Exhibit 10.60

 

Robinson Property Trust
Ancillary Agreement

 

This Robinson Property Trust Ancillary Agreement (this “Ancillary Agreement”) is
entered into among Kennecott Holdings Corporation (formerly Kennecott
Corporation), Kennecott Rawhide Mining Company, and Kennecott Nevada Copper
Company (collectively, “Kennecott”), and BHP Copper Inc. (“BHP Copper”), and BHP
Nevada Mining Company (“BHP NMC”) (collectively, “BHP”) on September 12, 2003.

 

Recitals

 

Whereas, Kennecott was one of several former owners and operators of certain
portions of a mining property commonly known as the “Robinson Property” located
in White Pine County, Nevada, and more particularly described in Exhibit A to
this Ancillary Agreement.

 

Whereas, on December 20, 1989 the Second Judicial Court for the State of Nevada
in and for the County of Washoe (the “Court”) entered an order enforcing that
certain “Stipulation to Dismiss with Prejudice and to Confirm Settlement
Agreement” in Silver King Mines, Inc., et al. v. Kennecott Corporation et al.,
No. CV 89-4027 Dept. No. 9 (herein defined, together with all amendments
thereto, as the “Stipulation”), to which Kennecott and other former
owners/operators of the Robinson Property were parties. By the Stipulation, the
former owners/operators reached a settlement of a number of issues concerning
the Robinson Property.

 

Whereas, the Stipulation provided, among other provisions, that Kennecott was to
receive a three percent (3%) net smelter return royalty interest in the base
metals and associated metals co-products, including precious metals, produced
from the Robinson Property (the “NSR Royalty”) and that Kennecott would begin to
receive such NSR Royalty after a trust fund was funded for Reclamation and
Remediation (as those terms are defined in the Stipulation) of the Robinson
Property (the “Trust Fund”).

 

Whereas, under the Stipulation, an amount equivalent to the first Twenty Million
Dollars ($20,000,000), inclusive of interest, of the NSR Royalty was to be
deposited into the Trust Fund.

 

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Whereas, on December 11, 1990, the Court entered an order entitled “Amendment to
Stipulation to Dismiss with Prejudice and to Confirm Settlement Agreement and
Order” in Silver King Mines, Inc., et al. v. Kennecott Corporation et al.,
No. CV89-4027 Dept. No. 1(9) to which Kennecott and other certain prior owners
and operators of the Robinson Property were a party (the “First Amendment”). The
First Amendment amended various provisions to the Stipulation concerning use of
the Trust Fund for Reclamation and Remediation obligations.

 

Whereas, under the terms of a letter of agreement dated December 14, 1990 (the
“Letter Agreement”), Magma Copper Company agreed to assume responsibility for
specified indemnification obligations arising out of the Stipulation and the
First Amendment, as more fully described in paragraphs 5 and 6 of the Second
Amendment identified below.

 

Whereas, pursuant to the Letter Agreement, on October 25, 1991, Kennecott; Magma
Copper Company, Magma Nevada Mining Company and Magma Limited Partner Company,
and the Robinson Mining Limited Partnership (collectively “Magma”); and other
certain former owners/operators of the Robinson Property entered into an
agreement entitled “Amendment No. 2 to Stipulation to Dismiss with Prejudice and
to Confirm Settlement Agreement and Order” that was approved by the Court on
December 12, 1991 in Silver King Mines, Inc. et al. v. Kennecott Corp. et al.,
No. CV89-4027 Dept. No. 1(9) (the “Second Amendment”).

 

Whereas, under the terms of the Second Amendment, Magma assumed specified
Reclamation and Remediation obligations with respect to the Robinson Property
and specified indemnity obligations to Kennecott and received the rights in, and
assumed the obligations relating to, the Trust Fund.

 

Whereas, in February 1996, following the acquisition by BHP Sub Inc. of Magma
Copper Company’s stock, Magma Copper Company’s name was changed to BHP Copper
Inc. In addition, Magma Nevada Mining Company’s name was changed to BHP Nevada
Mining Company and Magma Limited Partner Co. became BHP Copper Limited Partner
Company. BHP Nevada Mining Company and BHP Copper Limited Partner Company
continued as partners in the Robinson Mining Limited Partnership.

 

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Whereas, in May 1999, BHP Copper Limited Partner Co. was merged into BHP Nevada
Mining Company, resulting in the dissolution of the Robinson Mining Limited
Partnership, with the partnership assets and liabilities being assumed by BHP
NMC.

 

Whereas, through various transactions, corporate acquisitions and
reorganizations, including those set forth above, Kennecott and BHP remain
parties to the Stipulation.

 

Whereas, on June 29, 1999, operations at the Robinson Property were temporarily
terminated due to economic conditions and the operation has been placed in care
and maintenance resulting in a cessation of royalty accruals.

 

Whereas, since the inception of its operations, BHP NMC has performed
Reclamation and Remediation work at the Robinson Property to address
environmental issues from its operations and those of its predecessors.

 

Whereas, as among themselves, Kennecott and BHP (collectively, the “Parties”)
intend (i) to more fully define the NSR Royalty (including a protocol for
conducting audits and resolving disputes regarding the NSR Royalty) and to
provide for public recording of the NSR Royalty, (ii) to more fully define BHP’s
obligation to initially fund the Trust Fund (including a dispute resolution
protocol should Kennecott object to the initial amount of funding); (iii) to
provide a protocol governing indemnity claims under the Stipulation, (iv) to
define BHP’s reporting obligations regarding Reclamation and Remediation
expenditures (including a dispute resolution protocol for any disagreement or
dispute related thereto), and (v) to define the confidentiality obligations of
the Parties with respect to information provided or exchanged pursuant to the
Stipulation.

 

NOW THEREFORE, in exchange for the mutual obligations contained in this
Ancillary Agreement and other consideration, the adequacy and sufficiency of
which the Parties hereby acknowledge, the Parties, intending to be legally
bound, agree as follows:

 

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1.         NSR Royalty. The NSR Royalty shall be calculated as provided in, and
paid in accordance with the provisions of Exhibit B, which exhibit sets forth a
protocol for conducting audits and resolving disputes regarding the NSR Royalty.
To provide record notice of the NSR Royalty, BHP shall execute and deliver, and
Kennecott shall record, the Notice of Royalty Interest in Robinson Property
attached as Exhibit C.

 

2.         Initial Funding of the Trust Fund. BHP Copper shall form the Trust
Fund under that certain September 12, 2003 Robinson Restoration Trust Agreement
between BHP Copper Inc., BHP Nevada Mining Company, Kennecott, and The Bank of
New York (the “Trust Agreement”). The amount by which BHP Copper initially funds
the Trust Fund (the “Initial Amount”) shall be the NSR Royalty for the period of
February 1996 to December 31, 1999 (“Accrued Royalty”) plus interest on the
Accrued Royalty (“Accrued Interest”) minus previously incurred Reclamation and
Remediation expenses (“Previous Reclamation Expenses”). Based on the auditing
procedure previously undertaken by BHP Copper and Kennecott, BHP Copper has
determined that the Accrued Royalty is $8,708,948; the Accrued Interest is
$1,272,761; and the Previous Reclamation Expenses are approximately $4,956,032.
Therefore, the Initial Amount funded to the Trust Fund shall be $5,025,677.
Within 30 days after initial funding, Kennecott shall specify and request in
writing from BHP additional relevant materials and data necessary for Kennecott
to reasonably determine the Accrued Royalties and Previous Reclamation Expenses,
for purposes of a final audit of the Initial Amount (“Final Audit Materials”).
The requested Final Audit Materials shall not already be in Kennecott’s
possession and shall not be duplicative of materials and data previously
provided by BHP to Kennecott. BHP shall provide Final Audit Materials, to the
extent that they are reasonably available to BHP, within 30 days of the request.
Unless Kennecott objects within 60 days of receipt of the Final Audit Materials
as provided in Section 5 of this Ancillary Agreement, the Initial Amount shall
satisfy all NSR Royalty payment obligations of BHP Copper and/or BHP NMC
incurred up through the end of FY2002; and the Previous Reclamation Expenses and
Initial Amount shall be credited against the NSR Trust Fund obligation amount,
pursuant to the Robinson Stipulation (specifically Sections 5 of the
December 14, 1990 Letter Agreement and 8 of the Second Amendment).

 

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3.         Indemnity Protocol.

 

(a)        As set forth in Section 1(H) of the Stipulation and paragraph 6 of
the Second Amendment to the Stipulation, the parties constituting BHP are
obligated, jointly and severally, “to save, indemnify and hold Kennecott and its
predecessors and successors free and harmless from any and all liability for all
environmental and reclamation costs, investigations, demands, and liabilities
associated with the Robinson Property occurring or accruing at any time in an
amount equal to the total of such costs multiplied by the Participating Interest
percentage of ... [BHP] ..., but in no event shall ... [the] indemnity to
Kennecott and its predecessors and successors be less than forty percent (40%)
of such costs.”

 

(b)       If any third party shall notify Kennecott with respect to any matter
(a “Third Party Claim”) which may give rise to a claim for indemnification
against BHP under the Stipulation, then Kennecott shall notify BHP thereof in
writing, provided however, that unreasonable delay on the part of Kennecott in
notifying BHP that causes actual prejudice to BHP may relieve BHP from any
obligation hereunder. BHP shall have the right to assume the defense of the
Third Party Claim with counsel of its choice at any time within fifteen (15)
days after Kennecott has given notice of the Third Party Claim; provided
however, that Kennecott may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim. BHP agrees that
it will not consent to the entry of any judgment or enter into any settlement
with regard to any Third Party Claim without the prior written consent of
Kennecott (not to be unreasonably withheld) and Kennecott agrees that it will
not consent to the entry of any judgment or enter into any settlement with
respect to any Third Party Claim without the prior written consent of BHP (not
to be unreasonably withheld). In the event that BHP does not assume and conduct
the defense of the Third Party Claim in accordance with the Stipulation,
(i) Kennecott may defend against and consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim in any manner it
reasonably may deem appropriate (however, Kennecott will consult with, and
obtain consent from, BHP in connection therewith, which consent shall not be
unreasonably withheld) and (ii) BHP will remain responsible for any cost,
injury, expense or damage

 

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which Kennecott may suffer or incur resulting from, arising out of, relating to,
or caused by the Third Party Claim to the fullest extent provided in the
Stipulation.

 

4.         Reporting Reclamation and Remediation Activities & Expenditures.

 

(a)        BHP NMC will provide Kennecott with a report within thirty (30) days
of the end of each calendar quarter during which Reclamation or Remediation
activities have occurred on the Robinson Property, and which report shall detail
information relating to the Reclamation and Remediation activities and
expenditures (“Reclamation and Remediation Report”). Such reports shall be
provided pursuant to Section 7 (“Notices and Consents”) of this Ancillary
Agreement. Each Reclamation and Remediation Report shall describe the
Reclamation and Remediation conducted during the quarter just ended and the
costs associated with such Reclamation and Remediation activities. Each
Reclamation and Remediation Report shall be in sufficient detail that Kennecott
can determine the reasonableness of such costs and whether such activities
constitute Reclamation and/or Remediation. In addition to the notice recipients
identified in Section 7, all Reclamation and Remediation Reports shall be
provided to the Kennecott Nevada Company Director of Health, Safety and
Environmental Quality, or such other recipient as Kennecott may designate in
writing to BHP NMC and BHP Copper.

 

(b)       If Kennecott (i) disagrees with any Reclamation or Remediation costs
or related expenditure information provided by BHP NMC, (ii) contends that any
such costs or related expenditures are unreasonable, or (iii) disagrees with BHP
NMC’s classification of any environmental activity as Reclamation or Remediation
(as those terms are defined in the Stipulation), Kennecott will so notify BHP
within 90 days of Kennecott’s receipt of the report. Such disputes shall be
subject to dispute resolution per Section 4(e) of this Ancillary Agreement.

 

(c)        If Kennecott (i) agrees with BHP NMC’s Reclamation and Remediation
Report for particular Reclamation or Remediation expenditures, (ii) fails to
timely notify BHP of

 

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its disagreement with all or portions of a Reclamation and Remediation Report or
Kennecott’s disagreement is resolved in favor of BHP pursuant to dispute
resolution under Section 4(e) of this Ancillary Agreement, such Reclamation or
Remediation expenses covered by the Reclamation and Remediation Report shall
thereafter qualify as “Approved Reclamation and/or Remediation.” Kennecott’s
failure to notify BHP of its disagreement with a calculation, cost,
classification or expenditure in a Reclamation and Remediation Report shall not
be a waiver of Kennecott’s right to dispute similar calculations, costs, or
expenditures in future Reports.

 

(d)       At BHP NMC’s request, before BHP NMC incurs costs to perform
Reclamation or Remediation expenditures, Kennecott agrees to provide a review
and determination of whether a proposed Reclamation or Remediation expenditure
will qualify as Approved Reclamation and/or Remediation, as defined herein.
Kennecott will provide such determination within 60 days of its receipt of a
detailed description of the proposed activity. Any disagreement concerning
Kennecott’s determinations under this Section 4(d) shall be subject to dispute
resolution per Section 4(e) of this Ancillary Agreement.

 

(e)        Disagreements or disputes between the Parties concerning this
Ancillary Agreement including, without limitation, a disagreement or dispute
concerning any Reclamation and Remediation activity, classification, expense or
report, shall be governed by this Section 4(e); provided however, that the
timing for audits and resolution of disagreements or disputes regarding the
calculation or payment of the NSR Royalty shall be governed by Exhibit B;
provided further, that Kennecott’s objection, if any, to the Initial Amount of
the Trust Fund shall be governed by section 5 of this Ancillary Agreement. In
the event of a disagreement or dispute, the Parties shall provide one another
with written notice of such disagreement or dispute and shall within 30 days of
such notice attempt, in good faith, to resolve the disagreement or dispute. Each
of the Parties shall, within such 30 day period, provide the other all
documentation and records supporting the position it is taking regarding the
dispute. If the Parties cannot resolve the disagreement or dispute, the Parties
agree that their respective senior management shall meet within 60 days after
such notice. If the disagreement or dispute cannot be resolved

 

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by senior management, the Parties agree to formally resolve the disagreement or
dispute through a binding arbitration, in the manner provided by
Section 4(e)(i-ii) below.

 

(i)          The Parties agree to submit any disagreement or dispute governed by
the provisions of Section 4(e) that has not been resolved under those provisions
to binding arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association except as modified in this
Section 4(e)(i-ii) Any such submittal shall be made within 30 days after the
meeting among senior management referenced in Section 4(e). The
arbitrator(s) shall be an attorney or a panel of no more than three attorneys,
actively engaged in the practice of law for at least ten years, with appropriate
expertise in the area of dispute, such as mining law, environmental law, or
accounting. The Parties shall allow and participate in discovery in accordance
with the Nevada Rules of Civil Procedure for a period of 60 days after the
filing of the answer or other responsive pleading. All discovery disputes shall
be resolved by the arbitrator or the chair of the arbitration panel if the
matter has been submitted to a panel.

 

(ii)         The arbitration hearing shall be conducted in Reno, Nevada, no
later than 90 calendar days after the filing of the answer or other responsive
pleading. The arbitrator(s) shall render a written decision within the shorter
of 30 days after the arbitration hearing or 120 days after the filing of the
answer or other responsive pleading. The Parties agree to share equally the
costs and fees of the arbitrator(s) and the arbitration proceeding; provided
however, that the prevailing Party shall be entitled to recover all costs
incurred, including reasonable attorneys’ fees, to enforce its rights hereunder.
Judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.

 

5.         Resolution of Dispute Regarding Initial Amount. Should Kennecott not
agree that the Initial Amount of $5,025,677 satisfies all of BHP’s NSR Royalty
payment obligations incurred up through the end of FY2002, Kennecott shall have
60 days from the date of receipt of the Final Audit Material regarding initial
funding of the Trust Fund pursuant to Section 2 hereof, to object in writing to
BHP. Upon BHP’s receipt of such objection, the

 

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parties shall submit the dispute to binding arbitration in the manner provided
by Section 5(a-b) below.

 

(a)        The parties shall submit the dispute regarding the Initial Amount to
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association except as modified in the Section 5. The
arbitrator(s) shall be an attorney or a panel of no more than three attorneys,
actively engaged in the practice of law for at least ten years, with appropriate
expertise in the area of dispute. The arbitration hearing shall be conducted in
Reno, Nevada, no later than 60 calendar days after the filing of the answer or
other responsive pleading. The arbitrator(s) shall render a written decision
within the shorter of 30 days after the arbitration hearing or 90 days after the
filing of the answer or other responsive pleading.

 

(b)       Should the arbitrator(s) conclude that the Initial Amount exceeds
$5,025,677, BHP shall sufficiently fund the Trust Fund to make up the difference
between $5,025,677 and the amount decided upon by the arbitrator(s). Should the
arbitrator(s) conclude that the Initial Amount is less than $5,025,677, the
Parties shall execute a certificate of discharge in the form required by the
Trust Agreement to reimburse BHP Copper for the amount by which $5,025,677
exceeds the amount decided upon by the arbitrator(s).

 

(c)        The Parties agree to share equally the costs and fees of the
arbitrator(s) and the arbitration proceeding; provided however, that the
prevailing Party shall be entitled to recover all costs incurred, including
reasonable attorneys’ fees, to enforce its rights hereunder. Judgment on the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.

 

6.         Confidentiality.

 

(a)        All information and data provided to any Party under this Ancillary
Agreement shall be confidential; provided however, that the recipient of such
confidential information shall have the right to disclose the same to its
parents, affiliates, financial advisors and other representatives under an
obligation of confidentiality. The obligation

 

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of confidentiality shall not apply to any information that is in the public
domain through no fault of the recipient, which is already in the possession of
the recipient, or which is required to be disclosed as a matter of law or stock
exchange rules, or which is publicly disclosed by the disclosing Party or its
affiliates; provided however, that information that is provided to Kennecott in
reports hereunder, or the equivalent, prior to the date of this Ancillary
Agreement, as a part of the implementation of this Ancillary Agreement, shall be
confidential and protected as such by Kennecott subject to the exceptions
described above.

 

(b)       In the event that a party that receives confidential information
pursuant to this Ancillary Agreement (or a third party that receives such
information from a party) becomes legally compelled to disclose any of the
confidential information, the party so compelled will provide the other party
with prompt notice thereof so that the other party may seek a protective order
or other appropriate remedy. In any event, the party legally compelled to
disclose confidential information will furnish only that portion of the
confidential information which is legally required and will exercise its best
efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the confidential information provided.

 

7.         Notices and Consents. All notices and consents required by this
Ancillary Agreement shall be in writing, shall be sent by express courier which
retains written records of receipts of packages for same-day, next-business-day
or two-business-day delivery to the Party or Parties entitled to receive such
notice or consent and to all other Parties to this Ancillary Agreement at the
address and to the attention of the individuals listed below or to such other
address as may be provided by written notice pursuant to this section. All other
communications required by this Ancillary Agreement, such as reports, may be
sent by regular mail to the addresses and to the attention of the individuals
listed below.

 

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BHP Copper Inc.

BHP Nevada Mining Company.

Ben Wichers, President

John Kline, Manager

200 S. Veterans Memorial Blvd.

7 Miles West of Ely on US 50

San Manuel, AZ 85631

Ruth, NV 89319

 

 

copy to:

copy to:

Chris Ramey, Legal Counsel

Chris Ramey, Legal Counsel

BHP Billiton

BHP Billiton

1360 Post Oak Boulevard, Suite 150

1360 Post Oak Boulevard, Suite 150

Houston, Texas 77056

Houston, Texas 77056

 

 

Kennecott Holdings Corporation

Kennecott Rawhide Mining Company

General Counsel

General Counsel

8362 West 10200 South

224 North 2200 West

Bingham Canyon, Utah 84006

Salt Lake City, Utah 84116

 

 

Kennecott Nevada Copper Company

 

Chief Financial Officer

 

224 North 2200 West

 

Salt Lake City, Utah 84116

 

 

8.         General Provisions.

 

(a)        Construction of Ancillary Agreement. This Ancillary Agreement has
been prepared and negotiated jointly by the Parties and their respective
counsel. This Ancillary Agreement shall not be construed against either Party by
reason of the drafting of the Ancillary Agreement or any part thereof.

 

(b)       Entire Agreement. This Ancillary Agreement, together with the
Stipulation, embodies the entire agreement and understanding of the Parties with
respect to the matters addressed in the Stipulation and this Ancillary
Agreement.

 

(c)        Governing Law. This Ancillary Agreement shall be construed and
enforced in accordance with the laws of the State of Nevada, without regard to
conflict of law principles.

 

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(d)       Counterparts. This Ancillary Agreement may be executed in any number
of counterparts, each of which shall be deemed a duplicate original. However,
this Ancillary Agreement shall not bind any Party until all Parties have signed
a counterpart. The Parties intend that fax signatures may be utilized and, if
so, are binding as fully as original signatures.

 

(e)        Authority. Each of the undersigned signatories to this Ancillary
Agreement certifies his or her full authority to execute this document and to
bind legally the Party he or she represents.

 

(f)        Retroactive Effect. This Ancillary Agreement shall apply
retroactively to the date of the Stipulation.

 

(g)       No Third Party Rights. This Ancillary Agreement is intended solely for
the benefit of the Parties hereto and is not intended to confer any rights upon
any third party or create any third-party beneficiary relationship.

 

(h)       Incorporation of Recitals and Exhibits. The Recitals to, and Exhibits
identified in, this Ancillary Agreement are incorporated herein by reference and
are specifically made a part hereof.

 

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IN WITNESS WHEREOF, the Parties have caused this Ancillary Agreement to be
executed by their duly authorized corporate officers.

 

 

BHP COPPER INC.

 

BHP NEVADA MINING COMPANY

 

 

 

By:

/s/ B.K. Wichers

 

By:

/s/ B.K. Wichers

Title:

President

 

Title:

Chairman & President

Date:

9/5/03

 

Date:

9/5/03

 

 

 

 

 

 

KENNECOTT HOLDINGS CORPORATION

 

KENNECOTT RAWHIDE MINING COMPANY

 

 

 

By:

[Illegible signature]

 

By:

[Illegible signature]

Title:

Sr. V.P.

 

Title:

President & CEO

Date:

9/12/03

 

Date:

9/12/03

 

 

 

 

 

 

KENNECOTT NEVADA COPPER COMPANY

 

 

 

 

 

By:

[Illegible signature]

 

 

Title:

President and CEO

 

 

Date:

9/12/03

 

 

 

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EXHIBIT A to ANCILLIARY AGREEMENT

 

Description of Robinson Property

 

Incorporating the property description contained in Exhibit A from that certain
December 17, 1990 Deed and Assignment from Kennecott Nevada Copper Company,
formerly known as Nevmind Inc., Kennecott Corporation, and Kennecott Nevada
Company to Magma Nevada Mining Company, and as further depicted on that certain
January 2001 Map of Robinson Property, White Pine County, Nevada, prepared by
Land Management Services, Inc., Reno, Nevada and included in Exhibit Al,
specifically excluding the water distribution and sanitary sewer systems that
were conveyed by Kennecott Copper Corporation to Ruth-McGill Water Company by
Quitclaim Deed made the 25th day of January, 1966 and recorded in the County
Recorder’s Office of White Pine County, State of Nevada, in Book 264, pages 434
- 437, a copy of which is included in Exhibit A2.

 

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EXHIBIT B to ANCILLIARY AGREEMENT

 

NSR Royalty

 

A.        Definitions

 

“Net Smelter Return” or “NSR” shall mean the Gross Value received by BHP Nevada
Mining Company (“BHP NMC”) or its successors or assigns from the sale or other
disposition of Minerals, less the following expenses incurred (without
duplication) by BHP NMC or its successors or assigns with respect to such
Minerals after the Minerals have (i) left the primary process facility on or
near the Robinson Property, and (ii) reached the concentrate stage, or the
slimes stage for concentrates requiring further refinement or any similar
product stage:

 

(1)        actual charges for treatment in the smelting and refining process
(including, without limitation, handling, representation, umpiring, assaying,
processing, penalties, impurity charges, and other processor deductions);

 

(2)        any sales, severance, gross production, privilege, value added or
similar taxes (but specifically excluding income taxes) assessed on or in
connection with the sale or other disposition of Minerals; and

 

(3)        actual costs of transportation (including, without limitation,
freight, insurance, security charges, transaction taxes, import and export
duties, levies, imposts, handling, port, demurrage, delay, stowage and
forwarding expenses incurred by reason of or in the course of such
transportation) of such Minerals from the process facility on or near the
Robinson Property to the refinery, smelter, other purchaser, user, or customer.

 

The terms “smelter” or “refinery” means conventional smelters and refineries, as
well as any other type of production plant used in lieu of a conventional
smelter or refinery to further upgrade concentrates slimes, or any sale of other
products from the Robinson Property. BHP NMC or its successors or assigns shall
be permitted to sell concentrates in the form usually

 

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commercially marketable to an Affiliate of BHP NMC or its successors or assigns,
provided that such sales shall be at prices and on terms no less favorable than
those which would be extended to an unaffiliated third party in a bona fide
arm’s length transaction under similar circumstances and the price thus
determined shall be the Gross Value. Similarly, if, prior to the point at which
the Gross Value is determined, BHP NMC of its successors or assigns or an
Affiliate incurs costs that are deductible or treats concentrates, slimes (for
concentrates requiring further refinement) or similar products prior to a sale,
deemed sale or other disposition in a smelter or refinery that it or such
Affiliate owns or controls, it or such Affiliate may deduct such costs and
treatment charges, but only to the extent they are no more than the amount that
BHP NMC or its successors or assigns or such Affiliate would have charged an
unaffiliated third party in a bona fide arm’s length transaction under similar
circumstances for treatment of similar ore at prevailing terms.

 

“Affiliate of BHP NMC or its successors or assigns” means any person,
partnership, venture, corporation, or other form of enterprise which directly or
indirectly controls, is controlled by, or is under common control with BHP NMC
or its successors or assigns. “Control” as used in the previous sentence means
the possession, directly or indirectly, of the power to direct or cause
direction of management and policies through ownership of voting securities,
contract, voting trust or otherwise.

 

“Gross Value” shall be the revenue actually received by BHP NMC or its
successors or assigns from the sale or other disposition of Minerals, including
all revenues received in the form of credits made by the smelter or refinery for
associated metals co-products. Provided however, that if BHP NMC or its
successors or assigns’ sale or disposition is based upon a contract for the sale
of Minerals that fixes a selling price for metals on other than a market price
of the product on the date of delivery to the purchaser (less deductions
normally negotiated as a part of such contracts), specifically including, but
not limited to, forward sales, futures trading, or commodity options trading,
and any other price hedging, price protection, and speculative arrangements not
involving physical delivery of Minerals, such Minerals shall be deemed to have
been sold on the earlier of the date of delivery to the buyer or the date of
outturn from the smelter or refinery. In such event, the Gross Value of such
Minerals shall be based on the payable metal value contained in such material
and on the “Spot Price” for such metals. Spot Price for each such metal shall be
the monthly average of closing prices quoted in Platt’s Metals Week, as follows:

 

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(1) in the case of copper the COMEX First Position Settlement Price for High
Grade (Premium) copper for immediate delivery, (2) in the case of silver the
London Bullion Market Association P.M. Silver Fix, or (3) in the case of gold
the London Bullion Market Association P.M. Gold Fix. In the case of other
commodities, the closing price fixed by the London Metal Exchange (“LME”) shall
be used. The monthly average Spot Price for a metal shall be calculated by
dividing the sum of all prices so reported for that metal during the calendar
month in which the sale or deemed sale occurred by the number of days for which
such prices were reported during the month. In the event of cessation or
suspension of any such price quotations for a period of more than five
(5) consecutive days in a given month, or if the commodity price is not fixed by
the LME, the parties shall agree on a reputable substitute quotation mechanism
for each affected metal. Should BHP NMC or its successors or assigns otherwise
terminate or “buy-back” any of such price protection arrangements without actual
physical delivery of Minerals, Kennecott shall not share in any profits or
losses therefrom.

 

“Minerals” shall mean base metals and associated metals co-products, including
precious metals, produced from the Robinson Property and sold, deemed to be sold
or otherwise disposed of by BHP NMC or its successors or assigns, whether sold
as refined metals, cathodes, concentrates, precipitates or any other marketable
form.

 

“Produced” shall mean the mining, saving, stockpiling, extraction from the soil,
or other creation of a marketable product containing Minerals from the Robinson
Property.

 

“Robinson Property” shall mean the property described in Exhibit A of the
“Robinson Property Trust Ancillary Agreement” to which this Exhibit B is
attached.

 

All capitalized terms not otherwise defined in this Exhibit B shall have the
meaning ascribed to them under the “Robinson Property Trust Ancillary Agreement”
to which this Exhibit B is attached.

 

B.            Calculation and Payment.

 

Calculation and payment of the NSR Royalty shall be made subject to the
following terms:

 

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1.             Payment. The amount of NSR Royalty due on Minerals sold, deemed
to be sold or otherwise disposed of shall be paid to the Robinson Reclamation
Trust pursuant to the Robinson Stipulation, within 30 days after the month end
of the month in which the date such Minerals are sold, deemed to be sold or
otherwise disposed of, until BHP NMC or its successors or assigns have deposited
an aggregate amount into the Trust Fund on a cumulative basis, pursuant to the
terms of and in full satisfaction of the trust funding obligations set forth in
the Robinson Stipulation. Once the Trust Fund has been satisfied pursuant to the
Robinson Stipulation, the NSR Royalty due on Minerals sold, deemed to be sold or
otherwise disposed of shall be paid to Kennecott pursuant to the requirements of
the Robinson Stipulation, within 30 days after the month end of the month in
which the date such Minerals are sold, deemed to be sold or otherwise disposed
of. Nothing herein shall be construed to enlarge or diminish the rights and
obligations of any Party to the Robinson Stipulation. Notwithstanding the
foregoing, final adjustments for assays, prices or other allowable adjustments
can be netted against future payments.

 

2.             Financial Report Information. BHP NMC or its successors or
assigns shall provide Kennecott’s designee copies of all relevant data relating
to the NSR Royalty calculation on a quarterly basis within 30 days of the end of
each calendar quarter (the “Audit Report”).

 

3.             Accounting Principles. The NSR Royalty shall be calculated in
accordance with generally accepted accounting principles and practices
consistently applied using the accrual method.

 

4.             Audit and Disputes. With respect to payments made after the
creation of the Trust, Kennecott, upon written notice, shall have the right to
audit the records that relate to the calculation of the NSR Royalty within 21
months after receipt of the Audit Report applicable to each such payment of the
NSR Royalty. Kennecott shall be deemed to have waived any right it may have had
to object to a payment made, unless it provides notice in writing of such
objection within 24 months after receipt of the Audit Report applicable to each
payment of the NSR Royalty. If the Parties are unable to resolve the dispute
within 60 days after the receipt of such notice, the dispute shall be resolved
in accordance with the dispute resolution provisions of Section 4(e) of the
“Robinson Property Trust Ancillary Agreement” except as modified in this
Section 4. Unless the Parties agree to share the costs of arbitration, the
arbitrator shall determine

 

18

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what part of the costs and expenses incurred in any such proceeding shall be
borne by each party participating in the arbitration. Kennecott’s objection, if
any, to the Initial Amount of the Trust shall be governed solely by section 5 of
the “Robinson Property Trust Ancillary Agreement.”

 

5.             Records. BHP NMC or its successors or assigns shall keep for
period of five [5] year, accurate records of tonnage, volume of products,
analyses of products, weight, moisture, assays of pay metal content and other
records, as appropriate, related to the computation of the NSR Royalty.

 

6.             Right to Inspect. Kennecott or its authorized representative, on
not less than 30 days’ notice to BHP NMC or its successors or assigns, may enter
upon those surface and subsurface portions of the Robinson Property necessary to
review the accuracy of the records required to be kept in Section 5 above, and
shall have the right to be represented at any smelter or processing facility at
which the weighing, sampling and assaying of Minerals which will be used for
calculating the Gross Value or the deductible expenses are determined, and may,
subject to the obligations of confidentiality described in Section 6 of the
“Robinson Property Trust Ancillary Agreement,” inspect and copy all records and
data pertaining to the computation of its interest, including without limitation
such records and data which are maintained electronically. Kennecott or its
authorized representative shall enter the Robinson Property at Kennecott’s own
risk and may not unreasonably hinder operations on or pertaining to the Robinson
Property. Kennecott shall indemnify and hold harmless BHP Copper Inc., BHP NMC
or their successors or assigns and their Affiliates (including without
limitation direct and indirect parent companies), and their respective
directors, officers, shareholders, employees, agents and attorneys, from and
against any liabilities which may be imposed upon, asserted against or incurred
by any of them by reason of injury to Kennecott or any of its agents or
representatives caused by Kennecott’s exercise of its rights herein.

 

7.             Real Property Interest. The NSR Royalty shall attach to any
amendments, relocations or conversions of any mining claims or leases comprising
the Robinson Property, or to any renewals or extensions of leases thereof. The
NSR Royalty shall be a real property interest that runs with the Robinson
Property and shall be applicable to BHP NMC or its successors or assigns and
their successors and assigns.

 

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8.             Commingling. BHP NMC or its successors or assigns shall have the
right to commingle ore, concentrates, minerals and other material mined and
removed from the Robinson Property from which Minerals are to be produced, with
ore, concentrates, minerals and other material mined and removed from other
lands and properties; provided however, that BHP NMC or its successors or
assigns shall calculate from representative samples the average grade thereof
and other measures as are appropriate, and shall weigh (or calculate by volume)
the material before commingling. In obtaining representative samples,
calculating the average grade of the ore and average recovery percentages, BHP
NMC or its successors or assigns may use any procedures accepted in the mining
and metallurgical industry which it reasonably believes suitable for the type of
mining and processing activity being conducted and, in the absence of fraud or
bad faith, its choice of such procedures shall be final and binding on
Kennecott. In addition, comparable procedures may be used by BHP NMC or its
successors or assigns to apportion among the commingled materials all penalty
and other charges and deductions, if any, imposed by the smelter, refiner, or
purchaser of such material.

 

20

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EXHIBIT C to ANCILLIARY AGREEMENT

 

Notice Of Royalty Interest In Robinson Property

 

NOTICE is hereby given that:

 

1.         Pursuant to the terms of a December 20, 1989, Order of the Court
entitled “Stipulation to Dismiss with Prejudice and to Confirm Settlement
Agreement” (the “Stipulation”) entered in Silver King Mines, Inc., et al. v.
Kennecott Corp. et al., No. CV 89- 4027 Dept. No. 9 (2nd Judicial Dist, Nevada),
KENNECOTT HOLDINGS CORPORATION, KENNECOTT RAWHIDE MINING COMPANY, and KENNECOTT
NEVADA COPPER COMPANY (collectively “KENNECOTT”), with an address at 224 North
2200 West, Salt Lake City, Utah 84116, are the owners of a three percent (3%)
net smelter return royalty on the base metals and associated metals co-products,
including precious metals, produced from that certain property located in White
Pine County, Nevada, that is particularly described on Schedule 1 hereto (the
“Robinson Property”), payable in accordance with the terms set forth in the
Stipulation (the “NSR Royalty”).

 

2.         Under the terms of the Stipulation, KENNECOTT granted SILVER KING
MINES, INC., PACIFIC SILVER CORPORATION, and ALTA GOLD COMPANY (collectively
“ALTA GOLD”) and WHITE PINE GOLD CORPORATION, SUNNYSIDE GOLD CORPORATION and
ECHO BAY MINES LTD. (collectively “ECHO BAY”), an option to acquire the Robinson
Property (the “Option”), in consideration for, among other things, the NSR
Royalty.

 

3.         On December 11, 1990, the Court entered an order entitled an
“Amendment to Stipulation to Dismiss with Prejudice and to Confirm Settlement
Agreement and Order” (the “First Amendment”). On December 12, 1991, the Court
approved an “Amendment No. 2 to Stipulation to Dismiss with Prejudice and to
Confirm Settlement Agreement and Order” (the “Second Amendment”). The First and
Second Amendments amended various terms of the Stipulation, including the terms
governing payment of the NSR Royalty.

 

21

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4.         As reflected in the Second Amendment, the Option was exercised and
MAGMA COPPER COMPANY, MAGMA NEVADA MINING COMPANY and MAGMA LIMITED PARTNER CO.
and ROBINSON MINING LIMITED PARTNERSHIP, a Delaware limited partnership
(consisting of MAGMA NEVADA MINING CO. as the general partner and MAGMA LIMITED
PARTNER CO. as the limited partner) (“ROBINSON MINING”) succeeded to certain of
the rights and obligations of ECHO BAY and ALTA GOLD under the Stipulation. In
particular, ROBINSON MINING became the owner of the Robinson Property and MAGMA
COPPER COMPANY and ROBINSON MINING assumed the obligation to pay the NSR
Royalty.

 

5.         In February 1996, MAGMA COPPER COMPANY’s name was changed to BHP
COPPER INC. At the same time, MAGMA NEVADA MINING COMPANY’s name was changed to
BHP NEVADA MINING COMPANY, and the MAGMA LIMITED PARTNER CO. name was changed to
BHP COPPER LIMITED PARTNER COMPANY. BHP NEVADA MINING COMPANY and BHP COPPER
LIMITED PARTNER COMPANY continued as partners in ROBINSON MINING. In May 1999,
BHP COPPER LIMITED PARTNER CO. was merged into BHP NEVADA MINING COMPANY,
resulting in the dissolution of ROBINSON MINING, with the partnership assets and
liabilities being assumed by BHP NEVADA MINING COMPANY.

 

6.         On September 12, 2003, BHP COPPER INC., BHP NEVADA MINING COMPANY and
KENNECOTT entered into the Robinson Property Trust Ancillary Agreement (the
“Ancillary Agreement”) pursuant to which KENNECOTT, BHP COPPER INC., and BHP
NEVADA MINING COMPANY more fully defined the NSR Royalty, provided for this
public recording of the NSR Royalty, and defined other procedures and protocol
for implementation of the Stipulation.

 

22

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Dated the 12th day of September, 2003.

 

 

 

 

 

 

 

 

KENNECOTT RAWHIDE MINING COMPANY

 

 

 

 

 

 

 

 

By: 

[Illegible signature]

 

 

 

Title:

President & CEO

 

 

 

 

 

 

 

 

 

KENNECOTT NEVADA COPPER COMPANY

 

 

 

 

 

 

 

 

By: 

[Illegible signature]

 

 

 

Title:

President & CEO

 

 

 

 

 

 

 

 

 

KENNECOTT HOLDINGS CORPORATION

 

 

 

 

 

 

 

 

By: 

[Illegible signature]

 

 

 

Title:

Sr. V.P.

 

 

 

 

 

 

 

 

 

BHP COPPER INC.

 

 

 

 

 

 

 

 

By: 

/s/ B.K. Wichers

 

 

 

Title:

President

 

 

 

 

 

 

 

 

 

BHP NEVADA MINING COMPANY

 

 

 

 

 

 

 

 

By: 

/s/ B.K. Wichers

 

 

 

Title:

Chairman & President

 

 

 

 

23

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Acknowledgments

 

STATE OF UTAH

)

 

)

COUNTY OF SALT LAKE

)

 

On this 12th day of September, 2003, personally appeared before me, a Notary
Public, Adrian F. Jackman, President & CEO of Kennecott Rawhide Mining Company,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of Kennecott Rawhide Mining Company.

 

GRAPHIC [g163043kk05i001.gif] 

 

 

 

 

 

 

 

/s/ Leslie Smith

 

Notary

 

STATE OF UTAH

)

 

)

COUNTY OF SALT LAKE

)

 

On this 12th day of September, 2003, personally appeared before me, a Notary
Public, Adrian F. Jackman, President & CEO of Kennecott Nevada Copper Company,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of Kennecott Nevada Copper Company.

 

GRAPHIC [g163043kk05i001.gif] 

 

 

 

 

 

 

 

/s/ Leslie Smith

 

Notary

 

STATE OF UTAH

)

 

)

COUNTY OF SALT LAKE

)

 

On this 12th day of September, 2003, personally appeared before me, a Notary
Public, Adrian F. Jackman, Sr. V.P. of Kennecott Holdings Corporation,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of Kennecott Holdings Corporation.

 

GRAPHIC [g163043kk05i001.gif] 

 

 

 

 

 

 

 

/s/ Leslie Smith

 

Notary

 

24

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STATE OF ARIZONA

)

 

)

COUNTY OF PIMA

)

 

On this 15th day of September, 2003, personally appeared before me, a Notary
Public, Ben K. Wichers, President of BHP Copper Inc., personally known or proved
to me to be the person whose name is subscribed to the above instrument who
acknowledged to me that they executed the above instrument on behalf of BHP
Copper Inc.

 

 GRAPHIC [g163043kk05i002.gif]

 

 

 

 

 

/s/ Lynn C. Feldt

 

Notary

 

 

STATE OF ARIZONA

)

 

)

COUNTY OF PIMA

)

 

On this 15th day of September, 2003, personally appeared before me, a Notary
Public, Ben K. Wichers, Chairman & President of BHP Nevada Mining Company,
personally known or proved to me to be the person whose name is subscribed to
the above instrument who acknowledged to me that he executed the above
instrument on behalf of BHP Nevada Mining Company.

 

 GRAPHIC [g163043kk05i002.gif]

 

 

 

 

 

/s/ Lynn C. Feldt

 

Notary

 

25

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SCHEDULE 1

 

TO

 

EXHIBIT C of ANCILLIARY AGREEMENT

 

Description of Robinson Property

 

Incorporating the property description contained in Exhibit A from that certain
December 17, 1990 Deed and Assignment from Kennecott Nevada Copper Company,
formerly known as Nevmind Inc., Kennecott Corporation, and Kennecott Nevada
Company to Magma Nevada Mining Company, and as further depicted on that certain
January 2001 Map of Robinson Property, White Pine County, Nevada, prepared by
Land Management Services, Inc., Reno, Nevada and included in Exhibit Al,
specifically excluding the water distribution and sanitary sewer systems that
were conveyed by Kennecott Copper Corporation to Ruth-McGill Water Company by
Quitclaim Deed made the 25th day of January, 1966 and recorded in the County
Recorder’s Office of White Pine County, State of Nevada, in Book 264, pages 434
- 437, a copy of which is included in Exhibit A2.

 

26

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