$50,000.00 (fifty thousand dollars
currency of the United States of America) refunded within 10 days of such notice
of termination. The refund is also applicable in the event the Salas Family
terminates this Letter before its 60 (sixty) day term. However, if for any other
reason the Acquirer does not sign the Definitive Agreements, such sum of money
will remain to the benefit of C.P. VICTOR SALAS GAMERO, with no need for a
refund to the Acquirer.
8. Either as a separate agreement or as a part of the Definitive Agreements, the
Acquirer acknowledges the ineludible commitment to respect and not to modify in
the future the 25%

10

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

 

capital shares owned by the Salas Family, under no scheme either by capital
investment or liability capitalization, and specifically renounces its majority
right to change the share structure on the grand total Capital Stock of 75% and
25% respectively. The funding that the Acquirer provides during the lifespan of
the project will be treated solely as loans to the Company. In the event there
is a proposal to sale 80% or more of the Capital Stock in the Company and agreed
by both parties, the Salas Family will agree to sell their corresponding shares
in the same terms and conditions as the Acquirer. In addition, the Salas Family
agrees to sell an additional portion of their owned stock to the Acquirer once
the sale conditions are set and accepted by both parties.
9. In case the Acquirer chooses to use the services and collaboration of C.P.
Victor Salas Gamero and Ing.Victor Salas Martos in the day to day management of
the Company, not only in the formalization of the purchase of new mining
concessions, but also in the future expansion and strengthening plans, the
rights and limitations the Salas should have in exercising their work will be
established in writing; in addition, the monthly compensation for these services
will be US$8,000.00 (eight thousand dollars currency of the United States of
America) and paid by the Company. A one year renewable contract will be signed
for the job to be performed. It is understood that the collaboration and support
provided to the Company by the Salas and to the Directors of the Acquirer will
be those in which their opinion and participation is required and translate into
greater benefits for the Company and its shareholders.
10. DISCLAIMER OF LIABILITIES. No party to this Letter shall have any liability
to any other party for any liabilities, losses, damages (whether special,
incidental or consequential), costs, or expenses incurred by the party in the
event the negotiations among the parties are terminated as provided in paragraph
7. Except to the extent otherwise provided in any Definitive Agreement entered
into by the parties, each party shall be solely responsible for its own
expenses, legal fees and consulting fees related to the negotiations described
in this Letter, whether or not any of the transactions contemplated in this
Letter are consummated.
11. TERMINATION. Except for the provisions set forth in paragraphs 5 - 14 of
this Part Two, each party hereby reaffirms its intention that this Letter as a
whole, and paragraphs 1 - 4 in particular, are not intended to constitute, and
shall not constitute, a legal and binding obligation, contract or agreement
between any of the parties, and are not intended to be relied upon by any party
as constituting such. Accordingly, the parties agree that any party to this
Letter may unilaterally withdraw from negotiation or dealing at any time for any
or no reason at the withdrawing party’s sole discretion by notifying the other
party of the withdrawal in writing. If any party withdraws from dealing or
negotiation prior to May 11, 2008, or fails to negotiate in good faith, or if
each party hereto has not entered into all required Definitive Agreements by May
25, 2008, then any obligation to negotiate and prepare the Definitive Agreements
or otherwise deal with any other party to this Letter, and the agreements of the
parties set forth in paragraphs 5 - 14 shall immediately terminate. However, the
terms of any Definitive Agreements entered into by the parties control over the
right to withdraw from dealing or negotiations in this Letter, in that case
termination will be effective expressly and immediately, without the need for a
resolution by any administrative or judicial authority.
12. ACQUIRER EXCLUSIVE OPPORTUNITY. Sellers agree that neither they nor any of
their affiliates will pursue, solicit or discuss any opportunities for any party
other than Acquirer

11

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

 

to acquire or otherwise control the Capital Stock until this Letter is
terminated by Acquirer or mutually by Acquirer and Sellers or any of the events
in paragraph 7 do not occur by the dates stated and Sellers notify Acquirer in
writing that they are pursuing other buyers for the Capital Stock.
13. PERSONALITY.- Independently of the Definitive Agreements, from this point on
the parties reciprocally recognize their personality with which they appear and
commit not to contend such personality.
14. COMPETENCE.- The parties, in all matters relating to this Letter, agree to
expressly submit to the jurisdiction of the competent courthouses and applicable
laws of the city of Durango, Mexico, renouncing to any other jurisdiction that
might correspond due to present or future address. This document exists in both
English and Spanish versions, and in case of discrepancies, the parts agree that
the English version will prevail.
Sincerely,
COLORADO GOLDFIELDS INC.
TODD C. HENNIS
mogul1882@yahoo.com
PRESIDENT
10920 W. ALAMEDA AVE.
SUITE 207
LAKEWOOD, CO 80226
TEL. 303-984-5324
FAX 303-569-0156
INDIVIDUALLY
VICTOR SALAS MARTOS
vicsalas@prodigy.net.mx
FRANCISCO SARABIA No. 721 PTE.
ZONA CENTRO
DURANGO, DGO CP 34000
TEL (618) 811-65-24

12

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

 

FAX (618) 813-56-02
AS LEGAL REPRESENTATIVE FOR C.P. VICTOR SALAS GAMERO
VICTOR SALAS MARTOS
AS LEGAL REPRESENTATIVE FOR C.P. LILIANA SALAS MARTOS
VICTOR SALAS MARTOS

13