Exhibit 10.3
GUARANTEE AGREEMENT
     This GUARANTEE AGREEMENT (this “Agreement”) dated as of February 22, 2006,
is by High River Gold Mines Ltd., a corporation formed under the federal laws of
Canada (the “Guarantor”), in favour of ROYAL GOLD, INC., a Delaware corporation
(the “Creditor”).
Recitals
     A. Société des Mines de Taparko, also known as SOMITA, SA, a société
anonyme formed under the laws of the Republic of Burkina Faso (the “Debtor”) is
indebted and liable to the Creditor pursuant to that certain Funding Agreement,
dated December 1, 2005, between the Debtor and the Creditor (the “Original
Funding Agreement”) as amended by First Amendment to Funding Agreement dated as
of February 8, 2006, (the “First Amendment”), and as further amended and
restated by Amended and Restated Funding Agreement dated as of February 22, 2006
(as so amended and restated, the “Funding Agreement”). Pursuant to the Funding
Agreement, the Creditor agreed to provide funding to the Debtor in the amount of
U.S.$35,000,000 to be used in the development of the Project (as defined in the
Funding Agreement) in the Republic of Burkina Faso. Except as otherwise
specifically noted, all capitalized terms used but not defined in this Agreement
shall have the meanings given to such terms in the Funding Agreement.
     B. The Guarantor is the indirect owner of 90% of the issued and outstanding
shares of the Debtor, through one of its subsidiaries. The Government of the
Republic of Burkina Faso is the owner of the remaining 10% of the issued and
outstanding shares of the Debtor.
     C. In connection with the development of the Project, the Debtor has
entered into the Taparko/Bouroum Project Contract Agreement, dated as of
February 3, 2006 (the “Construction Agreement”), between Debtor and Senet CC, a
corporation formed under the laws of the Republic of South Africa (“Senet”).
     D. Pursuant to Section 4.2 of the Construction Agreement, Senet is
obligated to provide Performance Security (as defined in the Construction
Agreement) in an amount equal to 10% of the Accepted Contract Amount (as defined
in the Construction Agreement) reducing to 5% upon the occurrence of certain
events stated therein. The Creditor has required, as a condition precedent to
disbursement of the Second Tranche under the Funding Agreement, that the
Guarantor provide additional performance security for the obligations of Senet
under the Construction Agreement that are the subject of the Performance
Security (the “Obligations”), and the Guarantor has agreed to provide the
additional performance security.
     E. The board of directors of the Guarantor has determined that (i) the
Guarantor will derive substantial direct and indirect benefit from the
transactions
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contemplated by the Funding Agreement and the documents related thereto,
(ii) the Debtor’s continuing ability to obtain the funding from the Creditor
under the Funding Agreement is important to the financial success of the Debtor
and the Guarantor, (iii) the Guarantor will derive economic benefit from the
financial success of the Creditor, and (iv) it is in the best interests of the
Guarantor, and necessary and convenient to the conduct, promotion and attainment
of the business of the Guarantor, for the Guarantor to provide additional
performance security for the Obligations as provided in this Agreement.
     F. This Agreement is executed and delivered to the Creditor by the
Guarantor to induce the Creditor to disburse the Second Tranche to the Debtor
under the Funding Agreement and in satisfaction of a condition precedent to the
Creditor providing such funding. The Guarantor acknowledges and agrees that the
Creditor would not provide the funding to the Debtor under the Funding Agreement
unless the Creditor executed and delivered this Agreement.
     G. This Agreement is the document referred to as “Guaranty I” in the
Funding Agreement.
Agreement
     For good and valuable consideration, including payment to the Guarantor of
the sum of ten dollars, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees with the Creditor as follows:
     1. Guarantee. The Guarantor hereby unconditionally guarantees performance
and payment of all amounts up to fifteen percent (15%) of the Accepted Contract
Amount, forthwith on demand by the Creditor or any other person, upon the
occurrence of any of the events set forth in clauses (a) through (d) of
Section 4.2 of the Construction Agreement. The obligation of Guarantor hereunder
may be offset by the Retention Money (as defined in the Construction Agreement)
and amounts paid or payable by or on behalf of Senet with respect to the
Performance Security pursuant to Section 4.2 of the Construction Agreement. This
guarantee shall be a continuing guarantee and shall remain in effect until
issuance of the Performance Certificate (as defined in the Construction
Agreement) pursuant to the Construction Agreement.
     2. Liability Unaffected by Certain Matters. The liability of the Guarantor
hereunder shall be absolute and unconditional irrespective of, and shall not be
released, discharged, limited or otherwise affected by:

  (a)   the lack of validity or enforceability of the Performance Security in
whole or in part for any reason whatsoever, including without limitation by
reason of prescription, by operation of law or as a result of any applicable
statute, law or regulation;

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  (b)   any prohibition or restriction imposed in respect of any rights or
remedies of any person in respect of the Performance Security, including without
limitation any court order which purports to prohibit or suspend the time for
payment of the Performance Security or the rights or remedies of the Debtor
against Senet under the Construction Agreement or in respect of the Performance
Security;     (c)   the lack of validity or enforceability in whole or in part
of:

  (i)   the Construction Agreement;     (ii)   the Funding Agreement or any
other agreement made from time to time between the Debtor and the Creditor;    
(iii)   any security given by the Guarantor in favour of the Creditor from time
to time;     (iv)   any guarantee given by any person in favour of the Creditor
from time to time in connection with or relating to the Debtor, Senet, the
Obligations, the Construction Agreement or the Performance Security; or     (v)
  any security given by any such guarantor in favour of the Creditor from time
to time in connection with any of its or the Debtor’s obligations to the
Creditor or the Obligations,

      (collectively, the “Documents”);     (d)   any change in the corporate
existence, structure, ownership or control of the Guarantor, the Debtor or Senet
(including any of the foregoing arising from any merger, consolidation,
amalgamation, reorganization or similar transaction); any change in the name,
objects, capital stock, constating documents or by-laws of the Guarantor, the
Debtor or Senet; or the dissolution, winding-up, liquidation or other
distribution of the assets of the Guarantor, the Debtor or Senet, whether
voluntary or otherwise;     (e)   the Debtor’s, Senet’s or the Guarantor’s
becoming insolvent or bankrupt or subject to any proceeding under the provisions
of the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors
Arrangement Act (Canada), or any similar law in the Republic of Burkina Faso or
the Republic of South Africa, the arrangement provisions of applicable corporate
legislation, any legislation similar to the foregoing in any other jurisdiction,
or any legislation enacted substantially in replacement of any of the foregoing,
or the Creditor’s voting in favour of any proposal, arrangement or compromise in
connection with any of the foregoing;

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  (f)   the failure or neglect of the Debtor to demand performance of the
obligations of Senet under the Construction Agreement or payment in connection
with the Performance Security by Senet, any guarantor or any other person;    
(g)   the valuation by the Creditor of any security held in respect of the
obligations of Senet under the Construction Agreement, which shall not be
considered as a purchase of such security or as payment on account of such
obligations;     (h)   any right or alleged right of set-off, combination of
accounts, counterclaim, appropriation or application or any claim or demand that
the Debtor or the Guarantor may have or may allege to have against the Creditor;
or     (i)   any other circumstances which might otherwise constitute a legal or
equitable defence available to, or complete or partial discharge of, the
Guarantor in respect of this Agreement.

     3. Liability Unaffected by Actions of Creditor. The liability of the
Guarantor hereunder shall be absolute and unconditional irrespective of, and
shall not be released, discharged, limited or otherwise affected by anything
done, suffered or permitted by the Creditor in connection with the Debtor, the
Guarantor or any obligations of Senet under the Construction Agreement. For
greater certainty and without limiting the generality of the foregoing, without
releasing, discharging, limiting or otherwise affecting in whole or in part the
liability of the Guarantor under this Agreement, and without notice to or the
consent of the Guarantor, the Creditor may from time to time:

  (a)   receive payments in respect of the Obligations and payments of the
Performance Security;     (b)   amend, renew, waive, release or terminate any
Document or any provisions thereof in whole or in part from time to;     (c)  
settle, compromise, waive, release or terminate the obligations of the Debtor or
Senet in whole or in part from time to time;     (d)   grant time, releases and
discharges to the Guarantor;     (e)   take, refrain from taking or release
guarantees from other persons in respect of obligations of the Debtor or Senet;
    (f)   refrain from demanding payment from or exercising any rights or
remedies in respect of any guarantor of the obligations of the Debtor or Senet;

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  (g)   apply all monies received from any person or from the proceeds of any
security to pay such part of the obligations of the Debtor or Senet as the
Creditor may see fit, or change any such application in whole or in part from
time to time, notwithstanding any direction which may be given regarding
application of such monies by any person; and     (h)   otherwise deal with the
Debtor, Senet, any guarantor of the obligations of the Debtor or Senet or any
other person and any security held by the Creditor in respect of the obligations
of the Debtor or Senet, as the Creditor may see fit in its absolute discretion.

     4. Liability Unaffected by Failure of Creditor to Take, Hold or Enforce
Security. The Guarantor agrees that the Guarantor has provided this Agreement to
the Creditor on the express understanding that the Creditor has no obligation to
obtain any security from any other person to secure payment or performance of
any of the Obligations; and if the Creditor in its absolute discretion obtains
any such security from any other person, the Creditor shall have no obligation
to continue to hold such security or to enforce such security. The Guarantor
shall not be entitled to rely on or benefit from, directly or indirectly, any
such security which the Creditor may obtain. In furtherance of the foregoing,
the liability of the Guarantor hereunder shall be absolute and unconditional
irrespective of, and shall not be released, discharged, limited or otherwise
affected by:

  (a)   the loss of or failure by the Creditor to register, perfect or maintain
any security given by the Guarantor or other persons in respect of the
Obligations, whether intentionally or through failure, neglect or otherwise;    
(b)   the failure or neglect of the Creditor to enforce any security held in
respect of the Guarantor or in respect of any other guarantor of the
Obligations;     (c)   the Creditor’s having released, discharged, compromised
or otherwise dealt with any such security in any manner whatsoever (and for
greater certainty the Creditor shall not be bound to exhaust its recourse
against any other persons or enforce any security held in respect of the
Obligations or take any other action or legal proceeding before being entitled
to payment from the Guarantor under this Agreement, and the Guarantor hereby
waives all benefits of discussion and division); or     (d)   the enforcement by
the Creditor of any such security in an improvident or commercially unreasonable
manner (including the sale or other disposition of any assets encumbered by such
security at less than the fair market value thereof) whether as a result of
negligence, recklessness or wilful action or inaction on the part of the
Creditor or otherwise, and regardless of any duty which the Creditor might have
to the Guarantor under applicable law (including applicable personal property
security legislation) in respect of the enforcement of any such security.

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     5. Waivers. No delay on the part of the Creditor in exercising any of its
options, powers, rights or remedies, or any partial or single exercise thereof,
shall constitute a waiver thereof. No waiver, modification or amendment of this
Agreement or of any such options, powers, rights or remedies shall be deemed to
have been made unless made in writing and signed by an authorized officer of the
Creditor, and any such waiver shall apply only with respect to the specific
instance involved, and shall not impair the rights of the Creditor or the
liability of the Guarantor hereunder in any other respect or at any other time.
     6. Foreign Currency Obligations. The Guarantor shall make payment hereunder
in United States dollars (the “Required Currency”). If the Guarantor makes
payment hereunder in any other currency (the “Payment Currency”), such payment
shall constitute satisfaction of the said liability of the Guarantor hereunder
only to the extent that the recipient of such payment is able to purchase
Required Currency with the amount of the Payment Currency received from the
Guarantor on the date of receipt, in accordance with such recipient’s normal
practice; and the Guarantor shall remain liable hereunder for any deficiency.
     7. Withholding Taxes. Except as otherwise required by law, each payment by
the Guarantor hereunder shall be made without withholding for or on account of
any present or future tax imposed by or within the jurisdiction in which the
Guarantor is domiciled, any jurisdiction from which the Guarantor makes any
payment or any other jurisdiction, or (in each case) any political subdivision
or taxing authority thereof or therein. If any such withholding is required by
law, the Guarantor shall make the withholding, pay the amount withheld to the
appropriate governmental authority before penalties attach thereto or interest
accrues thereon and forthwith pay such additional amount as may be necessary to
ensure that the net amount actually received (after payment of such taxes
including any taxes on such additional amount paid) is equivalent to the amount
which would have been received if no amounts had been withheld.
     8. Representations and Warranties. The Guarantor represents and warrants to
the Creditor as follows, and acknowledges that the Creditor is relying on such
representations and warranties as a basis for maintaining the extension of
credit to the Debtor under the Funding Agreement:

  (a)   the Guarantor is duly incorporated, existing and in good standing under
the laws of its jurisdiction of incorporation; it has full corporate power,
authority and capacity to enter into and perform its obligations hereunder; all
necessary action has been taken by its directors or shareholders and otherwise
to authorize the execution and delivery of this Agreement and the performance of
its obligations hereunder; the Guarantor has, to the extent required by law,
disclosed to its shareholders all information required with respect to the
delivery of this Agreement; there is no provision in any shareholder agreement
which restricts or limits its powers to enter into or perform its obligations
under this Agreement; and none of the execution or delivery of this Agreement,
or compliance with the

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      provisions of this Agreement conflicts with, or results in a breach of its
charter documents or by-laws; and

  (b)   none of the execution or delivery of this Agreement, or compliance by
the Guarantor with the provisions of this Agreement conflicts with or results in
a breach of any agreement or instrument to which the Guarantor is a party or by
which the Guarantor or any of the Guarantor’s assets are bound or affected, or
requires the consent of any other person (other than any consents which have
been obtained).

     9. Revival of Indebtedness and Liability. If at any time all or any part of
any payment previously applied to any portion of the Obligations is rescinded or
returned for any reason whatsoever, whether voluntarily or involuntarily
(including, without limitation, as a result of or in connection with the
insolvency, bankruptcy or reorganization of the Debtor or the Guarantor, or any
allegation that any person received a payment in the nature of a preference),
then to the extent that such payment is rescinded or returned, such portion of
the Obligations shall be deemed to have continued in existence notwithstanding
such initial application, and this Agreement shall continue to be effective or
be reinstated, as the case may be, as to such portion of the Obligations as
though such payment had not been made.
     10. Restrictions of Right of Subrogation. The Guarantor agrees not to
exercise or enforce any right of indemnity, exoneration, contribution,
reimbursement, recourse or subrogation against Senet, the Debtor or any other
guarantor of the Obligations, or as to any security therefor, unless and until
all of the Obligations have been paid and satisfied in full, and all obligation
of the Guarantor hereunder have been extinguished.
     11. Expenses. The Guarantor agrees to pay to the Creditor, forthwith on
demand by the Creditor, all expenses (including legal fees on a solicitor and
his own client basis) incurred by the Creditor in connection with the
preservation or enforcement of any of the Creditor’s rights and remedies
hereunder.
     12. Notices. Without prejudice to any other method of giving notice, all
communications provided for or permitted hereunder shall be in writing and
delivered in the same manner as provided for notices under the Funding Agreement
to the addresses set forth below the signature blocks in this Agreement.
     13. Severability. If any provision of this Agreement shall be invalid or
unenforceable, all other provisions hereof shall remain in full force and effect
and all changes rendered necessary by the context shall be deemed to have been
made.
     14. Interpretation. This Agreement shall be construed as if all changes in
grammar, number and gender rendered necessary by the context have been made. As
used in this Agreement, “person” includes an individual, corporation,
partnership, joint
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venture, trust, unincorporated association or any government, crown corporation
or governmental agency or authority or any combination of the foregoing.
     15. Further Assurances. The Guarantor agrees, at the Guarantor’s own
expense, to promptly execute and deliver or cause to be executed and delivered
to the Creditor, upon the Creditor’s request from time to time, all such other
and further documents, agreements, opinions, certificates and instruments as are
required under this Agreement or as may be reasonably requested by the Creditor
if necessary or desirable to more fully record or evidence the obligations
intended to be entered into herein and pursuant to the Pledge of Securities of
even date (the “Pledge”) between Creditor and Guarantor.
     16. Entire Agreement; Amendments; Conclusive Delivery. This Agreement and
the Pledge constitute the entire agreement between the Guarantor and the
Creditor relating to the subject matter hereof, and no amendment of this
Agreement shall be effective unless made in writing and executed by the
Guarantor and the Creditor. Possession by the Creditor of an original executed
copy of this Agreement shall constitute conclusive evidence that:

  (a)   this Agreement was negotiated, executed and delivered in Denver,
Colorado, and executed and delivered by the Guarantor to the Creditor free of
all conditions;     (b)   there is no agreement or understanding between the
Creditor and the Guarantor that this Agreement was delivered in escrow or is not
intended to be effective until the occurrence of any event or the satisfaction
of any condition;     (c)   the Creditor has not made any representation,
warranty, statement or promise to the Guarantor regarding the Creditor’s
intention to obtain any security in respect of the Obligations or guarantees
from other persons in respect of the Obligations, the circumstances under which
the Creditor may enforce this Agreement, the manner in which the Creditor might
enforce this Agreement or any other matter which might conflict with any
provision expressly set out herein; and     (d)   there is no representation,
warranty, statement, promise, understanding, condition or collateral agreement
between the Creditor and the Guarantor relating to this Agreement or the subject
matter of this Agreement, other than as expressly set out herein.

     17.     Governing Law.

  (a)   This Agreement shall be construed in accordance with and governed by the
laws of the Province of Ontario. Notwithstanding the foregoing, for

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      the purpose of legal proceedings, this Agreement has been negotiated,
executed and delivered in Denver, Colorado.

  (b)   EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON EXCLUSIVE
JURISDICTION OF, AT THE ELECTION OF CREDITOR, ANY UNITED STATES FEDERAL OR
COLORADO STATE COURT SITTING IN DENVER, COLORADO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT CREDITOR MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AGAINST GUARANTOR OR ITS PROPERTIES IN THE COURTS OF
ANY JURISDICTION. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT
REFERRED TO IN THIS SECTION 17(b). EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.     (c)   GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING IN SAID COURTS BY THE MAILING THEREOF IN ACCORDANCE WITH SECTION 13
OF THIS AGREEMENT. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ROYAL GOLD
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

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  (d)   Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.     (e)   EXCEPT
AS PROHIBITED BY LAW, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER DOCUMENTS OR TRANSACTIONS RELATING THERETO.

     18. Successors and Assigns. This Agreement shall enure to the benefit of
the Creditor and its successors and assigns, and shall be binding on the
Guarantor and its successors and assigns; “successors” includes any entity
resulting from the merger of an entity with any other entity. Without limiting
the generality of the foregoing, if the Creditor assigns or transfers all or any
portion of the Obligations and this Agreement or any interest therein to any
other person, such person shall thereafter be entitled to the benefit of this
Agreement to the extent of the interest so transferred or assigned, and the
Obligations or portion thereof or interest therein so transferred or assigned
shall be and shall remain part of the “Obligations” hereunder.
     19. Legal Advice. The Guarantor acknowledges that the Guarantor has had
ample opportunity to review and consider this Agreement, fully understands the
provisions hereof and has received legal advice from the Guarantor’s solicitors
in connection with this Agreement. The Guarantor represents and warrants that it
has consulted with its legal counsel regarding all waivers under this Agreement.
     20. Receipt of Copy of Agreement. The Guarantor hereby acknowledges receipt
of a copy of this Agreement.
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     This Agreement has been executed and delivered by the Guarantor as of the
dated first written above.

                  HIGH RIVER GOLD MINES LTD.
 
           
 
  By:                  
 
      Name:    
 
           
 
      Title:    
 
           
 
           
 
  By:                  
 
      Name:    
 
           
 
      Title:    
 
           
 
                    Guarantor’s Address for Notices and Service:
 
                    1200 — 155 University Avenue         Toronto, Ontario      
  M5H 3B7
 
                    Fax no. 416-360-0010
 
                    with a copy to:
 
                    Cassels Brock & Blackwell LLP         2100 Scotia Plaza, 40
King Street W.         Toronto, Ontario M5H 3C2         Attention: David Poynton
        Fax no. 416-644-9348
 
                    Creditor’s Address for Notices and Service:
 
                    1600 Wynkoop Street         Suite 1000         Denver,
Colorado         USA 80202-1132         Attention: President         Fax no.
303-595-9385

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