EXHIBIT 10.3

SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (this “Agreement”) is dated as of June 19, 2007, and is
by and between Wits Basin Precious Minerals Inc., a Minnesota corporation
(“Issuer”), and China Gold, LLC a Kansas limited liability company, its
successors and assigns (together with its successors and assigns, “Purchaser”).
 
RECITALS
 
The following recitals are a material part of this Agreement.
 
A.  Issuer and Purchaser are parties to that certain Convertible Notes Purchase
Agreement dated as of April 10, 2007, as amended by the Amendment to the
Convertible Notes Purchase Agreement dated as of June 19, 2007 (as the same may
hereafter be further modified, amended, restated or supplemented from time to
time, the “Convertible Notes Purchase Agreement”), pursuant to which, among
other things, Issuer has agreed to issue and sell, and Purchaser has agreed to
purchase from Issuer 8.25% Secured Convertible Notes in an aggregate principal
amount of at least $12,000,000 (the “Notes”) within 12 month of the Initial
Closing Date. All capitalized terms used in this Agreement without definition
have the definitions given to them in the Convertible Notes Purchase Agreement.
 
B.  Pursuant to the Purchase Agreement, on April 10, 2007, Issuer sold, and
Purchaser purchased, the Initial Note in the amount of $3,000,000. On May 7,
2007, Issuer sold, and Purchaser purchased, an Additional Note in the amount of
$2,000,000.
 
C.  Issuer desires that Purchaser acquire an Additional Note in the principal
amount of $4,000,000.
 
D.  Under the terms of the Convertible Notes Purchase Agreement, Purchaser’s
obligation to purchase the Additional Note is subject to Purchaser’s receipt of
a Security Agreement, in form and substance satisfactory to Purchaser and
Issuer, granting Purchaser a security interest in all of the assets acquired
from the use of proceeds for the sale of all of the Additional Notes.
 
E.  To cause Purchaser to purchase the Additional Notes as contemplated in the
Convertible Notes Purchase Agreement, Issuer has agreed to grant to Purchaser a
security interest in certain of its existing property to secure all of its
existing and future obligations to Purchaser, including all of its Obligations.
 
AGREEMENT
 
NOW, THEREFORE, to cause Purchaser to purchase the Additional Notes, and in
recognition that Purchaser would not be required to purchase the Additional
Notes but for Issuer’s promises and agreements hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, Issuer and Purchaser agree as follows:
 
 
 

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1.  Grant of Security Interest. Issuer grants to Purchaser a present and
continuing security interest in all of Issuer’s right, title and interest in and
to all the following property of Issuer (collectively, the “Collateral”):
 
(a)  Promissory note of China Global Mining Resources Limited, a corporation
organized and existing under the laws of the British Virgin Islands (“China
Global”) in the amount of US$2,000,000 dated as of June 15, 2007 in favor of
Issuer;
 
(b)  All contract rights and privileges and instruments now or hereafter
assigned or pledged as security or guaranty the payment of the promissory note
referenced in subsection (a) above, including but not limited to: (i) Joint
Venture Agreement dated April 14, 2007 and Supplemental Agreement dated June 6,
2007 with Shaanxi Hua Ze Nickle Smelting Co. in respect of acquisition of 80%
equity interest in Sino-American Hua Ze Nickel & Cobalt Metal Co., Ltd; and (ii)
commodity purchase agreement dated June 15, 2007 with Shaanxi Hua Ze Nickle
Smelting Co. for purchase of 40 tons of electrolytic nickel with purity of not
less than 99%;
 
(c)  Promissory note of China Global in the amount of US $5,000,000 dated as of
June 15, 2007 in favor of Issuer;
 
(d)  All contract rights and privileges and instruments now or hereafter
assigned or pledged to secure or guaranty payment of the promissory note
referenced in subsection (c) above, including, but not limited to: (i) Equity
Transfer Heads of Agreement dated May 4, 2007 with Lu Benzhao in respect of
purchase of 95% of the equity in Yun County Changjiang Mining Company Limited;
and (ii) Equity and Asset Transfer Heads of Agreement, dated May 4, 2007 with Lu
Benzhao, Lu Nan, Maanshan Zhaoyuan Mining Co., Ltd.and Xiananshan Mining Co.,
Ltd. In respect of purchase of 100% equity in Nanjing Sudan Mining Co., Ltd. And
assets from both of Mannshan Zhaoyuan Mining Co., Ltd. And Xiaonanshan Mining
Co., Ltd.;
 
(e)  All financing statements and other writings which now or hereafter evidence
a security interest for the benefit of Issuer in the items specified in
subsection (a) through (d) above;
 
(f)  All additions and accessions to, replacements and substitutions for,
proceeds of, and the use or operation of the property described in subsections
(a) through (e) above, whether tangible or intangible, and, to the extent not
otherwise included, all payments under any insurance policy (whether or not
Purchaser is the loss payee thereof) and under any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral.
 
 
 

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To the extent that the Uniform Commercial Code does not apply to any item of the
Collateral, it is the intention of the parties and this Agreement that Purchaser
have a common law pledge or collateral assignment of such item of Collateral.

2.  Security for Obligations. This Agreement secures the payment and performance
of all of the Obligations.
 
3.  [Reserved.]
 
4.  Further Assurances.
 
(a)  Issuer agrees that it shall, from time to time and at its sole expense,
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that Purchaser may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Purchaser to exercise and
enforce its rights and remedies under this Agreement with respect to any
Collateral. Without limiting the generality of the foregoing, Issuer shall: (i)
if any Collateral is or shall become evidenced by any promissory note or other
instrument or any certificate or document of title or the like, deliver and
pledge to Purchaser such note, instrument, certificate or document duly endorsed
with recourse by Issuer, and accompanied by duly executed instruments of
transfer or assignment, all in form and content satisfactory to Purchaser; and
(ii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Purchaser may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.
 
(b)  Issuer hereby authorizes Purchaser to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Collateral, without the signature of Issuer to the extent permitted by law.
A copy of this Agreement shall be sufficient as a financing statement to the
extent permitted by law.
 
(c)  Issuer will furnish to Purchaser from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Purchaser may reasonably request from time to
time, all in reasonable detail.
 
5.  Purchaser’s Duties. The powers conferred on Purchaser under this Agreement
are solely to protect its interest in the Collateral and shall not impose any
duty upon it 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 under this Agreement, Purchaser shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against other parties or
any other rights pertaining to any Collateral. Upon full and complete payment
and performance of all of the Obligations under the Investment Documents,
Purchaser shall release the Collateral of the Liens created and granted under
this Agreement and, at Issuer’s expense, execute and deliver to Issuer such
documents as Issuer shall reasonably request to evidence such release.
 
 
 

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6.  Issuer Remains Liable. Notwithstanding anything in this Agreement to the
contrary, (a) Issuer shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, (b) the exercise by Purchaser of any of its rights under this
Agreement shall not release Issuer from any of its duties or obligations under
the contracts and agreements included in the Collateral, and (c) Purchaser shall
not have any obligation or liability under the contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Purchaser be obligated
to perform any of the obligations or duties of Issuer thereunder or to take any
action to collect or enforce any claim for payment assigned under this
Agreement.
 
7.  Remedies. If any Event of Default shall have occurred and be continuing:
 
(a)  Purchaser shall have the right pursuant to the applicable Uniform
Commercial Code (or pursuant to applicable law for any Collateral not subject to
the Uniform Commercial Code) to take immediate possession of the Collateral, and
(i) to require Issuer to assemble the Collateral, at Issuer’s expense, and make
it available to Purchaser at a place designated by Purchaser which is reasonably
convenient to both parties, and (ii) to enter any of the premises of Issuer or
wherever any of the Collateral shall be located, and to keep and store the same
on such premises until sold or otherwise realized upon (and if such premises are
the property of Issuer, Issuer agrees not to charge Purchaser for storage
thereof).
 
(b)  Purchaser shall have the right to sell or otherwise dispose of all or any
Collateral at public or private sale or sales, with such notice as may be
required by law, all as Purchaser, in its sole discretion, may deem advisable.
Issuer agrees that ten (10) days written notice to Issuer of any public or
private sale or other disposition of such Collateral shall be reasonable notice
thereof, and such sale shall be at such locations as Purchaser may designate in
such notice. Purchaser shall have the right to conduct such sales on Issuer’s
premises, without charge therefor. All public or private sales may be adjourned
from time to time in accordance with applicable law. Purchaser shall have the
right to sell, lease or otherwise dispose of such Collateral, or any part
thereof, for cash, credit or any combination thereof, and Purchaser may purchase
all or any part of such Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations.
 
(c)  Purchaser may exercise with respect to the Collateral all of the rights and
remedies (i) provided for in this Agreement, (ii) provided under the Convertible
Notes Purchase Agreement or under the other Investment Documents, (iii) afforded
to a secured party upon a default under the Uniform Commercial Code, or (iv)
otherwise available at law or in equity.
 
 
 

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8.  Indemnity and Expenses.
 
(a)  Issuer agrees to indemnify Purchaser from and against any and all claims,
losses and liabilities arising out of or relating to this Agreement or any of
the Obligations (including enforcement of this Agreement and Purchaser’s
exercise of its rights and remedies under this Agreement), unless such claims,
losses and liabilities are caused solely by Purchaser’s gross negligence or
willful misconduct.
 
(b)  Issuer shall upon demand pay to Purchaser the amount of any and all
charges, costs, fees and expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, that Purchaser may
incur following Issuer’s default in connection with (i) the custody,
preservation, use of, or the sale of, collection from, or other realization
upon, any of the Collateral, (ii) the exercise or enforcement of any of the
rights of Purchaser under this Agreement, or (iii) the failure by Issuer to
perform or observe any of the provisions of this Agreement. All such fees,
expenses and disbursements shall be deemed Obligations secured by this
Agreement.
 
9.  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas without regard to any choice of
law rule thereof giving effect to the laws of any other jurisdiction; provided,
however, that if any of the Collateral is located in any jurisdiction other than
Kansas, then the laws of such jurisdiction shall govern the method, manner and
procedure for foreclosure of Purchaser’s security interest in such Collateral
and the enforcement of Purchaser’s other remedies in respect of such Collateral
to the extent that the laws of such jurisdiction are different from or
inconsistent with the laws of Missouri.
 
10.  Organizational Representations; UCC Filing Offices. Issuer represents and
warrants to Purchaser that (a) Issuer is a corporation incorporated under the
laws of Minnesota and (b) Issuer’s chief executive office is located at 80 South
Eighth Street, Suite 900, Minneapolis, Minnesota 55402-8773. If Issuer changes
the address of its chief executive office, or if Issuer changes its name,
identity, corporate structure or state of incorporation (without implying any
right of Issuer to make any such change without the prior consent of Purchaser),
then, in each case, Issuer shall give Purchaser not less than ten (10) Business
Days prior written notice thereof.
 
11.  Miscellaneous.
 
(a)  No amendment or waiver of any provision of this Agreement nor consent to
any departure by Issuer from the terms or provisions of this Agreement, shall in
any event be effective unless it shall be in writing and signed by the party
against whom enforcement of such amendment, waiver or consent is sought, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
 
 
 

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(b)  The paragraph and section headings in this Agreement are solely for
convenience and shall not be deemed to limit or otherwise affect the meaning or
construction of any part of this Agreement. This document shall be construed
without regard to any presumption or rule requiring construction against the
party causing such document or any portion thereof to be drafted. The section
and other headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect any of the terms of this Agreement. Any
pronoun used in this Agreement shall be deemed to cover all genders. The terms
“include”, “including” and similar terms shall be construed as if followed by
the phrase “without being limited to.” The term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision or
section of this Agreement. An Event of Default shall “continue” or be
“continuing” until such Event of Default has been waived in writing by
Purchaser.
 

(c)  If any provision or provisions of this Agreement shall be unlawful, then
such provision or provisions shall be null and void, but the remainder of the
Agreement shall remain in full force and effect and be binding on the parties.
 

(d)  This Agreement may be validly executed and delivered by fax or other
electronic transmission and in one or more counterpart signature pages by
different signatories thereto.
 

(e)  Any notice or demand that Purchaser may wish to give to Issuer shall be
served upon it in the fashion prescribed for notices in the Convertible Notes
Purchase Agreement at the address and facsimile number for Issuer set forth in
the Convertible Notes Purchase Agreement, and any notice or demand so sent shall
be deemed to be served as set forth in the Convertible Notes Purchase Agreement.
 

12.  Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY LAW, AND AS
SEPARATELY BARGAINED-FOR CONSIDERATION TO PURCHASER, ISSUER HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY (WHICH PURCHASER ALSO WAIVES) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR OTHERWISE RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER INVESTMENT DOCUMENTS, THE OBLIGATIONS, THE
COLLATERAL, PURCHASER’S CONDUCT IN RESPECT OF ANY OF THE FOREGOING, ANY OTHER
INVESTMENT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
REGARDLIESS OF WHICH PARTY INITATES SUCH ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM. TO EFFECTUATE THE FOREGOING, PURCHASER IS HEREBY GRANTED AN
IRREVOCABLE POWER OF ATTORNEY TO FILE, AS ATTORNEY-IN-FACT FOR ISSUER, A COPY OF
THIS AGREEMENT IN ANY COURT, AND THE COPY OF THIS AGREEMENT SO FILED SHALL
CONCLUSIVELY BE DEEMED TO CONSTITUTE ISSUER’S WAIVER OF TRIAL BY JURY IN ANY
PROCEEDING ARISING OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER INVESTOR DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL OR PURCHASER’S CONDUCT
IN RESPECT OF ANY OF THE FOREGOING.
 
[Remainder of page intentionally left blank; signature page follows.]
 
 
 
 

 
 
 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
 

ISSUER:
Wits Basin Precious Minerals Inc.
 
a Minnesota corporation      
 
By:
     

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PURCHASER:
China Gold, LLC   a Kansas limited liability company      
 
By:
China Gold, LLC
 
Its:
General Partner
           
 
By:
     

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[SIGNATURE PAGE TO SECURITY AGREEMENT]