HOMERO BUSTILLOS GONZALEZ
 
ASSIGNEES OR DESIGNEES
 
and
 
AMERICAN GOLD HOLDINGS LTD.
 
 
 
 
 

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OPTION TO PURCHASE AGREEMENT
 
JANUARY 11, 2011

 
 
 
 
 
 

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TABLE OF CONTENTS
 
ARTICLE 1
INTERPRETATION
 
Section 1.1 Defined Terms
1
Section 1.2 Interpretative clauses.
6
Section 1.3 Conditions Precedent.
7
 
ARTICLE 2
GRANT AND EXERCISE OF OPTION
 
Section 2.1 Grant of Option to Buy 70% of all mining rights in Property.
7
Section 2.2 Purchase Price
7
Section 2.3 Option to Purchase Payments, Expenditures and Financing
9
Section 2.4 Work Commitment, Expenditures and Exploration Objective(s).
9
 
ARTICLE 3
OPTION PERIOD
 
Section 3.1 Conduct of Business.
10
Section 3.2 Access for Exploration
10
Section 3.3 Optionee's Obligations
10
Section 3.4 Engagement
11
Section 3.5 Emergency Expenditures
11
 
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
 
Section 4.1 Signing Representations and Warranties of Optionor
12
Section 4.2 Closing Representations and Warranties of Optionor
12
Section 4.3 Representations and Warranties of Optionee.
13
Section 4.4 Survival
14
 
ARTICLE 5
POST-CLOSING PERIOD
 
Section 5.1 Anti-Dilution Rights.
14
Section 5.2 Nominees to Optionee's Advisory Board
14
Section 5.3 Further Assurances
14
 
ARTICLE 6
TERMINATION
 
Section 6.1 Termination by Optionee
14
Section 6.2 No Termination on Closing
14
Section 6.3 Obligations Cease
14
Section 6.4 Non-Compliance by Optionor
15

 
 
 
 

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ARTICLE 7
ARBITRATION
 
Section 7.1 Arbitration of Disputes.
15
Section 7.2 Notice to Arbitrate
15
Section 7.3 BCICAC Administration and Rules.
15
Section 7.4 Arbitration Award.
15
 
ARTICLE 8
MISCELLANEOUS
 
Section 8.1 Notices.
16
Section 8.2 Time of the Essence.
17
Section 8.3 Time of the Essence.
17
Section 8.4 Confidential Information
17
Section 8.5 Expenses
17
Section 8.6 Amendments.
17
Section 8.7 Waiver.
18
Section 8.8 Non-Merger.
18
Section 8.9 Entire Agreement
18
Section 9.0 Successors and Assigns.
18
Section 9.1 Severability.
18
Section 9.2 Governing Law.
19
Section 9.3 Method of Payment
19
Section 9.4 Counterparts.
19

 
SCHEDULES
 
SCHEDULE 1              Properties
 
 
 
 
 

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OPTION to PURCHASE AGREEMENT
 
THIS OPTION TO PURCHASE GREEMENT is made as of the 11th day of January, 2011.
BETWEEN:
 
HOMERO BUSTILLOS GONZALEZ ("HBG"), a Mexican national, the "Optionor")
 
AND:
 
AMERICAN GOLD HOLDINGS LTD., a company incorporated under the laws of the
British Virgin Islands, having its principal offices in Trident Chambers, Road
Town, Tortola (the "Optionee")
 
WITNESSES THAT WHEREAS:
 
A.  
HBG is the beneficial owner of a one hundred percent (100%) interest in and to
the eight (8) mining concessions in the project area known as "La Candelaria",
totaling 800 hectares and registered with the Directorate General of Mines at
the Ministry of Economy under certificates 234 759, 234 760, 234 761, 234 762,
and 235 690, 235 691, 235 692, 235 693 located in the Municipality of Guachochi,
in the State of Chihuahua, Mexico, and listed in Schedule 1 attached hereto (the
"Properties").

 
B.  
HBG has agreed to transfer the Properties to a new Mexican company to be
incorporated by the Optionee. The Optionee will endeavour to incorporate a
company within 6 months of the closing of this Definitive Agreement under the
laws of Mexico having its principal offices in Guachochi, Chihauhua.

 
C.  
The Optionor has agreed to grant to the Optionee, subject to and upon the terms
of this Agreement, an option to purchase seventy percent (70%) of the shares of
the Company and an undivided 70% interest in the eight (8) mining concessions
subject of this Buy-Sell Agreement.

 
NOW THEREFORE in consideration of the premises and the covenants, agreements,
representations and warranties herein, the sufficiency of which is hereby
acknowledged, the Parties hereto covenant and agree as follows:
 
ARTICLE 1
INTERPRETATION
 
Section 1.1 Defined Terms.
 
As used in this Agreement, the following terms have the following meanings:
 
"Affiliate" means any company, group, person, partners or associates or any
other stakeholder who directly or indirectly controls or is controlled by or
associated with Optionor or Optionee.
 
 
 

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"Definitive Agreement" means this option to purchase agreement and all schedules
and instruments in amendment or confirmation of it and the expressions "Article"
and "Section" followed by a number mean and refer to the specified article or
section of this Agreement.
 
"Assets" means all property and assets of the Company of every nature and kind
and wherever situated and includes, for greater certainty and without limiting
the generality of the foregoing, the Properties, the Books and Records, the
Corporate Records and the Contracts, Mining Concession Titles, and all rights
and interests related to the granting of those titles.
 
"Associate" means one or more of the following relationships with Optionor or
Optionee;
 
(1) 
a corporation of which that Person or another Associate of that Person
beneficially owns, directly or indirectly, at least 10% of the voting shares;

 
(ii)  
a partner or business associate, or stakeholder affiliated with that Person,
corporation or Optionor or Optionee;

 
(iii)  
a trust or estate in which that Person, business associate or stakeholder has a
substantial beneficial interest or for which that Person serves as trustee or in
a similar capacity;

 
(iv)  
that Person's spouse or a relative of that Person or that Person's spouse.

 
"Authorization" means, with respect to any person, corporation or stakeholder or
associate, any order, permit, approval, waiver, license or similar authorization
of any governmental or public department, central bank, commission, board,
bureau, agency or instrumentality or stock exchange having jurisdiction over the
Person.
 
"Books and Records" means all books of account, tax records, sales and purchase
records, supplier lists, computer software, business reports, plans and
projections and all other documents, files, correspondence and other information
and records of the Company (whether in written, printed, electronic or computer
printout form) acquired or generated in the course of its Business.
 
"Business" means the business of exploring for, developing and exploiting
mineral deposits, as well as the sale of any and all metallic or non-metallic
products produced from such exploitation.
 
"Business Day" means any day of the year, other than a Saturday, Sunday or any
other day on which banks are required or authorized to close in Reno, Nevada.
 

 
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"Closing" means the completion of the Transaction by signing of this Option to
Buy -Sell Agreement, known as the "more-comprehensive, definitive agreement" in
the letter of intent "L01" Dated November 15, 2010 and executed by the parties
on or about November 25th, 2010.
 
"Closing Date" means the date which is this Option to Buy-Sell Agreement is
signed by the Optionee and the Optionee delivers to the Optionor the executed
copy notice of the Option to Buy-Sell Agreement, duly signed, or such other date
as the Parties may agree for the Closing to take place. A period of up to
ninety (90) days was stipulated in the closing of the definitive agreement in
the original LOl entered into by Optionor and Optonee for the acquisition of a
seventy (70%) interest in La Candelaria, the  LOl is incorporated herein by this
reference.
 
"Company" means a company to be incorporated under the laws of Mexico, as
contemplated in Section 1.3(b).
 
"Company Shares" means all of the issued and outstanding shares in the capital
of the Company.
 
"Contracts" means all agreements to which the Company is a party including all
contracts, leases of personal property and commitments of any nature, written
or oral.
 
"Corporate Records" means the corporate records of the Company, including:
 
a)  
all incorporation and other constitutional documents and by-laws,

 
b)  
all minutes of meetings and resolutions of shareholders and directors (and any
committees),

 
c)  
the share certificate books, and

 
d)  
the registers of securities, of transfers, of directors, of powers of attorney
and all other official registers of the Company.

 
"Effective Date" means the date that the conditions precedent set out in Section
1.3 are met.
 
"Encumbrances" means any mortgage, charge, pledge, hypothecation, security
interest, assignment, lien (statutory or otherwise), charge, title retention
agreement or arrangement, restrictive covenant, option, right of pre-emption,
privilege or any contract to create any of the foregoing or any other
arrangement or condition which, in substance, secures payment or performance of
an obligation or which is capable of registration or registered against title.
 
"Expenditures" means all costs and expenses of whatever kind or nature spent or
incurred by or on behalf of the Optionee from the Effective Date in the conduct
of exploration, development and evaluation activities on or in relation to the

 
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Properties directly related to advancing the geologic information related to the
mining concessions subject to this Option to Purchase/Buy-Sell Agreement
including:
 
a)  
in holding the Properties in good standing (including any monies expended as
required to comply with Laws, such as for the completion and submission of
assessment work and filings required in connection therewith), in curing title
defects and in acquiring and maintaining surface and other ancillary rights,
including payments owners of surface rights;

 
b)  
in preparing for and in the application for and acquisition of environmental and
other permits necessary or desirable to commence and complete exploration,
development and evaluation activities on the Properties;

 
c)  
in doing geophysical and geological surveys, drilling, assaying and
metallurgical testing, including costs of assays, metallurgical testing and
other tests and analyses to determine the quantity and quality of minerals,
water and other materials or substances;

 
d)  
in acquiring services or facilities or the use thereof and for all parts,
supplies and consumables;

 
e)  
for salaries and wages, including actual labour overhead expenses for employees
assigned to exploration, development and evaluation activities directly related
to advancing the geologic information  related to the mining concessions subject
to this Option to Purchase/Buy-Sell Agreement;

 
f)  
travelling expenses and fringe benefits (whether or not required by law) of all
persons engaged in work with respect to and for the benefit of the Properties
including for their food, lodging and other reasonable needs;

 
g)  
payments to contractors or consultants for work done, services rendered or
materials supplied, provided that such engagement of any non-arm's length person
must be on terms no more favourable to such person than what would be customary
in the industry for an arm's length person;

 
h)  
all taxes or other imposts levied against or in respect of the Properties or
activities thereon and the cost of insurance premiums and performance bonds or
other security; and

 
"Final Payment" means the final payment of the Purchase Price under Section 2.2.
 
"Financing" means any equity financing arranged by or on behalf of the Optionee,
affiliates, associates, assignees, designees or transferees.
 
"Financing Deadline" has the meaning ascribed to that term in Section 2.3(e);

 
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'Initial Financing" means at least US$ 150,000 of gross proceeds in Financing
needed to conduct the initial exploration/development work at La Candelaria and
bring current mining taxes for the eight mining concessions included in this
option to purchase agreement as soon as possible.
 
"Laws" means any and all applicable laws including all statutes, codes,
ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral
or administrative or ministerial or departmental or regulatory judgments,
orders, decisions, rulings or awards, policies, guidelines, and general
principles of common and civil law and equity, binding on or affecting the
Person referred to in the context in which the word is used.
 
"Net Smelter Returns" means a standard mining industry royalty agreement duly
executed by the Company and Optionee as payor to the Optionor, of the two (2%
NSR) net smelter returns royalty.
 
"Option" has the meaning specified in Section 2.1.
 
"Option Period" means the period between the close of business on the date of
this Agreement and the Closing Date.
 
"Optionee" means American Gold Holdings Ltd. or affiliates, associates,
assignees, designees or transferees.
 
"Optionor" means Homero Bustillos Gonzalez or affiliates, associates, designees
or transferees.
 
"Optionor's Shares" has the meaning ascribed to that term in Section 2.2.4
 
"Parties" means the Optionor and the Optionee and any other Person who may
become a party to this Agreement by, through or under the Optionor or the
Optionee.
 
"Person" means a natural person, partnership, limited liability partnership,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity or governmental entity, and pronouns have a similarly
extended meaning.
 
'Post Closing Period" means the period commencing with the Closing Date and
ending on that date upon which the Optionee's comply completely with all the
terms of this Definitive Option to Purchase/Buy - Sell Agreement or the three
year period stipulated in the Work Commitment agreed to by Optionor and Optionee
in the LOI, which ever occurs first.
 
"Properties" means the mineral concessions referred to in Recital A and
described in Schedule 1 as may be modified and varied under applicable Laws from
time to time.
 
"Purchase Price" means the purchase price as described in Section 2.2
 
 
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"Regulatory Approval" means the Authorizations required by the Optionee for its
participation in the Transaction from all securities commissions, stock
exchanges and other regulatory authorities having jurisdiction or from its
shareholders.
 
"Related Party" means either of the Optionor or Homero Bustillos Gonzalez or any
Affiliate or Associate of either of the Optionee, partners, subsidiaries or
designees, or transferees.
 
"Shares" means 300,000 common shares in the capital of the Optionee, a private
company and, more specifically, the same number of shares vended in to a
public company either on a one to one (1:1) basis from Optionee's private
company or on the same basis the Optionee is granted for this transfer/vend-in.
This same requirement pursuant to this agreement shall apply to any of the
1,000,000 "earn-in" shares tied to mineral deposit discoveries. The common
shares issued as earn-in shares require an additional 1,000,000 shares of the
Optionee's private company issued to Optionor in the public company. The
additional earn-in shares are contingent upon discovery of a 1,000,000 ounce
gold-equivalent gold deposit. It is recognized that the shares of the private
company (American Gold Holdings Ltd.) will be vended into a public company
on a reputable North American exchange.
 
"Transaction" means the purchase and sale of the Company Shares and Optionor's
or affiliate's acquisition of 70% of the mining rights and interest to the eight
(8) concessions as stipulated in the LOI, and as contemplated hereunder.
 
Section 1.2  Interpretative clauses.
 
(a)  
Any reference in this Agreement to gender includes all genders and words
importing the singular number only will include the plural and vice versa.

 
(b)  
The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and are not to affect its interpretation.

 
(c)  
The schedules attached to this Agreement, for all purposes of this Agreement,
form an integral part of it.

 
(d)  
All references in this Agreement to dollars, unless otherwise specifically
indicated, are expressed in the currency of the United States of America.

 
(e)  
In this Agreement:

 

 
(i) 
the words "including" and "includes" mean "including (or includes)without
limitation", and the phrase "the aggregate of", "the total of", "the sum of", or
a phrase of similar meaning means "the aggregate (or total or sum), without
duplication, of"; and

 

 
(ii) 
in the computation of periods of time from a specified date to alater specified
date, unless otherwise expressly stated, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding".

 
 
 
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Section 1.3  Conditions Precedent.
 
The obligation of the Optionee to complete the Transaction is subject to and
does not become binding until:
 
(a)  
receipt by the Optionee of Regulatory Approval, if this is required;

 
(b)  
the incorporation of the Company, which must have (i) constitutional documents
or commitments to transfer shares in the Company satisfactory to the Optionee

 
(c)  
the transfer of all the rights and interest in the Property to the Company of
all of the Properties indicated in Schedule 1 to be for initial transfer, free
and clear of encumbrances

 
When all of the conditions precedent have been met, the date that the latter of
the above three was met will be the effective date of this Agreement (the
"Effective Date"). Each of the Parties and HBG to take all such actions and do
all such things within its, their or his control as may be necessary or
advisable to fulfill and satisfy the conditions precedent as soon as possible
but no later than February 14, 2011. If the conditions precedent are not met by
February 14, 2011, or such date as agreed upon as an extension by the Parties
(such later date as the Optionee may reasonably request to which Optionor
agrees), then this Agreement will have no further force and effect and no Party
will have any further obligation or liability to another except in relation to
its covenants under this Section 1.3.
 
ARTICLE 2
GRANT AND EXERCISE OF OPTION
 
Section 2.1  Grant of Option to Buy 70% of all mining rights in Property.
 
The Optionor hereby grants to the Optionee the irrevocable and exclusive option
(the 'Option") exercisable in accordance with this Article 2, to
purchase  seventy (70%) percent of the rights and interests in the mining
concessions subject of this definitive agreement, free and clear of all
Encumbrances for the Purchase Price.
 
Section 2.2  Purchase Price
 
The purchase price for the Option will be:
 
1)
Cash Option Payments Required for the Buy Sell Agreement to remain in force. The
Purchaser/Optionee will pay the Vendor USD $250,000 in cash consideration as
follows:

 

 
a) 
USD $25,000 on the signing of this letter. Paid pursuant to theoriginal LOI.

 

 
b) 
USD $100,000 on signing of the definitive agreement (90 day periodfor closing of
the definitive agreement was stipulated in the LOI)

 
 
 
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c) 
USD $125,000 within 12 months of the closing of the definitiveagreement.

 
2)
Granting or Payment in Common Shares: The Purchaser/Optionee will grant and
deliver to the Vendor 300,000 of its shares as follows: 300,000 common shares in
the capital of American Gold Holdings Ltd. and when a vend-in or transfer to a
public trading company occurs or the same number of shares granted toOptionee
per share for this vend-in either on a one to one (1:1) basis for shares in
Optionee's private company or on the same basis Optionee is granted for this
transfer/vend-in to the public company to be delivered on the Closing Date or
whenever a vend-in occurs according to the following schedule:

 

 
a) 
150,000 shares immediately upon listing of a recognizable North American public
exchange (eg., TSX Venture)

 

 
b) 
150,000 shares within 6 months of listing on a recognizable North American
public exchange

 
3)
The Purchaser/Optionee will grant the Optionor/Vendor "earn-in" shares tied to
mineral deposit discoveries. The shares issued under this feature would
requirean additional 1,000,000 shares of the Purchaser either on a one to one
(1:1) basis for shares held by Optionor in the Optionee's private company or on
the same share for share basis as the Optionee is granted for the
transfer/vend-in. This is contingent upon discovery of at least a 1,000,000
ounce gold- equivalent deposit. This provision would be applied against a
credible and recognizable standard on a one-time basis subsequent to completion
of the work commitment or at any time this minimum threshold is met and is not
dependent on the size of discovery, assuming the minimum threshold is met.

 
4)
The Optionor/Vendor will retain a 2% Net Smelter Returns Royalty ("NSR") on
thegross mineral production. The Optionee/ Purchaser will have the option to
buy­-out 1% of the NSR for $1,000,000.

 
5)
The Optionor/Vendor will provide a consulting prospector, or engineer acceptable
to the Purchaser to act as VP of Exploration or member of the advisory board for
the public company to oversee activities related to this Property. This
consulting agreement would be for a period of 1 year with an option to renew for
1 additional year. The amounts paid to the consultant will be applied against
the work commitment.

 
Section 2.3  Option to Purchase Payments, Expenditures and Financing
 
In consideration for the granting of this Exclusive Option to Purchase, the
Optionee will do the following:
 

 
(a) 
within five Business Days after the Effective Date, pay to the Optionor the sum
of US $100,000.00 due and payable on signing of this Definitive Agreement, and

 
 
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(b) 
make all subsequent option payments on a timely basis pursuant to Sec. 2.2 -
Purchase Price as further shown in Paragaph 2 (C), page 1 of the LOl executed by
Optionor and Optionee, incorporated herein by this reference, and

 

 
(c) 
all other conditions related to completion of good delivery of shares of
Optionee's private company and a number of shares on either a one to one (1:1)
basis or on the same basis Optionee is granted for the transfer/vend-in to a
public trading company; and

 

 
(d) 
complete and timely compliance with the Work Program as stipulated in the LOl
and this agreement with the exploration and mine development program(s)
conducted in the Properties; and

 

 
(e) 
obligated to raise a minimum of US $450,000 within the three (3) year period
provided for in order to comply with on-going cash option payments and the work
program.

 
Section 2.4  Work Commitment, Expenditures and Exploration Objective(s):
 
To keep the Option in good standing the Optionee must:
 
(1) The Purchaser/Optionee will provide a work commitment for the Property of
USD $450,000 over 3 years as follows:
 

 
a) 
Begin and continue to explore the Properties with the express purpose of
advancing the geologic knowledge of the Property and spend at least USD $150,000
within the 1st year of the closing date of this Definitive Agreement

 

 
b) 
Continue to explore the Properties with the express purpose of advancing the
geologic knowledge of the Property and spend at least a minimum of USD $150,000
within the 2nd year of the closing date of this Definitive Agreement

 

 
c) 
Continue to explore the Properties with the express purpose of advancing the
geologic knowledge of the Property and spend at least a minimum of USD $150,000
within the 3rd year of the closing date of this Definitive Agreement

 
(2)  All exploration and mine development work will be conducted as part of the
Work Program will be in accord with the best practices and usual standards of
professional conduct with the express focus of further exploring and defining
mineral resources and mining reserves.
 
 
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ARTICLE 3
OPTION PERIOD
 
Section 3.1  Conduct of Business.
 
During the Option Period, the Optionor, HBG will:
 
(a) 
after the Effective Date, transfer to the Company, free and clear of
Encumbrances other than the royalty to be granted to the Optionor hereunder, any
of the Properties not a part of the initial transfer of Properties to the
Company; and

 
(b) 
cause the Company to conduct the Business in the ordinary course including,
without limiting the generality of the foregoing, maintaining and preserving the
Properties and refraining from selling, transferring or otherwise disposing of
the Properties described in Schedule 1 or any interest therein or from amending
or waiving any rights to the Properties.

 
Section 3.2  Access for Exploration.
 
Throughout the Option Period, the Optionee and its directors, officers,
employees, consultants and other agents will have the exclusive right in respect
of the Properties to
 
(a) 
enter thereon;

 
(b) 
have exclusive and quiet possession thereof;

 
(c) 
carry out exploration and development activities including, without limitation,
the removal of ores, minerals and metals from the Properties, but only for the
purpose of testing; and

 
(d) 
bring upon and erect upon the Properties such structures and other facilities
asmay be necessary or advisable to carry out exploration and development
activities.

 
The Optionee's rights pursuant to this Section 3.2 will at all times be subject
to any restrictions that may be required by applicable Laws and to rights of
entry and access reserved to the Optionor hereunder.
 
Section 3.3  Optionee's Obligations
 
The Optionee is obligated during the entire period of this Option Agreement:
 
(a) 
to conduct all work on or with respect to the Properties, and to
otherwiseproperly use and maintain the Properties, in a manner consistent with
good exploration, engineering and mining practices and in compliance with all
applicable laws and regulations; and

 
(b) 
to keep the Properties in good standing by the doing and filing of all
necessarywork and by the doing of all other acts and things and making all
other  payments which may be necessary in that regard; and

 
 
 
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(c) 
to keep the Properties free and clear of all Encumbrances arising from its
activities thereon (except liens being contested in good faith) and proceed with
all diligence to contest and discharge any Encumbrance that is filed against the
Properties; and

 
(d) 
to permit the directors, officers, employees, consultants and other agents of
the Optionor, at their own risk, access to the Properties at all reasonable
times, provided that the Optionor jointly and severally indemnifies the Optionee
against and save it harmless from all costs, claims, liabilities and expenses
that the Optionee may incur or suffer as a result of any injury (including
injury causing death) to any director, officer, employee, consultant or other
agent of the Optionor while on the Properties except to the extent that any such
costs, claims, liabilities or expenses result from the Optionee's gross
negligence or wilful misconduct; and

 
(e) 
to deliver to the Optionor monthly reports (including up-to-date maps)
containing information on exploration activity, drilling and assays of core,
channel samples, and any or all results during active field operations or
metallurgical testing and pre-feasibility or feasibility studies, including all
engineering reports, environmental studies, geological reports and financial
projections based on interim or final results of exploration or mining
development;

 
(f) 
to maintain true and correct Books and Records of Expenditures during the entire
period of this Option Agreement;

 
(g) 
to consult with the Optionor on all material matters involving negotiations or
other dealings with Federal, State or Municipal governments, local land owners,
regulatory authorities and other Persons in Mexico having authority or influence
in respect of the Properties, and its exploration and development and any
Authorizations in connection therewith.

 
Section 3.4  HBG Engagement
 
The Optionee will engage HBG or his designate as a consultant with respect to
its work respecting the Property for a period beginning upon signing of this
agreement for one year with an option for one additional 1 year.
 
Effective Date. For his consulting services HBG or his designate will be paid on
a monthly basis. HBG or his designate shall be paid reasonable traveling
expenses, including, but not limited to hotel, food, fuel costs and car rental
if one is not supplied by the Company. Periodical expense reports will be
submitted to the Company for approval and reimbursement. Consulting and travel
expenditures will be applied against the company's work commitment.
 
Section 3.5  Emergency Expenditures
 
Notwithstanding any other provision of this Agreement, the Optionee will be
entitled to incur as Expenditures all costs and expenses necessary to preserve
or protect life, limb, property or the environment or to comply with Laws,
Authorizations, and lawful orders in respect of the Properties.

 
 
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
 
Section 4.1 Signing Representations and Warranties of the Optionor.
 
The Optionor represents to and warrants in favour of the Optionee the following:
 
(a) 
Litigation: There are no pending actions, suits or proceedings threatened
against the Optionor or the Properties.

 
(b) 
Properties: The Optionor owns and has exclusive possession of, or has a right to
acquire good and valid title to and exclusive possession of, all of the
Properties and other Assets, free and clear of all Encumbrances and defects in
title.

 
Section 4.2  Post Closing Representations and Warranties of the Optionor
 
The Optionee will incorporate a Company within 6 months of the closing of this
Definitive Agreement under the laws of Mexico having its principal offices in
Guachochi, Chihauhua, and the Optionor will represent and warrant in favour of
the Optionee as follows:
 
(a) 
Nature of Business and Compliance with Laws: The Company's only activities are
respecting the Business and it is conducting and has always conducted the
Business and any past business in compliance with Laws. The Company has all the
Authorizations necessary for it to carry on the Business as it is presently
carried on and to own and hold its Assets.

 
(b) 
Title to the Assets. The only assets of the Company are the eight mining
concessions or Properties (which are recorded in the name of the Company), the
maps, reports, samples, core assay results and other geological or scientific
data related to the Properties, the Books and Records and the Corporate Records,
and the Company owns good and valid title to and exclusive possession of all of
the Assets, free and clear of all Encumbrances and defects in title, other than
the Underlying Agreements and the royalty to be granted hereunder to the
Optionors, and no Person except the Optionor, the Optionee and the Underlying
Owners has any royalty, claim or other right in or to any of the Assets.

 
(c) 
Material Contracts: The Company has no Contracts material to the ownership of
the Assets or the operation of the Business or otherwise except the Underlying
Agreements. No default has occurred under any of the Underlying Agreements, each
of which is in good standing and unamended subsequent to its being reinstated by
Optionor.

 
(d) 
Subsidiaries: The Company has no subsidiaries and holds no shares or other
ownership, equity or propriety interests in any other Person.

 
(e)
Books and Records: All accounting and financial Books and Records are fully,
properly and accurately kept in accordance with international generally accepted
accounting principles and are complete in all material respects. Copies of such
Books and Records will be provided to the Optionee.

 

 
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(f) 
Financial Statements: The Company's balance sheet is prepared in accordance with
generally accepted accounting principles, and presents fairly and completely the
assets and liabilities of the Company and its shareholder's equity as of such
date. Copies of such balance sheet will be made available to the Optionee.

 
(g) 
No Liabilities: Except as reflected or reserved against in the Company's balance
sheet as of the Closing Date, the Company has no liabilities or obligations of
any nature (whether absolute, accrued, contingent or otherwise) except for
current liabilities incurred in the ordinary course since such date and under
the Underlying Agreements.

 
(h) 
Environmental Matters: There are no reports or other documents relating to
environmental matters affecting the Company or any of the Properties. To the
best knowledge of each of them, all activities on the Properties by or on behalf
of the Company or any previous owners have been conducted in accordance with all
environmental Laws and any lawful orders or permits issued in connection
therewith, and there are no contaminants or sources of contamination on or
emanating from the Properties.

 
(i) 
Employees: The Company does not have and has never had any employees.

 
Section 4.3  Representations and Warranties of Optionee.
 
The Optionee represents to and warrants in favour of the Optionor the following:
 
(a) 
Incorporation: The Optionee is a body corporate duly incorporated, organized and
validly subsisting under the Laws of its incorporating jurisdiction.

 
(b) 
Power and Authority: The Optionee has full power and authority to carry on its
Business and to enter into this Agreement and carry out its obligations
hereunder including, without limitation, the issuance of the Shares in
Optionee's private company and shares in for a vend-in. And when a vend-in or
transfer to a public trading company occurs, then the same number of shares
granted to Optionee per share for this vend-in either on a one to one (1:1)
basis for shares in Optionee's private company or on the same basis Optionee is
granted for this transfer/vend-in to the public company to be delivered on the
Closing Date or whenever a vend-in occurs equal to the ownership/stock held by
Optionor in American Gold Holdings.

 
(c) 
Conflict: Neither the execution and delivery of this Agreement nor the
consummation of the Transaction conflict with, result in the breach of or
accelerate the performance required by an agreement to which the Optionee is a
party nor does the execution and delivery of this Agreement violate or result in
the breach of any Laws applicable to the Optionee.

 
(d) 
Execution and Binding Obligation: This Agreement constitutes a legal, valid and
binding obligation of the Optionee enforceable against it in accordance with its
terms

 
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(e) 
Proceedings: No proceedings are pending for and the Optionee is unaware of any
basis for the institution of any proceedings leading to the dissolution or
winding-up of the Optionee or its subjection to bankruptcy or any other Laws
governing the affairs of insolvent persons.

 
Section 4.4  Survival
 
The representations and warranties of the Parties set forth in this Article 4
will survive the Closing and the Final Payment.
 
ARTICLE 5
POST-CLOSING PERIOD
 
Section 5.1  Anti-Dilution Rights.
 
During the Post Closing Period, the Optionee will, in any financing it arranges
or which is arranged on its behalf, offer under the same terms Optionee is
offered, to the Optionor the opportunity to maintain their aggregate percentage
shareholding, participating in such financing(s) to the extent necessary to
maintain such aggregate percentage interest.
 
Section 5.2  Nominee to Optionee's Advisory Board
 
During the Post-Closing Period, the Optionor will be entitled to appoint one
nominee, who is acceptable to the Optionee acting reasonably, for appointment or
election to the Optionee's Advisory Board.
 
Section 5.3  Further Assurances.
 
From time to time during the Post-Closing Period, each Party must, at the
reasonable request of any other Party, execute and deliver such additional
conveyances, transfers and other assurances as may be reasonably required to
effectively evidence the ownership of the Properties by the Company and the
transfer the Company Shares to the Optionee and to otherwise carry out the
intent of this Agreement.
 
ARTICLE 6
TERMINATION
 
Section 6.1  Termination by Optionee.
 
The Optionee, at its sole discretion, may terminate this Definitive Option to
Purchase/Buy Sell Agreement at any time during the Option Period upon at least
30 days' written notice to the Optionor.
 
Section 6.2  No Termination on Closing
 
If the Optionee does complies with all the terms of this Option to Purchase/Buy
­Sell Agreement and thereby does exercise the Option granted to Optionee by
Optioner this Agreement will not terminate on the expiry of the Post Closing
Period.
 
Section 6.3  Obligations Cease
 
Except as may have arisen prior to termination, on and after any termination
this Agreement under this Article 6, no Party will have any liability to any
other under or in relation to this Agreement except that the provisions of
Section 8.3 and all other provisions necessary for the interpretation and
enforcement thereof will remain in full force and effect. Without limiting the
generality of the foregoing, upon any termination under Section 6.1, the
Optionee will not be liable to the Optionor for any failure to make any payment
to the Optionors not yet due.
 
 
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Section 6.4 Non-Compliance by Optionor
 
Should the Optionor not comply with all the option payments and good delivery of
shares stipulated in Section 2.2.2 of this Definitive Agreement and the work
program minimum investment of US $ 450,000 included in "Expenditures" as defined
herein  within thirty-six months of the Effective date, this option agreement
shall be null and void and any liability under or in relation to this Agreement
shall cease, save the Optionee's obligation to return all the Properties
transferred to the Company by Optionor to any entity or person designated by
Optionor in good standing, including but not limited to the properties and
Company being free and clear of all encumbrances including mining taxes, labor
liens, and claims for exploration or mine development work, mining or
feasibility studies.
 
ARTICLE 7
ARBITRATION
 
Section 7.1  Arbitration of Disputes.
 
All minor disputes (those not affecting the continuing validity or
enforceability of this agreement) arising out of or in connection with this
Agreement will be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre
("BCICAC") by a sole arbitrator.
 
Section 7.2  Notice to Arbitrate.
 
Any Party may refer any such matter to arbitration by notice to the others and,
within 30 days after receipt of such notice, the affected Parties will endeavour
to agree on the appointment of an arbitrator, who will be capable of commencing
the arbitration within 21 days of his appointment. The arbitrator will be an
individual who by a combination of education and experience is competent to
adjudicate the matter in dispute and who has indicated his willingness and
ability to act as arbitrator in accordance with this Article 7.
 
Section 7.3  BCICAC Administration and Rules.
 
The appointing authority for the arbitration will be the BCICAC. The case will
be administered by the BCICAC in accordance with its ''Procedures for Cases
under the BCICAC Rules". The place of arbitration will be Vancouver, British
Columbia, Canada and the language of the arbitration will be English.
 
Section 7.4  Arbitration Award.
 
The award of the arbitrator will be final and binding upon each of the Parties
and will not be subject to appeal or judicial review.

 
 
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ARTICLE 8
MISCELLANEOUS
 
Section 8.1  Notices.
 
Any notice, direction or other communication given under this Agreement must be
in writing and may be given by delivering it or sending it by facsimile or other
similar form of recorded communication to any address provided by the Optionors
or addressed:
 

 
(a)
to the Optionor, HBG at:

 
Alamo #6, Colonia, Alta Vista
Guachochi, Chihuahua 33180
Telephone:       (649) 196-3542
E-mail                 bustilloshomero@hotmail.com
 

 
(b)
to the Optionee, David Craven at:

 
Trident Chambers
Road Town, Tortola BVI
Attention:           Director
Telephone:
 
with a copy to:
 
World Trade Center
10 Route de l'Aeroport PO Box 691
CH-1215 Geneva 15
Attention: David Craven
Telephone:         +41 22 799 0800
 
Any such communication to the above addresses will be deemed to have been
validly and effectively given: (I) if personally delivered, on the date of such
delivery if such date is a Business Day and such delivery was made prior to 2:00
p.m. (Carson Ci and otherwise on the next Business Day; or (ii) if transmitted
by facsimile, e-mail or similar means of recorded communication on the Business
Day following the date of transmission.
 
 
 
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Any Party may change its address for service from time to time by notice given
in accordance with the foregoing and any subsequent notice must be sent to such
Party at its changed address.
 
Section 8.2  Time of the Essence.
 
Time is of the essence of this Agreement.
 
Section 8.3 Area of Influence and Non-Competition
 
The Optionee - Purchaser/Buyer or affiliates, partners or agents shall not
acquire any property interests within a boundary of twenty kilometers of the
exterior boundaries of the Property - La Candelaria concessions in the greater
Guachochi area as further described or shown in the LOI attached hereto and
incorporated herein by this reference (hereinafter referred to as the "Area of
Influence") for a period of five years from the date of this Definitive
Agreement without the express consent of Optionor ­Vendor/Seller.
 
Section 8.4  Confidential Information
 
The Parties will keep confidential all information concerning the exploration of
the Properties or otherwise relating to the Transaction, the Company or the
Properties, and will not disclose it to any other Person, except:
 
(a) 
to an Affiliate, consultant, advisor, financier, potential property purchaser,
or potential investor to whom the disclosing Party has a bona fide reason for
disclosing the information and who has executed an undertaking in favour of both
Parties to keep such information confidential;

 
(b) 
as required by Laws or stock exchange policy; and

 
(c) 
information that is or becomes a part of the public domain, other than because
of a breach of this Section 8.3.

 
Section 8.5  Expenses.
 
Except as otherwise expressly provided in this Agreement, all costs and expenses
(including the fees and disbursements of legal counsel, investment advisers and
accountants) incurred in connection with this Definitive Option to Purchase/Buy
Agreement and the Transaction must be paid by the Party incurring such expenses.
 
Section 8.6  Amendments.
 
This Definitive Agreement may only be amended, supplemented or otherwise
modified by written agreement prior to the Effective Date signed by all Parties
and after the Effective Date signed by the Optionor and the Optionee.

 
 
 
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Section 8.7  Waiver.
 
(a) 
No waiver of any of the provisions of this Agreement constitutes a waiver of any
other provision (whether or not similar); nor is such waiver binding unless
executed in writing by the Party to be bound by the waiver.

 
(b) 
No failure on the part of any Party to exercise, and no delay in exercising any
right under this Agreement operates as a waiver of such right; nor does any
single or partial exercise of any such right preclude any other or further
exercise of such right or the exercise of any other right.

 
Section 8.8  Non-Merger.
 
Except as otherwise expressly provided in this Definitive Agreement, the
covenants and the representations and warranties herein will not merge on and
will survive the Closing and the Final Payment and, notwithstanding such Closing
and Final Payment or any investigation made by or on behalf of any Party, will
continue in full force and effect. Neither Closing or Final Payment will
prejudice any right of one Party against any other Party in respect of anything
done or omitted under this Definitive Agreement or in respect of any right to
damages or other remedies.
 
Section 8.9  Entire Agreement.
 
This Definitive Agreement constitutes the entire agreement between and among the
Parties with respect to the Transaction and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties.
 
Section 9.0  Successors and Assigns.
 
(a) 
This Definitive Agreement will become effective when executed by each of the
Parties and after that time will be binding upon and endure to the benefit of
each of them and their respective heirs, successors and permitted assigns.

 
(b) 
Except as permitted under Section 9.1 (c), neither this Definitive Agreement nor
any of the rights or obligations under this Agreement are assignable or
transferable by any Party without the prior written consent of the other Parties
which may, in his, her or its sole discretion, be arbitrarily withheld.

 
(c) 
The Optionee will be entitled, upon giving notice to the other Parties at any
time on or prior to the Closing Date or at any time during the three (3) year
period of the work commitment, to assign this Agreement or any of the Optionee's
rights and obligations under this Agreement to any Affiliate, Associate(s),
Assignee(s), Designee(s) of the Optionee or Transferee(s) subject to the that
party executing an agreement confirming the assignment and the assumption by the
assignee or transferee of all obligations of the Optionee under this Agreement.

 
Section 9.1  Severability.
 
If any provision of this Agreement is determined by an arbitrator or any court
of competent jurisdiction to be illegal, invalid or unenforceable, that
provision will be severed from this Agreement and the remaining provisions will
continue in full force and effect.

 
 
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Section 9.2  Governing Law.
 
This Agreement is governed by and must be interpreted and enforced in accordance
with the laws of the state of Nevada in state court in Carson City County
(without reference to its choice of law rules). The parties hereby consent to
such venue and governing law.
 
Section 9.3  Method of Payment.

Unless provided otherwise, any payments of money required to be made hereunder
to the Optionors may be made by cash, cheque, wire or electronic funds transfer.
Payments may be made in Canada, in the USA, or in any place designated by
depository agent in U.S. Dollars. The Optionor hereby designate HBG his
assignees or designees as their depository agent to receive payments due
hereunder. Upon making payment to such depository, the Optionee will have
fulfilled its payment obligation to the Optionor hereunder for such payment.
 
Section 9.4  Counterparts.

This Agreement may be executed in any number of counterparts and all such
counterparts taken together constitute one and the same instrument. This
Agreement may be signed and accepted by facsimile.
 
IN WITNESS WHEREOF the Parties have executed this Definitive Option to Purchase
or Buy Agreement and Share Purchase Agreement related to the shares of the
Company.
 

For Optionor:

Homero Bustillos Gonzalez

/s/ Homero Bustillos Gonzalez
 

 
For Optionee:

AMERICAN GOLD HOLDINGS, LTD.

By:
/s/ D. Craven
 

Name: D. Craven
Its: Director
 

 
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