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EXHIBIT 10.1
 

 
MINERAL OPTION AGREEMENT:
 
LODE-STAR GOLDFIELD BONANZA PROJECT
 

 

 
Dated effective October 4, 2014
 

 
AMONG
 
LODE-STAR GOLD, INC.
 
AND
 
INTERNATIONAL GOLD CORP.
 
 
 
 

 
 
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TABLE OF CONTENTS
 
PART 1 DEFINITIONS AND INTERPRETATION
1
   
PART 2 CONDITIONS PRECEDENT
9
   
PART 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONOR
10
   
PART 4 REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
13
   
PART 5 GRANT OF OPTION AND NSR ROYALTY
15
   
PART 6 DEVELOPMENT DECISION
16
   
PART 7 OPERATOR, OPERATIONS AND MANAGEMENT COMMITTEE
16
   
PART 8 FUNDING
19
   
PART 9 AREA OF INTEREST
20
   
PART 10 TRANSFER OF INTEREST
21
   
PART 11 CONFIDENTIALITY
23
   
PART 12 TERMINATION
24
   
PART 13 CURE PERIOD, FORCE MAJEURE AND DEFAULT
25
   
PART 14 SECURITY
27
   
PART 15 ARBITRATION AND INJUNCTIVE RELIEF
27
   
PART 16 INDEMNITY
29
   
PART 17 GENERAL
29

 

 
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MINERAL OPTION AGREEMENT:
LODE STAR GOLDFIELD BONANZA PROPERTIES
 
 
THIS AGREEMENT is dated effective October 4, 2014
 
 
AMONG:
 
LODE-STAR GOLD, INC., a Nevada corporation having its executive office at 13529
Skinner Road, Suite N, Cypress, Texas, USA 77429
 
(the “Optionor”)
 
AND:
 
INTERNATIONAL GOLD CORP., a Nevada corporation having its executive office at
666 Burrard Street, Suite 600, Vancouver, British Columbia, Canada V6E 4M3
 
(the “Optionee”)
 
WHEREAS:
 
(A)
The Optionor is the registered and beneficial owner of certain mineral claims
located in the state of Nevada known as the “Goldfield Bonanza Project”
(collectively, the “Mineral Claims”), the specific description of which is
attached hereto as Schedule A;

 
(B)
The Optionor has agreed to grant an exclusive option to the Optionee to acquire
up to an eighty percent (80%) undivided interest in and to the Property (as
defined below) by paying certain consideration as set forth herein; and

 
(C)
This Agreement is intended to confirm discussions regarding the earning of such
interest and the subsequent arrangements that may be entered into to hold the
Property and if warranted, develop one or more mining projects thereon (the
“Transaction”).

 
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
covenant and agree as follows:
 
PART 1
DEFINITIONS AND INTERPRETATION
 
1.1                      Definitions.  For the purposes of this Agreement,
except as otherwise expressly provided herein, the following words and phrases
will have the following meanings:

 
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(a)           “Affiliate” means any Person that controls, is controlled by, or
is under common control with, a Party.  For the purposes of the preceding
sentence only, “control” means the right to the exercise, directly or
indirectly, of more than fifty percent (50%) of the voting rights attributable
to the controlled Person;
 
(b)           “Agreement” means this Mineral Option Agreement and the Schedules
hereto;
 
(c)           “Area of Interest” has the meaning set out in Section 9.1;
 
(d)           “Board” means the Board of Directors of the Optionee;
 
(e)           “Budget” has the meaning set out in Section 7.6;
 
(f)           “Business Day” means any day other than a Saturday, Sunday or day
that is a holiday in any of Vancouver, Canada, or Reno, Nevada;
 
(g)           “Commercial Production” means Mineral production operations
extracting at least 100 tons of ore per day from the Property, on average, for a
continuous period of six (6) months, subject to periods of Force Majeure or
periods in which such production operations are suspended due to normal weather
conditions (i.e., in the event Mineral production operations are interrupted by
an event of Force Majeure or normal weather conditions, then the operations
occurring immediately prior to such interruption and immediately after such
interruption ceases will be deemed to be continuous for purposes of establishing
a continuous period of six (6) months. (Any operation mining less than an
average of 100 tons of ore per day during a continuous period of less than six
(6) months will not, for the purposes of this Agreement, be regarded as capable
of Commercial Production unless the results of an appropriate Feasibility Study
indicate that an average of less than 100 tons of ore per day is a viable level
of full capacity production, whereupon the parties agree to discuss in good
faith an alternative minimum tonnage requirement.)  The effective date of
Commercial Production will be the first day of the six (6) month period referred
to above.  Solely for the purpose of computing production royalty on Minerals
produced from the Property and sold prior to achievement of Commercial
Production, all calculations will be made as if Commercial Production had
commenced with the first production of Minerals. After Commercial Production has
been achieved, Commercial Production will be deemed to exist unless three (3)
consecutive years pass during which there is no continuous period of six (6)
months, subject to periods of Force Majeure or periods in which production
operations are suspended due to normal weather conditions, during which at least
300 tons of ore per day were extracted from the Property;
 
(h)           “Common Share” means one common share in the capital of the
Optionee;
 
(i)           “Conditions Precedent” has the meaning set out in Section 2.1;
 
(j)           “Confidential Information” has the meaning set out in Section
11.1;

 
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(k)           “Control Interest” means the direct or indirect ownership or
control of the voting securities in a company which comprises fifty percent
(50%) or more of the total issued and outstanding voting securities of that
company;
 
(l)           “Defaulting Party” has the meaning set out in Section 13.4;
 
(m)           “Development Decision” means a decision by the Optionor or the
Management Committee, as the case may be, to approve a Development Program on
the Property, evidenced by written minutes, which will include, but not be
limited to, the approval of the capital expenditure Budget in relation thereto;
 
(n)           “Development Program” means a program prepared by the Operator and
approved by the Management Committee or the Optionor, as the case may be, for
the development and construction of a mine and related infrastructure and
processing facilities in connection with the Property which is consistent with a
Feasibility Study;
 
(o)           “Due Diligence” has the meaning set out in Section 2.2;
 
(p)           “Due Diligence Period” has the meaning set out in Section 2.2;
 
(q)           “Effective Date” means the date of this Agreement;
 
(r)           “Encumbrance” means any mortgage, charge, pledge, hypothecation,
security interest, assignment, lien (statutory or otherwise), charge, title
retention agreement or arrangement, royalty, restrictive covenant or other
encumbrance or other adverse third party interest of any nature or any agreement
to give or create any of the foregoing;
 
(s)           “Environmental Laws” has the meaning set out in Section 3.1(s);
 
(t)           “Environmental Liability” means any claim, demand, loss,
liability, damage, cost or expense (including legal fees) suffered or incurred
in respect of environmental cleanup and remediation obligations and liabilities
arising directly or indirectly from operations or activities conducted in or on
the Property;
 
(u)           “Environmental Report” has the meaning set out in Section 3.1(t);
 
(v)           “Expenditures “ means all costs and expenses of whatever kind or
nature funded, spent or incurred or in the conduct of activities on or in
relation to the Property, as the case may be, including:
 
(i)           in holding the Property in good standing (including land
maintenance costs and any monies expended as required to comply with applicable
laws and regulations), curing title defects and in acquiring and maintaining
surface, water and other ancillary rights;

 
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(ii)           in preparing for and in the application for and acquisition of
environmental and other permits necessary or desirable to commence and complete
exploration and development activities;
 
(iii)          in connection with any applications and necessary studies for the
obtaining of permits, licences, and other regulatory approvals including the
preparation for and attendance at hearings and other meetings relating to the
Property;
 
(iv)          in doing geophysical, geochemical and geological surveys,
drilling, assaying and metallurgical testing, including costs of assays,
metallurgical testing and other tests and analyses (including downhole surveys)
to determine the quantity and quality of Minerals and metals, water and other
materials or substances;
 
(v)           in the preparation of Work Programs and Budgets and the
presentation and reporting of data and other results obtained from those Work
Programs including any program for the preparation of any preliminary
assessment, technical report, pre-feasibility study, Feasibility Study or other
evaluation of the Property;
 
(vi)          in searching for, digging, trenching, sampling, assaying, testing,
working, developing, mining or extracting Minerals and metals;
 
(vii)         in conducting the drilling of holes drilled with reverse
circulation or diamond drill hole systems (including rotary air blast drilling)
or other forms of drilling available to the mining industry;
 
(viii)        in acquiring, erecting and installing a mining plant, milling and
metallurgical plant, ancillary facilities, buildings (including accommodations
for workers, if necessary), machinery, tools, appliances or equipment and
constructing access roads, railroads and other transportation facilities and, if
necessary, water pipelines for use in relation to the Property;
 
(ix)          in transporting Minerals, personnel, supplies, mining or milling
plant, buildings, machinery, tools, appliances or equipment in, to or from the
Property;
 
(x)           for environmental remediation and rehabilitation, including
reclamation costs and required bonding;
 
(xi)          in acquiring or obtaining the use of facilities, equipment or
machinery, and for all parts, supplies and consumables;
 
(xii)         for salaries, wages and/or other expenses for persons assigned to
exploration, evaluation, development and operation activities;
 
(xiii)        in paying assessments or contributions under worker’s
compensation, employment insurance, pension or other similar legislation or
ordinances relating to such personnel;

 
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(xiv)        in supplying food, lodging and other reasonable needs for
personnel;
 
(xv)         reasonable travelling expenses of all persons engaged in work with
respect to and for the benefit of the Property, including for their food,
lodging and other reasonable needs;
 
(xvi)        payments to contractors or consultants for work done, services
rendered or materials supplied;
 
(xvii)       the cost of insurance premiums and performance bonds or other
security;
 
(xviii)      all duties and taxes levied against or in respect of the Property,
and for activities in connection with the Property;
 
(xix)         reasonable travelling expenses for attendance at Board or
Management Committee (as the case may be) meetings and other meetings related to
the Transaction;
 
(xx)          Required Payments;
 
(xxi)         in preparing engineering, geological, financial or marketing
studies and reports and activities related thereto;
 
(xxii)        all principal and interest payments due and owing to third party
lenders;
 
(xxiii)       in obtaining independent legal services directly relating to
Operations; and
 
(xxiv)       the Operator’s Fee;
 
provided that the costs and expenses of goods or services supplied by any
Affiliate of the Optionee or the Optionor will be charged at the same rate as
would be used by a non-related party in a transaction at arm’s length for
equivalent goods or services;
 
(w)           “Feasibility Study” means a bankable feasibility study which is
defined as a report prepared by a mining consultant in compliance with the
standards set out in NI 43­101 setting forth in detail an analysis of the
economic and commercial viability of conducting operations for the production
and sale of Minerals from a mine on the Property and that recommends that all or
part of the Property should be brought into Commercial Production. It will also
describe in detail the method by which Commercial Production should be achieved
and continued, including, where applicable, reasonably anticipated exploration
costs to be undertaken to identify and quantify new mining reserves on the
Property and will contain an analysis of applicable environmental and
reclamation laws, the requirements of environmental permits, and an estimate of
the cost of complying with such laws. Such report will be in such form as is
ordinarily necessary to satisfy substantial international financing institutions
for the purpose of determining the advisability of providing project financing
on a commercially competitive basis taking into consideration all relevant
criteria deemed to be both normal and prudent for the mining industry in North
America;
 
 
 
 
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(x)           “First Option” means the exclusive right and option herein granted
by the Optionor to the Optionee to permit the Optionee to acquire a twenty
percent (20%) undivided right, title and interest in the Property, free and
clean of all Encumbrances, except Permitted Encumbrances;
 
(y)           “Force Majeure” has the meaning set out in Section 13.2(a);
 
(z)           “Governmental Authority” means any foreign, domestic, national,
federal, provincial, territorial, state, regional, municipal or local government
or authority, quasi government authority, fiscal or judicial body, government or
self-regulatory organization, commission, board, tribunal, organization, or any
regulatory, administrative or other agency, or any political or other
subdivision, department, or branch of any of the foregoing;
 
(aa)         “Indemnitees” has the meaning set out in Section 7.3(d);
 
(bb)         “Interest” means an undivided beneficial interest in the Property,
expressed as a percentage;
 
(cc)          “Management Committee” has the meaning set out in Section 7.5;
 
(dd)         “Margraf” means Margraf 1999 Trust, an existing royalty holder of
the Optionor;
 
(ee)          “Margraf Royalty” means a royalty in favour of Margraf as further
described in Schedule B;
 
(ff)           “Mineral Claims” has the meaning as set out in Recital (A), the
specific description of which is attached hereto as Schedule A;
 
(gg)         “Minerals” means all substances (whether metallic or non-metallic)
occurring naturally in the earth but excluding Other Minerals;
 
(hh)         “NI 43-101” means National Instrument 43-101 Standards of
Disclosure for Mineral Projects, published by the Canadian Securities
Administrators;
 
(ii)            “Non-Operator” has the meaning set out in Section 7.1;
 
(jj)            “Non-Selling Party” has the meaning set out in Section 10.4(a);
 
(kk)          “NSR Royalty” means a smelter returns royalty payable by the
Optionee to the Optionor as such royalty is further defined in Schedule C;
 
(ll)            “Offer” has the meaning set out in Section 10.4;
 
(mm)        “Offer Notice” has the meaning set out in Section 10.4;

 
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(nn)         “Offered Interest” has the meaning set out in Section 10.4(a);
 
(oo)         “Operations” means the activities of prospecting, exploration,
development, construction, mining, milling, processing, treatment operations and
related operations conducted by or on behalf of the Parties in respect of the
Property, including the preparation of any preliminary assessment, technical
report, pre-feasibility or Feasibility Study and any other reports, studies or
supplementary information;
 
(pp)         “Operator” has the meaning set out in Section 7.1;
 
(qq)         “Operator’s Fee” has the meaning set out in Section 7.2;
 
(rr)           “Option” means, collectively, the First Option and the Second
Option;
 
(ss)          “Option Cash Payments” has the meaning set out in Section 5.3(b);
 
(tt)           “Option Period” means the period from the Effective Date to and
including the date of exercise or termination of the Second Option;
 
(uu)         “Option Termination Notice” has the meaning set out in Section
12.1;
 
(vv)         “Optionee” has the meaning set out on page one hereof;
 
(ww)        “Optionor” has the meaning set out on page one hereof;
 
(xx)           “Other Minerals” means all geothermal resources, sand, gravel,
shot rock, aggregate, rock (including but not limited to development rock and
waste rock), building stone, limestone, peat, coal, lignite, oil, gas, other
liquid or gaseous hydrocarbons, and all other substances occurring and
producible naturally only as gases, liquids, or fluids from wells;
 
(yy)          “Parties” means the parties to this Agreement, and a reference to
a “Party” means one of them, except in Section 13.2, where a specific definition
is provided;
 
(zz)           “Penalty Payment” has the meaning set out in Section 5.6;
 
(aaa)        “Permitted Encumbrances” means the Margraf Royalty and the NSR
Royalty;
 
(bbb)       “Person” means an individual, corporation, trust, partnership,
limited liability company, contractual mining company, joint venture,
unincorporated organization, firm, estate, governmental authority or any agency
or political subdivision thereof, or other entity;
 
(ccc)        “Property” means the Mineral Claims, and all rights and interests
in the Mineral Claims and including without limitations all associated licences,
permits, lease agreements, real property rights, water rights, data, maps,
information, technical reports, drill core, samples and assays together with
exploration tools, equipment, and supplies thereafter acquired by either Party
in relation to the Mineral Claims;

 
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(ddd)       “Required Payments” means any Expenditures required to maintain the
Property in good standing;
 
(eee)        “Sale Deed” means the “Grant, Bargain and Sale Deed with
Reservation and Royalty” between Margraf (as grantor) and the Optionor (as
grantee) recorded on September 19, 2009 in Esmeralda County, Nevada, USA and
corrected and recorded by a “Correction of Grant, Bargain and Sale Deed with
Reservation of Royalty” on June 14, 2010 in Esmeralda County, Nevada, USA;
 
(fff)           “Satisfaction Date” means October 8 2014, as may be extended
from time to time as provided in Section 2.4;
 
(ggg)       “Second Option” means the exclusive right and option herein granted
by the Optionor to the Optionee to permit the Optionee to acquire an eighty
percent (80%) undivided right, title and interest in the Property, free and
clean of all Encumbrances, except Permitted Encumbrances;
 
(hhh)       “Seller” has the meaning set out in Section 10.4(a);
 
(iii)           “Third Party” has the meaning set out in Section 10.4(a);
 
(jjj)           “Transaction” has the meaning set out on page one hereof;
 
(kkk)        “Wholly Owned Affiliates” means an Affiliate of a Party that is
wholly owned by such Party; and
 
(lll)           “Work Program” has the meaning set out in Section 7.6.
 
1.2                      Interpretation.  For the purposes of this Agreement,
except as otherwise expressly provided herein:
 
(a)           the words “herein”, “hereof”, and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
Part, clause, subclause or other subdivision or Schedule;
 
(b)           the headings are for convenience only, do not form a part of this
Agreement and are not intended to interpret, define or limit the scope, extent
or intent of this Agreement or any of its provisions;
 
(c)           the word “including”, when following a general statement, term or
matter, is not to be construed as limiting such general statement, term or
matter to the specific items or matters set forth or to similar items or matters
(whether or not qualified by non-limiting language such as “without limitation”
or “but not limited to” or words of similar import) but rather as permitting the
general statement or term to refer to all other items or matters that could
reasonably fall within its possible scope;
 

 
 
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(d)           where the phrase “to the best of its knowledge” or phrases of
similar import are used in respect of the parties, it will be a requirement that
the party in respect of who the phrase is used will have made such due inquiries
as is reasonably necessary to enable such party to make the statement or
disclosure; and
 
(e)           words importing the masculine gender include the feminine or
neuter, words in the singular include the plural, words importing a corporate
entity include individuals, and vice versa.
 
PART 2
CONDITIONS PRECEDENT
 
2.1                      Conditions Precedent.  This Agreement and the
obligations of the Parties under it are subject to the satisfaction or waiver of
the following: (collectively, the “Conditions Precedent”)
 
(a)           approval of the Transaction and other matters contemplated herein
by the Board; and
 
(b)           completion of the Due Diligence by the Optionee to its sole
satisfaction.
 
2.2                      Due Diligence.  This Agreement is subject to the
completion of all legal, business, and environmental due diligence (the “Due
Diligence”) determined by the Optionee in its sole discretion and the timely
receipt by the Optionee of all operational, technical and environmental
documentation in connection with the Property, including without limitations,
mining leasing agreements, material contracts or financial data as may be
reasonably requested and receipt of all required consents and approvals as may
be necessary to complete the Transaction.  Without limiting the generality of
the foregoing, the Optionee is entitled to conduct specific technical due
diligence pertaining to environmental investigations.  The Optionee shall design
and fund the Due Diligence in its entirety.  The Optionor will provide
assistance in the execution of the Due Diligence provided it does not materially
interfere with the Optionor’s ongoing activities.  The Optionee further agrees
to use its commercially reasonable efforts to complete the Due Diligence within
a period of 45 days (the “Due Diligence Period”) from the Effective
Date.  However, the Optionor hereby agrees that, if circumstances require, the
Optionee shall have the right to extend the Due Diligence Period for a further
45-day period.  The Optionee agrees to provide the Optionor exclusively with any
and all data pertaining to the results of the Due Diligence, and the Optionor
agrees to provide the Optionee the exclusive right to finalize the Transaction
during the Due Diligence Period.
 
2.3                      Waiver.  The Conditions Precedent set out above are for
the benefit of the Optionee only and may be waived by it in its sole discretion.
 
2.4                      Non-Satisfaction and Extensions.  If the Conditions
Precedent are not satisfied, waived or extended on or by the Satisfaction Date,
this Agreement will terminate.  Any notice for the waiver of or extension of the
date for fulfilment of the Conditions Precedent must be in writing and executed
by the Optionee as contemplated in Section 2.3 on or before the Satisfaction
Date.  Extensions can be affected on one or more occasions by no more than 30
days per extension (each such extended date will be a Satisfaction Date).
 
 
 
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2.5                      Satisfaction.  Upon the Condition Precedent being
fulfilled or waived by the Satisfaction Date, this Agreement will be deemed to
continue as a binding agreement between the Parties.
 
PART 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONOR
 
3.1                      Representations and Warranties of Optionor.  The
Optionor hereby represents and warrants to the Optionee that:
 
(a)           the Mineral Claims are properly and accurately described in
Schedule A;
 
(b)           it is a corporation incorporated, validly existing, and in good
standing under the laws of the state of Nevada;
 
(c)           it has full power, authority and capacity to own the Property and
to carry on its business as presently conducted and is duly licensed to carry on
business in all jurisdictions in which it presently carries on business;
 
(d)           it has full power and authority to enter into this Agreement and
any agreement or instrument referred to or contemplated by this Agreement and to
carry out its obligations hereunder;
 
(e)           neither the execution and delivery of this Agreement nor any of
the agreements referred herein or contemplated hereby, nor the consummation of
the Transaction hereby contemplated conflict with, result in the breach of or
accelerate the performance required by any covenant or agreement contained in,
or constitute a default under, or result in the creation of any encumbrance
under the provisions of its constating documents or any shareholders’ or
directors’ resolution, indenture, agreement or other instrument whatsoever to
which it is a party or by which it is bound;
 
(f)            the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the laws of any
jurisdiction applicable or pertaining thereto;
 
(g)           there are no pending proceedings for, or any basis for the
institution of any proceedings leading to its dissolution or winding up or the
placing of it in bankruptcy or subject to any other laws governing the affairs
of insolvent Persons;
 
(h)           there are no actual, alleged, potential or future adverse claims,
actions, challenges, suits, prosecutions, legal, administrative or arbitral
proceedings or governmental investigations, domestic or foreign (including any
on behalf of any native or indigenous persons or tribes or governments with
respect to any lands included in the area of the Property), against or to, the
ownership of, or title to, the Property, nor is there any basis for the
foregoing;
 
 
 
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(i)            there are no actual, alleged, potential or future adverse claims,
actions, challenges, suits, prosecutions, legal, administrative or arbitral
proceedings or government investigations, domestic or foreign, that if resolved
adversely to the Optionor, individually or in the aggregate, would materially
adversely affect the business or continued operations of the Optionor;
 
(j)            the Optionor is not, to the best of its knowledge, in breach of
any law, ordinance, statute, regulation, by-law, order or decree of any kind
whatsoever with respect to the Property other than Mine Safety and Health
Administration violations existing prior to the execution of this Agreement;
 
(k)           the unpatented mining claims listed in Schedule A have been
properly located and maintained in accordance with state and federal mining law;
the Optionor has paid federal claim maintenance fees for the 2013-2014
assessment year ending on September 1, 2014; and the Optionor has completed all
other steps necessary to maintain the unpatented claims in good standing;
 
(l)            it is, and at the time of transfer to the Optionee of an Interest
in the Mineral Claims pursuant to the exercise of the First Option, it will be
the recorded and beneficial owner of all of the Mineral Claims free and clear of
all Encumbrances, liens, charges and claims of others, except the Permitted
Encumbrances;
 
(m)           there are no outstanding agreements or options to acquire or
purchase the Mineral Claims or any interest in the Mineral Claims.  In addition,
no person has any royalty or other interest whatsoever in production or profits
from the Property, except the Permitted Encumbrances;
 
(n)           no consent or approval of any third person, stock exchange or
Governmental Authority is required for the execution, delivery or performance of
this Agreement by Optionor or the transfer or acquisition of the Property or an
Interest;
 
(o)           the Optionor does not have notice, or knowledge of, any proposal
to terminate or vary the terms of or rights attaching to the Property from any
Governmental Authority, or of any challenge to the Optionor’s right, title or
interest in the Property;
 
(p)           the Property is not managed in an ownership capacity by any
Governmental Authority having jurisdiction that would impair the exploration for
Minerals or development of a mining project on the Property;
 
(q)           the Optionor has such access to the Property to enable it to
explore for Minerals and develop a mining project;
 
(r)           all work or expenditure obligations, cash, rental or lease
payments, duties, fees, taxes, assessments, licence payments and other charges
applicable to the Property, all reports of the work or expenditures and other
requirements to be paid, satisfied or filed to the keep the Mineral Claims in
good standing have been paid, satisfied or filed in full and are current;
 
 
 
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(s)           the Optionor and its personnel have conducted all activities on or
in respect of the Property in material compliance, with all applicable statutes,
regulations, by-laws, laws, orders and judgments, and all directives, rules,
consents, permits, orders, guidelines, approvals and policies of all applicable
Governmental Authorities, including but not limited to any applicable
environmental statutes, regulations, ordinances, by-laws and codes (the
“Environmental Laws”);
 
(t)            there are no pending or threatened orders or claims relating to
environmental matters requiring any work, repairs, construction or capital
expenditures with respect to the Property, and no condition exists or event has
occurred which, with or without notice or the passage of time or both, would
constitute a violation of or give rise to liability under any applicable
Environmental Laws with the exception of issues outlined in a reported entitled
“Limited Environmental Site Investigation Report — Mining Property, Goldfield
Nevada” dated February 12, 2011 and prepared by Keith Jay, Nevada —Certified
Environmental Manager (EM-1075) a copy of which is attached hereto as Appendix A
(the “Environmental Report”);
 
(u)           to the best of its knowledge and except as noted in the
Environmental Report, there has been no material spill, discharge, leak,
emission, ejection, escape, dumping, or any release or threatened release of any
kind, of any toxic or hazardous substance or waste (as defined by any applicable
law) from, on, in or under the Property or into the environment, as a result of
the activities of the Optionor or its predecessors in title or interest, except
releases expressly permitted or otherwise authorized by applicable law;
 
(v)           to the best of its knowledge and except as noted in the
Environmental Report, no toxic or hazardous substance or waste has been disposed
of or is located on the Property as a result of activities of the Optionor or
their respective predecessors in title or interest;
 
(w)           to the best of its knowledge no toxic or hazardous substance or
waste has been treated on or stored on the Property;
 
(x)            no toxic or hazardous substance or waste is now stored on the
Property as a result of activities of the Optionor;
 
(y)           the Mineral Claims have not been acquired, directly or indirectly,
as a result of the payment of a bribe to an official or the concealment or
conversion of the proceeds of a bribe to an official;
 
(z)            there are no mandatory obligations of the Optionor to relinquish
any part of the Property under any agreement;
 
(aa)          all information supplied or to be supplied to the Optionee or its
personnel in the course of the Due Diligence, is or will be accurate and correct
in all material aspects; and

 
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(bb)         this Agreement and any other agreement or instrument to be executed
and delivered by the Optionor hereunder constitutes a legal, valid and binding
obligation of it, enforceable in accordance with its terms by appropriate legal
remedy.
 
3.2                      Exclusive Benefit – Representations and
Warranties.  The representations and warranties contained in Section 3.1 are
provided for the exclusive benefit of the Optionee, and any misrepresentation or
breach of warranty may be waived by the Optionee in whole or in part at any time
without prejudice to its rights in respect of any other misrepresentation or
breach of the same or any other representation or warranty; and the
representations and warranties contained in Section 3.1 will survive the
execution of this Agreement and continue through the Option Period.
 
3.3                      Exclusion.  For further clarification, the Optionor
expressly makes no representations or warranties to the Optionee with respect to
any geologic or assay data, and the Optionee agrees that if it elects to rely
upon any of the data or other technical exploration information, it does so at
it sole risk.
 
3.4                      Delivery of Material Documents and Data.  The Optionor
hereby covenants and agrees with the Optionee that upon the execution of this
Agreement, the Optionor will deliver or cause to be delivered to the Optionee
copies of all available maps, assays, surveys, drill logs, samples,
metallurgical, geological, geophysical, geochemical and engineering data and
other documents and data in the Optionor’s possession respecting the Property.
 
3.5                      Exclusive Benefit – Covenants.  The covenants and
agreements contained in Section 3.4 are provided for the exclusive benefit of
the Optionee, and any breach may be waived by the Optionee in whole or in part
at any time without prejudice to its rights in respect of any other breach of
the same; and the covenants and agreements contained in Section 3.4 will survive
the execution of this Agreement and continue through the Option Period.
 
PART 4
REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
 
4.1                      Representations and Warranties the Optionee.  The
Optionee represents and warrants to the Optionor that:
 
(a)           it is a corporation incorporated, organized and validly subsisting
under the laws of the state of Nevada;
 
(b)           it has full power, authority and capacity to own the Property and
to carry on its business as presently conducted and is duly licensed to carry on
business in all jurisdictions in which it presently carries on business;
 
(c)           it has full power and authority to enter into this Agreement and
any agreement or instrument referred to or contemplated by this Agreement and to
carry out its obligations hereunder;

 
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(d)           neither the execution and delivery of this Agreement nor any of
the agreements referred herein or contemplated hereby, nor the consummation of
the Transaction hereby contemplated conflict with, result in the breach of or
accelerate the performance required by any covenant or agreement contained in,
or constitute a default under, or result in the creation of any encumbrance
under the provisions of its constating documents or any shareholders’ or
directors’ resolution, indenture, agreement or other instrument whatsoever to
which it is a party or by which it is bound;
 
(e)           the execution and delivery of this Agreement and the agreements
contemplated hereby will not violate or result in the breach of the laws of any
jurisdiction applicable or pertaining thereto;
 
(f)           there are no pending proceedings for, or any basis for the
institution of any proceedings leading to its dissolution or winding up or the
placing of it in bankruptcy or subject to any other laws governing the affairs
of insolvent Persons;
 
(g)           there are no actual, alleged, potential or future adverse claims,
actions, challenges, suits, prosecutions, legal, administrative or arbitral
proceedings or government investigations, domestic or foreign, that if resolved
adversely to the Optionee, individually or in the aggregate, would materially
adversely affect the business or continued operations of the Optionee;
 
(h)           the Common Shares issuable to the Optionor pursuant to Section 5.2
will, at the time of delivery to the Optionor, be duly authorized and validly
allotted and issued as fully paid and non-assessable free of any Encumbrances;
 
(i)           on the date of receipt by the Optionor of the certificate or
certificates representing such Common Shares, every consent, approval,
authorization, order or agreement that is required for the issuance of such
Common Shares, as applicable, and the delivery to the Optionor of such
certificate or certificates to be valid will have been obtained and will be in
effect;
 
(j)           the Common Shares are, and will be at all times during the Option
Period, part of a class of shares that is currently quoted on the OTCQB;
 
(k)           without limiting the generality hereof, there are no issued and
outstanding, pending or threatened orders ceasing, halting, suspending or
prohibiting trading in securities of the Optionee, and no investigations or
proceedings for such purposes are pending or threatened; and
 
(l)           this Agreement and any other agreement or instrument to be
executed and delivered by the Optionee hereunder constitutes a legal, valid and
binding obligation of it, enforceable in accordance with its terms by
appropriate legal remedy.
 
4.2                      Exclusive Benefit – Representations and
Warranties.  The representations and warranties contained in Section 4.1 are
provided for the exclusive benefit of the Optionor and a misrepresentation or
breach of warranty may be waived by the Optionor in whole or in part at any time
without prejudice to its rights in respect of any other misrepresentation or
breach of the same or any other representation or warranty; and the
representations and warranties contained in Section 4.1 will survive the
execution of this Agreement and continue through the Option Period.
 
 
 
 
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PART 5
GRANT OF OPTION AND NSR ROYALTY
 
5.1                      Grant of Option.  The Optionor hereby grants to the
Optionee the sole and exclusive right and option, subject to the terms of this
Agreement, to earn up to an eighty percent (80%) Interest in the Property free
and clear of all liens, charges and Encumbrances, except Permitted Encumbrances.
 
5.2                      Consideration for First Option.  The right of the
Optionee to exercise the First Option and acquire a twenty percent (20%)
Interest is conditional on the Optionee allotting and issuing to the Optionor,
as fully paid and non-assessable, a total of 35,000,000 Common Shares at a
deemed price of $0.02 per share on or before the Satisfaction Date and pursuant
to the terms of a subscription agreement in form and substance satisfactory to
the Optionor.
 
5.3                      Consideration for Second Option.  The right of the
Optionee to exercise the Second Option and acquire an additional sixty percent
(60%) Interest, for a total Interest of eighty percent (80%), is conditional on
the Optionee:
 
(a)           funding all Expenditures on the Property, commencing on the
Effective Date, until the termination of this Agreement; and
 
(b)           making cash payments in the form of the NSR Royalty of an
aggregate of $5,000,000 to the Optionor (the “Option Cash Payments”), commencing
on the Effective Date.
 
5.4                      Exercise of First Option.  Upon the Optionee allotting
and issuing the 35,000,000 Common Shares within the time period set out in
Section 5.2, the Optionee will be deemed to have exercised the First Option and
to have earned a twenty percent (20%) Interest in the Property.
 
5.5                      Exercise of Second Option.  Upon the Optionee making
the Expenditures and the Option Cash Payments within the time periods set out in
Section 5.3, the Optionee will be deemed to have exercised the Second Option and
to have earned an eighty percent (80%) Interest in the Property.
 
5.6                      Late Payment Penalties.  If the Optionee fails to make
any Option Cash Payments to the Optionor for a period of one (1) year from the
Effective Date, the Optionee shall pay an additional $100,000 to the Optionor on
the first anniversary of the Effective Date, and in any subsequent year in which
the Optionee has failed to exercise the Second Option and this Agreement remains
in effect, the Optionee shall make quarterly cash payments of $25,000 to the
Optionor, payable on the last day of the applicable quarter, until such time as
the Second Option has been exercised (in either case, a “Penalty Payment”).
 

 
 
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5.7                      Common Shares.  All Common Shares issued by the
Optionee pursuant to this Agreement will be issued as fully paid and
non-assessable, free and clear of all liens, charges and Encumbrances, and
subject only to such resale restrictions and hold periods as may be imposed by
applicable securities legislation and the policies of any exchange on which the
Common Shares may then be listed.
 
5.8                      Adjustment.  If the Optionee undertakes a change in
capitalization affecting its Common Shares prior to the exercise of the First
Option, such as subdivision, consolidation or reclassification of the Common
Shares or other relevant changes in Common Shares, including an adjustment
arising from a merger, acquisition or plan of arrangement, such proportionate
adjustments, if any, appropriate to reflect such change will be made by the
Optionee with respect to the number of Common Shares which may be issued by the
Optionee to the Optionor hereunder.
 
5.9                      Advance Royalties.  All advance royalties paid by the
Optionor to Margraf will be credited solely to the account of the Optionor
according to and described in the Sale Deed.
 
PART 6
DEVELOPMENT DECISION
 
6.1                      Development Decision before Exercise of First
Option.  Upon execution of this Agreement and before the exercise of the First
Option, as set out in Section 5.4, the Optionor will analyze and decide on
different Work Program alternatives to advance a project on the Property,
including, but not limited to, making a Development Decision.  The Optionor will
have sole discretion in approving Work Programs and Budgets prior to the
exercise of the First Option.
 
6.2                      Development Decisions after Exercise of First
Option.  After the exercise of the First Option, the Management Committee will
analyze and decide on different Work Program alternatives to advance a project
on the Property, including, but not limited to, making a Development Decision.
The Management Committee will have sole discretion in approving Work Programs
and Budgets after the exercise of the First Option.
 
6.3                      Decisions and Dispute Resolution of Management
Committee.  Except as otherwise provided in this Agreement, decisions of the
Management Committee will be by majority vote.
 
PART 7
OPERATOR, OPERATIONS AND MANAGEMENT COMMITTEE
 
7.1                      Operator.  The Optionee will act as operator (the
“Operator”) of the Property and the Optionor will be the “Non-Operator”, and if
the Optionee is removed or resigns as Operator during this time, the Optionor
will be the Operator, and the Optionee will be the Non-Operator.

 
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7.2                      Operator’s Fee.  The Operator will be entitled to be
paid or credited with the Operator’s Fee (except those set out in Sections
1.1(w)(xxiii) and 1.1(w)(xxiv)) in respect of fees and expenses relating to the
supervision and management of all work done with respect to and for the benefit
of the Property.
 
7.3                      Operator’s Obligations.  The Operator is obligated:
 
(a)           to consider, develop and submit Work Programs to the Optionor or
Management Committee (as the case may be) for consideration and approval, and to
implement Work Programs when approved according to the approved Budget;
 
(b)           to carry out Operations in a prudent and workmanlike manner, with
the degree of effort, skill and judgment that is in accordance with good
exploration, construction, mining, processing and engineering practices
generally prevailing in the mining industry and in accordance with all
applicable laws and regulations, including securities laws and regulations, and
all agreements, permits and licences relating to the Property and the Operator;
 
(c)           to pay and discharge all wages and accounts for material and
services and all other costs and expenses that may be incurred by the Operator
in connection with its Operations on the Property, and to save the Non-Operator
harmless from and against all liens in respect of such Operations that may be
filed against the Property, and in the event of any liens being so filed, to
proceed forthwith to have the same removed, provided that the foregoing
provision will not prevent the Operator from properly contesting in good faith
any claims for liens which the Operator considers unjustified;
 
(d)           to indemnify and save the Non-Operator, its directors, officers,
employees or representatives (the “Indemnitees”) harmless from all claims and
demands, costs (including reasonable attorneys’ fees and expenses incurred by
the Non-Operator), damages, actions, suits or other proceedings whatsoever
arising out of or attributable to the grossly negligent acts or omissions of the
Operator, its employees or representatives under this Agreement, except to the
extent contributed to by the negligent acts or omissions of the Indemnitees,
and/or where the Indemnitees acted in breach of safety, health, mining and other
laws or regulations;
 
(e)           to maintain and keep in force and, upon request by the
Non-Operator provide reasonable documentary verification of, levels of insurance
as are reasonable for Operations located in Nevada in respect of its activities
in connection with the Property;
 
(f)            to the extent within its control and subject to such health,
safety and mining or other regulations, permit the Non-Operator, its employees
or duly authorized representatives, at their own expense and risk and on
reasonable notice to the Operator, access to the Property, the information and
data with respect to same, and the Operator’s books and records in relation
thereto in order to examine any Operations carried out by or on behalf of the
Operator and results obtained therefrom;

 
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(g)           during the term of this Agreement and otherwise in accordance with
U.S. GAAP consistently applied, to maintain true and correct books, accounts and
records of Expenditures;
 
(h)           to deliver to the Optionor or Management Committee (as the case
may be) quarterly progress reports indicating the status of any approved Work
Program being conducted on the Property and disclosing any significant technical
data learned or obtained in connection with such work, along with an estimate of
the Expenditures funded or incurred during that quarter, but no reports will be
required during those periods in which there is no work being conducted;
 
(i)            to deliver to the Optionor or Management Committee (as the case
may be) annually a report on the Operations conducted on or with respect to the
Property for the previous year summarizing any significant technical data
learned or obtained and providing a breakdown of Expenditures funded or incurred
in carrying out the approved Work Program for that year;
 
(j)            to promptly notify the Optionor or Management Committee (as the
case may be) of any material exploration results or adverse events in connection
with the Property; and
 
(k)           to leave the Property upon termination of this Agreement in
substantial the same condition the Property was in prior to the Operator
commencing the Work Program.
 
7.4                      Non-Performance of Operator.  If the Operator fails to
perform work on the Property in a manner that is consistent with good
exploration, engineering and mining practices or fails to perform in a manner
consistent with its duties and responsibilities under this Agreement, or is
adjudged to be bankrupt or insolvent or a receiver or trustee in bankruptcy is
appointed for its business and assets, then the Non-Operator will have the
option to give to the Operator written notice setting forth particulars of the
Operator’s default.  If such notice is provided, the Operator will, within 45
days of receipt of such notice, commence to remedy the default.  Failure of the
Operator to commence to remedy the default within such 45 day period (and
thereafter to proceed continuously and diligently to complete all required
remedial action) will be grounds for termination of the Operator’s
appointment.  Upon such failure to commence to remedy such default within such
period, the Non-Operator will have the election to provide a written notice of
termination to the Operator designating a date of termination, and upon such
written notice of termination being delivered to the Operator, it will be deemed
to have resigned as Operator and the Non-Operator that gave notice will become
the successor operator on such designated date.  The Parties agree that the
appointment of the Non-Operator that gave notice as the successor operator will
be deemed to pre-date the date on which the Operator is adjudged to be bankrupt
or insolvent or a receiver or trustee is appointed as described above (in the
event this is the default event).
 
7.5                      Management Committee.  Upon the exercise of the First
Option a management committee (the “Management Committee”) will be formed
comprised of representatives from each Party, with voting based on each Party’s
proportionate Interest, and it will supervise exploration of the Property and
approve Work Programs and Budgets.  The procedures applicable to the Management
Committee will be as follows:
 
 
 
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(a)           Meetings – Meetings of the Management Committee will be held at
least quarterly in each year and will be called on 10 days’ notice by the
Operator, and failing that, by the Non-Operator.  The Operator or any Party may
on 10 days’ notice call an ad hoc meeting of the Management Committee.  For each
meeting an agenda must, at least seven (7) days prior to that meeting, be
distributed to the Parties by the person calling that meeting.
 
(b)           Minutes of Meeting – The Operator must cause minutes of each
meeting to be taken and distributed to the Parties for comments within seven (7)
days of that meeting, which will be the subject of approval at the next meeting.
 
(c)           Meetings by Conference Call – Any member of the Management
Committee may attend any meeting by conference telephone, so long as all
attendees at that meeting can hear and be heard by all other attendees.
 
(d)           Quorum – A quorum for a meeting of the Management Committee will
be one representative from each of the Optionee and the Optionor.
 
(e)           Voting – Each of the Optionee and the Optionor will have one vote
on the Management Committee, and such vote can be exercised by the
representative of such Party.  Items of business at a meeting will be voted upon
and if there is equality of votes in favour of and against any item of business
then the member or members representing the Optionee will have a casting vote.
 
(f)           Resolutions in Writing – In lieu of a meeting, the Management
Committee may pass resolutions in writing signed by one representative of each
of the Optionee and the Optionor.
 
7.6                      Work Programs and Budgets.  All Operations will be
conducted and all costs will be incurred on the basis of an approved Work
Program or Development Program, including the making of a Development Decision,
as the case may be (collectively a “Work Program”), and a budget (“Budget”) of
the estimated costs of that Work Program, except in the case of emergency
actions.  All proposed Work Programs and Budgets in respect of the Property must
be approved by the Management Committee before implementation by the Operator,
on at least an annual basis or more frequently as required.  Upon approval of a
Work Program and Budget, the Operator will implement such Work Program and
Budget within the time periods set out therein.
 
7.7                      Maintenance of Lands.  The Parties agree to keep the
Property and Mineral Claims in good standing as follows:
 
(a)           until the exercise of the First Option, the Optionor covenants to
keep the Property and Mineral Claims in good standing by making all Required
Payments; and
 
(b)           after the exercise of the First Option, the Optionee will be
responsible for keeping the Property and Mineral Claims in good standing by
making all Required Payments.
 
PART 8
FUNDING
 
8.1                      Funding. After the Effective Date, the Optionee will
fund one hundred percent (100%) of all approved Work Programs.
 

 
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PART 9
AREA OF INTEREST
 
9.1                      Area of Interest.
 
(a)           The “Area of Interest” will be defined as the area within the
external boundaries of the Property, plus an additional area of one mile outside
such external boundaries but will exclude rights in real property within the
Townsite of Goldfield which have no potential for exploration of Minerals.
 
(b)           During the term of this Agreement, none of the Parties (or their
Affiliates) will directly or indirectly acquire any of the following rights that
are located wholly or partially within the Area of Interest, unless acquired in
accordance with this Section 9.1:
 
(i)           rights to Minerals or other subsurface rights;
 
(ii)           rights in real property, other than real property which has no
potential for exploration of Minerals;
 
(iii)           any other surface or other rights in relation to real property,
including rights of way, easements etc.;
 
(iv)           entering into a new lease covering the rights set out in Sections
9.1(b)(i), 9.1(b)(ii), or 9.1(b)(iii); or
 
(v)           any right, concession, authorization, licence or permit in
relation to the use or diversion of water that may affect the development of
rights to Minerals.
 
(c)           If either Party acquires or proposes to acquire any such rights in
the Area of Interest, it must notify the other Party in writing of such
acquisition and the Optionee will have the election whether to add such rights
to the Property (whether such rights are contained wholly within the Area of
Interest or only partially within the Area of Interest), and:
 
(i)           if the Optionee does not want to include such rights as part of
the Property, the Optionor will be free to develop or otherwise deal with such
rights for its own account; or
 
(ii)           if the Optionee wishes to include such rights as part of the
Property, it will be obliged to exercise its election in writing within 45 days
of receipt of the written notice referred to in this Section 9.1 and, subject to
receipt of all required governmental and regulatory approvals, consents or
acceptances, such rights will be considered as part of the Property.
 
 
 
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(d)           The inclusion of any such rights will not, however, enlarge the
Area of Interest beyond the area defined on the Effective Date.
 
9.2                      Notwithstanding Section 9.1, both Parties agree that
any new unpatented claims staked on open ground by either Party (or its
Affiliate) either directly or indirectly, within the Area of Interest, will form
part of this Agreement.
 
PART 10
TRANSFER OF INTEREST
 
10.1                      Assignment to Wholly Owned Affiliates.  Either Party
may assign all or part of its rights under this Agreement or its Interest to a
Wholly Owned Affiliate, and in such a case, the transferee will covenant to be
bound by this Agreement, and notwithstanding such transfer, the transferring
Party will remain liable for all of its obligations hereunder prior to the date
of the transfer.  If such Wholly Owned Affiliate ceases to be a Wholly Owned
Affiliate of the applicable transferring Party, then any rights or Interests
assigned hereunder will be deemed to be transferred back to the transferring
Party for the same consideration as originally transferred.
 
10.2                      Ownership Structure.  The Parties agree that they will
hold their respective Interest only directly, or through Wholly Owned
Affiliates, all or substantially all the assets of which will comprise a direct
or indirect Interest.
 
10.3                      Assignments and Transfers Before the Exercise of the
First Option.  From the Effective Date and until the Optionee exercises the
First Option, if at all, except as provided in this Section 10.3 the following
will apply:
 
(a)           Assignment with Consent –  A Party may not assign all or any part
of its rights under this Agreement to a third party, unless it obtains the prior
written consent of the other Party, with such consent not to be unreasonably
withheld.
 
(b)           Restriction on Transfer of Assets – So long as the Optionee is in
compliance with the terms of this Agreement, the Optionor may not assign, sell,
transfer, pledge or mortgage all or any part of the Property (directly or
indirectly) except to the Optionee.
 
10.4                      Transfer After the Exercise of the First
Option.  After the Optionee exercises the First Option, if at all:
 
(a)           if a Party directly or indirectly owning an Interest receives a
bona fide offer (the “Offer”) from a third party (the “Third Party”) (whether
negotiations leading to such offer were initiated by the Party or by the Third
Party) to purchase all or a portion of a Party’s Interest (in each case, the
“Offered Interest”), such Party (the “Seller”) may accept the Offer and effect
such sale, transfer or assignment, provided that, the Offer is for cash,
securities of the Seller, or a combination of both, and the Seller has first
given the other party (the “Non-Selling Party”) a right of first refusal with
respect to such Offer in accordance with this Section 10.3;
 
 
 
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(b)           if the Seller accepts the Offer, such acceptance must be made
subject to the rights of the Non-Selling Party.  The Seller will give notice
(the “Offer Notice”) to the Non-Selling Party of its intention to sell and of
the terms and conditions of the Offer, including the consideration being offered
and the date upon which it wishes to consummate the transaction (which date will
be no earlier than 120 days after the date of the Offer Notice).  Thereafter,
the Non-Selling Party will have the right, by notice to the Seller within 60
days after receipt of the Offer Notice to elect to purchase the entirety of the
Offered Interest for a consideration equal to the price set out in the Offer for
and in accordance with the other terms and conditions of the Offer;
 
(c)           the Seller will transfer the Offered Interest to the Non-Selling
Party upon receipt of consideration therefore upon the earlier of (i) a date to
be mutually agreed and (ii) 60 days after Seller’s receipt of the notice of
election to purchase.  Notwithstanding the foregoing, in the event that the
Non-Selling Party has not elected to purchase all of the Offered Interest on the
terms set out in clause (b) above, the Seller will have the right to transfer
all of the Offered Interest to the Third Party on the terms set forth in the
Offer at any time within 120 days following the expiration of the 60-day period
in which the Optionee  may elect to purchase the Offered Interest;
 
(d)           if a transfer is effected in conformity with the preceding
provisions of this Section 10.3, a novation will occur and the transferor will
be relieved of all obligations assigned to and assumed by the transferee under
this Agreement in connection with the Offered Interest transferred, except for
any obligation for which it is then in default under this Agreement;
 
(e)           for further clarification;
 
(i)           the sale by a Party of part of its interest in its Wholly Owned
Affiliate that does not result in a loss of a Control Interest by such Party in
such Wholly Owned Affiliate will not be subject to this Section 10.3; and
 
(ii)           the Parties confirm that they are prohibited from transferring
(directly or indirectly) any rights or obligations provided for under this
Section 10.3 to any other party (including third parties or Affiliates).
 
10.5                      Terms of Sale.  A sale of an Interest pursuant to the
terms of Section 10.3 must be carried out in accordance with the following terms
and conditions:
 
(a)           subject to receipt of all required governmental and regulatory
approvals, consents or acceptances required at law;
 
(b)           each Party must execute and deliver such documents and instruments
as may be reasonably required by the other to facilitate the sale, including in
the case of the Seller, resignations of directors and officers appointed by the
Seller and any Wholly Owned Affiliate of the Seller to the Board (if
applicable), and a release of any and all claims which the Seller may have
against the Non-Selling Party (and in the case of a failure to execute such
document and instruction, will be deemed to have executed same or resigned, as
the case may be);
 
 
 
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(c)           title to all of the Offered Interest which is the subject of such
sale must be transferred to the Third Party or the Non-Selling Party (as the
case may be) and/or their applicable Affiliates, free and clear of all
Encumbrances, except Permitted Encumbrances;
 
(d)           any loans and accrued and unpaid interest thereon and any other
amounts owing by either Party to the other Party must be repaid concurrently
with and as part of completion of such sale;
 
(e)           the Seller must convey and transfer its Offered Interest to the
Third Party or the Non-Selling Party (as the case may be) or an Affiliate
designated by such parties at the time of completion of such sale;
 
(f)           the Third Party must become a party to this Agreement and assume
all liabilities and obligations of the Seller herein;
 
(g)           the Non-Selling Party will be prohibited from transferring,
assigning, selling, conveying or pledging to any other third party or Affiliate
such Offered Interest for a period of three (3) months after the completion of
such sale; and
 
(h)           the Non-Selling Party must provide to the other Party an
undertaking that it has not entered into any negotiations of any sort with any
parties (other than such Third Party purchaser) for the sale, assignment,
transfer, conveyance or pledge of the Offered Interest.
 
10.6                      General Prohibition on Assignment and Transfer of
Interest.  Except as provided in this Part 10, neither Party may sell, assign or
transfer its Interest or rights under this Agreement to a third party, unless it
obtains the prior written consent of the other Party, with such consent not to
be unreasonably withheld.
 
PART 11
CONFIDENTIALITY
 
11.1                      The Parties agree that this Agreement, the
Transaction, all information (whether embodied in tangible or electronic form)
exchanged between the Parties under this Agreement and all information
concerning or relating to the Transaction of which it becomes aware (the
“Confidential Information”) is confidential; and must be kept confidential and
must not be disclosed to any person at any time or in any manner, including
without limitations any press release or public announcement concerning the
existence of this Agreement or the Transaction, and will not be used other than
in the furtherance of the purposes of this Agreement, except:
 

 
23

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(a)           to a bank or other financial institution considering the provision
of or, which has provided financial accommodation to, a Party or an Affiliate of
a Party or to a trustee, representative or agent or such a bank or financial
institution;
 
(b)           by a Party to legal, financial and other professional advisers,
auditors and other consultants, officers and employees of a Party or a Party’s
Affiliate, provided that such Party or Party’s Affiliate has first agreed in
writing to maintain the confidentiality of the Confidential Information;
 
(c)           to the extent that the Confidential Information was publicly
available at the Effective Date or becomes publicly available subsequent to the
Effective Date without breach of this Agreement;
 
(d)           to the extent required by law or by a lawful requirement of any
Governmental Authority, or stock exchange having jurisdiction over the Parties
or their Affiliates, provided the disclosing Party has consulted the
non-disclosing Party in respect of such disclosure no later than two days prior
to making such disclosure;
 
(e)           information disclosed by a third party in respect of which such
third party is not under an obligation of confidentiality ; and
 
(f)           with the prior written consent of the other Party, such consent
not to be unreasonably withheld.
 
PART 12
TERMINATION
 
12.1                      Optionee’s Election to Terminate Option.  The funding
of the Expenditures, the making of the Option Cash Payments and the issuance of
the Common Shares pursuant to Sections 5.2 and 5.3 are within the sole and
unfettered discretion of the Optionee, and the Optionee may elect at any time to
terminate the Option by delivering notice to that effect to the Optionor (the
“Option Termination Notice”) and complying with the terms of this Part 12.
 
12.2                      Automatic Termination of Option.  The Option will,
subject to Section 13.1, be of no further force or effect, and will
automatically terminate if the Optionee:
 
(a)           has not issued the Common Shares as set out in Section 5.2;
 
(b)           has not funded the Expenditures or made the Option Cash Payments
as set out in Section 5.3;
 
(c)           has not made the Penalty Payments as set out in Section 5.6; or
 
(d)           delivers an Option Termination Notice to the Optionor.

 
24

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12.3                      Consequences of Termination.  If the Option is
terminated pursuant to Section 12.2, then the Optionee will acquire no Interest
and the Optionee will have no further obligations or rights under this
Agreement, subject to Section 17.8.
 
12.4                      Deliveries after Termination.  Upon termination of
this Agreement, the terminating Party must deliver all records, information and
data in respect of the Property and the non-terminating Party will pay its
Proportionate Share (calculated just prior to such termination) of all such fees
to maintain the Property in good standing for a period of three (3) months.  The
terminating Party may keep a copy of such record for archival purposes only,
subject to the terms of Section 11.1.  Other than filing such work or paying
such fees, the terminating Party will have no further rights or obligations to
the other Party, except in respect of those described herein and obligations or
liabilities, the cause of which may have arisen prior to the date of
termination.
 
12.5                      Further Assurances on Termination.  As soon as
possible after termination, but in any event no later than three days
thereafter, the Party exiting this Agreement will take all such steps and do all
such things and sign all such documents or procure the taking of all such steps,
the doing of all such things and the signing of all such documents as may be
necessary to transfer its Interest to the other Party.  Notwithstanding such
termination, the obligations of the exiting Party which arose prior to the
termination and/or in terms of this Agreement, will survive and the other Party
will be entitled to enforce same, including the reclamation activities and the
recovery of any money together with any damages, costs and expenses it will
incur in respect of the enforcement of its rights hereunder.
 
PART 13
CURE PERIOD, FORCE MAJEURE AND DEFAULT
 
13.1                      Cure Period.  The making of the Option Cash Payments
and issuance of the Common Shares within the time periods required by this
Agreement are subject to Force Majeure pursuant to Section 13.2 and are subject
to the cure period set out in Section 13.4 in which to satisfy such obligations.
 
13.2                      Force Majeure.
 
(a)           For the purposes of this Section 13.2, “Party” will include
Parties to this Agreement and the Operator.  No Party will be liable to another
Party and no Party will be deemed in default under this Agreement for any
failure or delay to perform any of its covenants and agreements when such
performance is directly prevented as a consequence of an event of Force
Majeure.  For the purposes of this Agreement, “Force Majeure” means any cause
not within the reasonable control of the Party, including but not limited to:
 
(i)           acts of war (whether war be declared or not); public disorders,
insurrection, rebellion, revolution, terrorist acts, sabotage, riots or violent
demonstrations;

 
25

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(ii)           civil disobedience caused by indigenous peoples, environmental
lobbyists, non-governmental organizations or local community groups or other
persons;
 
(iii)           injunctions imposed by any governmental authority except if
caused by a breach of the law or a court resolution;
 
(iv)           explosions, fires or floods not caused by or attributable to a
Party;
 
(v)           floods, earthquakes, hurricanes or other natural calamities or
acts of God;
 
(vi)          shortages in workforce or supplies, travel and access restrictions
imposed by government or other third parties, or other delays caused by
endemics, epidemics or pandemics;
 
(vii)         strike or lockout or other industrial labour action or disruption
(including unlawful but excluding lawful strikes or lockouts or other industrial
labour action) which:
 
(A)           have national, provincial, regional or state-wide application;
 
(B)           directly affect the performance of the obligations under this
Agreement; and
 
(C)           lasts for more than seven (7) consecutive calendar days;
 
(viii)           any action or failure to act within a reasonable time without
justifiable cause by any Governmental Authority, its employees or agents
including the denial of or delay in granting any authorization, licence, permit,
consent, approval or right which denial or delay will imply a material adverse
effect on the construction or operation of the project, upon due application and
diligent effort by the Party or the Operator (as the case may be) to obtain
same, or the failure once granted to remain (without justifiable cause) in full
force and effect or to be renewed on substantially similar terms;
 
(ix)           discovery of artifacts or archaeological ruins or any historic
heritage; and
 
(x)           injunctions not caused by any breach of this Agreement by any
Party.
 
(b)           So far as possible, the Party affected will make all reasonable
commercial efforts to remedy the delay caused by the events referred to above as
soon as feasible, provided, however, that nothing contained in this Section 13.2
will require any Party to settle any industrial dispute or to test the
constitutionality of any law, and failure to use such reasonable commercial
efforts will preclude a Party from continuing to claim Force Majeure.
 
(c)           A lack of funds will not be considered an event of Force Majeure,
and the payment of monies from one Party to the other Party will be deemed to be
within the reasonable control of the Party who is to pay and the lack of funds
for any such payment will not be considered an event of Force Majeure.
 
 
 
26

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(d)           The Party suffering Force Majeure will notify the other Parties in
writing of the expected period during which the Force Majeure will persist and
take all such reasonable steps to cure its inability to perform as a result of
the Force Majeure.
 
13.3                      Operator to Maintain Properties in Good
Standing.  Notwithstanding any claim of Force Majeure, the Operator will not be
relieved of its obligations to maintain the Property in good standing.
 
13.4                      Default.  Except as otherwise provided in this
Agreement, if any Party (in this Section 13.4, a “Defaulting Party”) is in
default of any requirement herein set forth, the other Party may give written
notice to the Defaulting Party specifying the default.  The Defaulting Party
will not, except as specifically otherwise provided herein, lose any rights
under this Agreement unless, within 30 days after the giving of notice of
default by the non-Defaulting Party, the Defaulting Party has failed to take
reasonable steps to cure the default by the appropriate performance or the
Defaulting Party fails to dispute the notice of default.  Upon any such failure,
the non-Defaulting Party will be entitled to seek any appropriate remedy
(including dilution of the Defaulting Party to the fullest extent) it may have
on account of such default.
 
PART 14
SECURITY
 
14.1                      Allocation of Obligation to Post Security.  To the
extent that security (whether in the form of cash, negotiable securities,
letters of guarantee, irrevocable letters of credit or otherwise) is required to
be posted in accordance with any applicable laws, regulations, agreements,
permits or licenses relating to Operations, the Property or the Operator or to
reclamation activities on the Property:
 
(a)           before the exercise of the First Option, the Optionor will lodge
security in such form as may be acceptable to the particular authority; and if
the security will expire at a particular time the Optionor must do all things to
replace or renew such security before that time if required by the authority;
and
 
(b)           after the exercise of the First Option, the Optionee will lodge
security in such form as may be acceptable to the particular authority; and if
the security will expire at a particular time the Optionee must do all things to
replace or renew such security before that time if required by the authority.
 
PART 15
ARBITRATION AND INJUNCTIVE RELIEF
 
15.1                      Demand for Arbitration.  Any dispute arising under or
related to this Agreement will be taken to successively higher levels of the
Parties’ management.  If there is no resolution of the dispute at the level of
the Chief Executive Officer of the Parties, then any such dispute will be
resolved by arbitration in accordance with this Part 15 and will be submitted to
arbitration by written demand of either Party.  To demand arbitration, a Party
will give written notice to the other Party specifying the issues in dispute,
the amount involved, the remedy requested and the name of the arbitrator the
demanding Party appoints.   Within 10 Business Days after receipt of the demand
for arbitration, the other Party will answer the demand in writing, specifying
the issues that Party disputes and the name of the arbitrator that such other
Party appoints.
 
 
 
 
27

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15.2                      Arbitration.  The arbitration will be determined by
one arbitrator, mutually selected by the Optionee and the Optionor within 10
Business Days after proper notice has been provided to all Parties that a
dispute has arisen under this Agreement.  The arbitrator appointed by such
Parties will be experienced and knowledgeable in the mining industry.  No person
will be appointed or selected as an arbitrator hereunder unless such person
agrees in writing to act.  If the Optionee and the Optionor cannot agree on a
single arbitrator, each party may appoint its own arbitrator, and the two (2)
arbitrators will then choose a third arbitrator. The arbitrators will endeavour
to reach a unanimous decision resolving the dispute, but the vote of two (2) out
of three (3) arbitrators will be binding and non-appealable.
 
15.3                      Conduct of Arbitration.  Except as specifically
provided in this Part 15, arbitration hereunder will be conducted in accordance
with the commercial arbitration rules of the American Arbitration Association
(in this Part, the “Rules”), as modified below.  The parties may conduct
discovery pursuant to the Nevada Rules of Civil Procedure and Nevada Rules of
Evidence.  The arbitrator or arbitrators, as the case may be, will fix a time
and place in Reno, Nevada reasonably convenient for the Parties, after giving
each Party not less than 30 Business Days’ notice, for the purpose of hearing
the evidence and representations of the Parties and they will preside over the
arbitration and determine all questions of procedure not provided for under such
Rules or this Part 15.  After hearing any evidence and representations that the
Parties may submit, the arbitrator or arbitrators, as the case may be, will make
an award and reduce the same to writing and deliver one copy thereof to each of
the Parties.  The arbitrator or arbitrators, as the case may be, will endeavor
to make an award within 30 days after the end of the hearing, subject to any
reasonable delay due to unforeseen circumstances.  Any decision by the
arbitrator or arbitrators, as the case may be, will be by reasoned decision and
will follow and apply the laws of the State of Nevada.  The expense of the
arbitration, including travel costs, expert witness and attorney’s fees and
costs will be paid as determined in the discretion of the arbitrator or
arbitrators, as the case may be, having due regard for the outcome of the
arbitration and the relationship of the result to the positions taken by the
Parties.  The award of the arbitrator or arbitrators, as the case may be, will
be final and binding upon each of the Parties.
 
15.4                      Jurisdiction of the Courts.  Judgment upon the award
may be entered by any court having jurisdiction thereof or having jurisdiction
over the relevant Party or its assets.  Subject to the obligation of the Parties
to arbitrate any dispute arising under or related to this Agreement, the courts,
state and federal, sitting in the State of Nevada will have exclusive
jurisdiction to hear and determine all matters relating to this Agreement,
including actions to enforce the obligation to arbitrate under this Part 15, or
to obtain injunctive relief under Section 15.5.  Nothing contained in this
Section 15.4 is intended to affect the rights of a Party to enforce an arbitral
award by recourse to the courts or to enforce a judgment or award outside of the
State of Nevada.
 
 
 
 
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15.5                      Injunctive Relief.  Each of the Parties agrees that
its failure to comply with the covenants and restrictions set out in Part 9
(Area of Interest), Part 10 (Transfer of Interest), Part 11 (Confidentiality) or
Section 12.4 (Deliveries after Termination) would constitute an injury and cause
damage to the other Party impossible to measure monetarily.  Therefore, in the
event of any such failure, the other Party will, in addition and without
prejudice to any other rights and remedies that it may have at law or in equity,
be entitled to injunctive relief restraining, enjoining or specifically
enforcing the provisions of Part 9, Part 10, Part 11 or Section 12.4 (as the
case may be).  Any Party intending to breach or that breaches the provisions of
Part 9, Part 10, Part 11 or Section 12.4 (as the case may be) hereby waives any
defense it may have in law to such injunctive relief or demand for arbitration
under this Agreement.  Preliminary injunctive relief may be sought by either
Party in a court in Nevada without first seeking arbitration; provided that upon
the granting of any application for preliminary injunctive relief, further
hearings on the matter by the court will be stayed pending disposition of the
matter by the arbitral tribunal.  Permanent disposition of the application for
injunctive relief may be made by the court in accordance with the award in
arbitration.
 
PART 16
INDEMNITY
 
16.1                      Optionor’s Indemnity.  The Optionor agrees to
indemnify and save the Optionee harmless from and against any Environmental
Liability suffered or incurred by the Optionee arising directly or indirectly
from any operations or activities conducted in or on the Property, whether by
the Optionor or others, prior to the Effective Date.
 
16.2                      Optionee’s Indemnity.  The Optionee agrees to
indemnify and save the Optionor harmless from and against any Environmental
Liability suffered or incurred by the Optionor arising directly or indirectly
from any operations or activities conducted on the Property, whether by the
Optionee, its employees or agents, after the Effective Date.
 
PART 17
GENERAL
 
17.1                      Currency.  All dollar amounts expressed refer to the
lawful currency of the United States of America.
 
17.2                      Costs.  Each Party will bear its own costs in respect
of the negotiation, drafting and settlement of this Agreement.
 
17.3                      Public Disclosure.  Prior to making any public
disclosure in relation to any matter involving the Transaction, this Agreement,
the Property or any agreements contemplated herein which may have a material
effect on the other Party or which may require the other Party to make such
disclosure contemporaneously with the disclosing Party, the Party proposing to
make a public disclosure will, unless it is compelled by law or by a lawful
requirement of any government authority or applicable stock exchange to make an
immediate public disclosure, provide an advance copy to the other Party for its
review and comment at such reasonable notice as circumstances may permit and
further prior to the time of the proposed public disclosure.  The Parties will
at all times seek to co-operate to the fullest extent to avoid any prejudice or
harm ensuing in respect of the disclosing Party as a result of a delay in
obtaining the comments of the other Party.  Provided, however, that a Party will
not be required to accept any such suggestions and comments and nothing herein
will be deemed to limit any Party’s legal obligations.
 
 
 
29

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17.4                      Governing Law.  This Agreement will be construed and
governed by the laws of the State of Nevada and the federal laws of the United
States of America applicable therein.
 
17.5                      Notice.  All notices and other communications under
this Agreement will be in writing and may be delivered personally or transmitted
by e-mail as follows:
 
To the Optionor:
 
Lode-Star Gold, Inc.
17213 Bending Oak Court
Cypress, Texas, USA 77429

 
Attention:       Lonnie Humphries
email:               lonniehumphries@msn.com
 
To the Optionee:
 
International Gold Corp.
666 Burrard Street, Suite 600
Vancouver, British Columbia, Canada  V6E 4M3

 
Attention:         Bob Baker
email:                 bobbaker@internationalgoldcorp.com
 
or to such addresses as each Party may from time to time specify by notice.  Any
notice will be deemed to have been given and received if personally delivered,
then on the day of personal service to the recipient Party, if sent by e-mail
transmission and successfully transmitted prior to 4:00 pm (of the time of the
receiving Party) on the day of transmission, and if transmitted after 4:00 pm
(of the time of the receiving Party) on that Business Day then on the next day
following the date of transmission.
 
17.6                      Further Assurances.  Subject to the terms and
conditions herein provided and to fiduciary obligations under applicable law as
advised by legal counsel, each of the Parties agrees to use reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, and co-operate with each other in connection with the foregoing,
including using reasonable commercial efforts to (i) obtain all necessary
consents, approvals and authorisations as are required to be obtained under any
federal, state, provincial or foreign laws; (ii) defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby; (iii) cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the transactions contemplated hereby; (iv) effect all necessary registrations
and other filings and submissions of information requested by all relevant
Governmental Authorities; (v) obtain all necessary waivers, consents and
approvals from other Parties to material agreements, leases and other contracts
or agreements (including the agreement of any persons as may be required
pursuant to any agreement, arrangement or understanding relating to the
Property); and (vi) fulfil all conditions and satisfy all provisions of this
Agreement.
 
 
 
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17.7                      Counterparts.  This Agreement may be executed in any
number of counterparts and by the different Parties hereto on separate
counterparts, each of which when so executed and delivered will be an original,
but all such counterparts together will constitute one and the same instrument.
 
17.8                      Survival.  Part 11 (Confidentiality), Section 12.4
(Deliveries after Termination), Part 15 (Arbitration and Injunctive Relief),
Section 17.4 (Governing Law) and Section 17.6 (Further Assurances on
Termination) and all limitations of liability and rights accrued prior to
completion, termination, or expiration of this Agreement will not merge on
completion, termination, or expiration of this Agreement, but will continue in
full force and effect after any termination or expiration of this Agreement as
will any other provision of this Agreement which expressly or by implication
from its nature is intended to survive the termination or expiration of this
Agreement.
 
17.9                      Waiver.  No consent or waiver expressed or implied by
either Party in respect of any breach or default by the other Party in the
performance of such other of its obligations hereunder will be deemed or
construed to be a consent to or a waiver of any other breach or default.
 
17.10                      Enurement.  This Agreement will enure to the benefit
of and be binding upon the Parties and their respective successors and assigns,
subject to the conditions hereof.
 
17.11                      Fiduciary Relationship.  Nothing herein will
constitute or be taken to constitute the Parties as partners or create any
fiduciary relationship between them.  It is not the intention of the Parties to
create, nor will this Agreement be construed to create, any mining, commercial
or other partnership.  None of the Parties will have any authority to act for or
to assume any obligation or responsibility on behalf of any other party, except
as expressly provided herein.  The rights and duties of the Parties will be
several and not joint or joint and several.
 
17.12                      Amendment.  No modification, alteration or waiver of
the terms herein contained will be binding unless the same is in writing, dated
subsequently hereto, and fully executed by the Parties.
 
17.13                      Inconsistencies.  In the event of any inconsistency
between the terms of this Agreement and any Schedule hereto, the terms of this
Agreement will control.
 
 
 
 

 
 
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17.14                      Time.  Time will be of the essence hereof.
 
17.15                      Entire Agreement.  This Agreement and the Schedules
attached hereto set forth the entire agreement and understanding of the Parties
in respect of the transactions contemplated hereby and supersede all prior
agreements and understandings, oral or written, among the Parties or their
respective representatives with respect to the matters herein and will not be
modified or amended except by written agreement signed by the Parties to be
bound thereby.
 
17.16                      Option Only.  This Agreement is an option only and
nothing herein contained will be construed as obligating the Optionee to do any
acts or make any payments, incur Expenditures or issue Common Shares hereunder,
and any act or acts or payment or payments as will be made hereunder will not be
construed as obligating the Optionee to do any further act or make any further
payment or payments.
 
[Signature Page to Follow]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first set forth above.
 
LODE-STAR GOLD, INC.
 
Per: 
cs// “Lonnie Humphries”          
Authorized Signatory
Name: Lonnie Humphries
Title: President

 
INTERNATIONAL GOLD CORP.
 
Per: 
cs// “Bob Baker”                      
Authorized Signatory
Name: Bob Baker
Title: President

 

 
 
 
 
 
 
 

 
 
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SCHEDULE A
 
LODE-STAR PROPERTY DESCRIPTION
Location

Lode-Star’s Goldfield Bonanza Project is located in west-central Nevada (Figure
1), in the Goldfield Mining District at Latitude 37° 42’, and Longitude 117°
14’. The above-noted mining claims leased by Lode Star are located in surveyed
sections 35 and 36, Township 2 South, Range 42 East, and in sections 1, 2, 11,
and 12, Township 3 South, Range 42 East, in Esmeralda County, Nevada. The
property is accessible by traveling approximately one-half mile northeast of the
community of Goldfield, along a county-maintained road that originates at U.S.
Highway 95, which runs through “downtown” Goldfield. The town of Goldfield,
which is the Esmeralda county seat (population 300), is 270 miles south of Reno
and 182 miles north of Las Vegas.

Property Description

The Property is comprised of a total of 31 patented lode claims and one
unpatented millsite claim.  The specific descriptions of such patented and
unpatented mining claims are more particularly described on Exhibit A to this
Schedule A, which specifies the following details of the Property:

 
1.
Including all of the Combination No. 1 Claim (Survey No. 2375) except the south
½ of such claim above the elevation of the 380’ level of the Combination Shaft,
and all of the Combination No. 2 Claim (Survey No. 2375) except the north ½ of
such claim above the elevation of the 380’ level of the Combination Shaft.

 
2.
Excluding, from surface, the upper 200 feet of the north ½ of the Deserted
Patent (Survey No. 2203) and the east ½ of the North End Patent (Survey No.
2203).

Together with any and all contracts, easements, leases and rights-of-way
affecting or appurtenant to the foregoing patented claims, and any and all
unpatented claims or millsite claims.
 
[End of Schedule A]
 
 
 
 
 
 
 
 

 
 
1

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EXHIBIT A OF SCHEDULE A
 

[itgc-a.jpg]

 
A-1

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

 

Patented Claims
 
Claim Name
U.S. Survey No.
Combination No. 3
2375
 
August
2916
 
Great Western
2525
 
Gold Coin
2525
 
February
2941
 
Mohawk No. 1
2283
 
Side Line Fraction
2567
 
January
2941
 
Silver Pick
2203
 
Silver Pick Fraction
2203
 
Deserted(1)
2203
 
Pipe Dream
2203
 
North End(2)
2203
 
Hazel Queen
2375
 
Fraction
2844
 
White Horse
2844
 
White Rock
2844
 
Yellow Jacket
2844
 
Firelight
2749
 
Emma Fraction
2360
 
S.E. 2/3 Red King (more or less)
2361
 
S.E. 1/2 (Cornishman)
2750
 
Kewana #3
2565
 
Combination No. 1 Claim(3)
2375
 
Combination No 2 Claim(4)
2375
 
Blue Jay
2844
19/24th interest
Omega
2844
19/24th interest
Apazaca
2844
19/24th interest
Alpha
2844
19/24th interest
Jim Fraction
4096
19/24th interest
O.K. Fraction
2560
¾ of ½ interest

 
Notes:
 
(1) Excluding the upper 200 feet from surface of the north ½ of such claim (the
“Deserted Excluded Zone”).  The Optionee may, in the Optionee’s sole and
unfettered discretion, by written notice to the Optionor at any time during the
term of the Agreement, opt to include the Deserted Excluded Zone in the
Property.
 
(2) Excluding the upper 200 feet from surface of the east ½ of such claim (the
“North End Excluded Zone”).  The Optionee may, in the Optionee’s sole and
unfettered discretion, by written notice to the Optionor at any time during the
term of the Agreement, opt to include the Excluded Zone in the Property.
 
(3) Includes all depths of the north ½ of such claim along with depths beneath
380 feet on the south ½ of such claim.
 
(4) Includes all depths of the south ½ of such claim along with depths beneath
380 feet on the south ½ of such claim.

 
A-2

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Unpatented Claims
 
Claim Name
Nevada Mining Claim (NMC) No.
Troublemaker
1034313

 
[End of Exhibit A of Schedule A]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
A-3

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[itgcb1.jpg]
 
[End of Schedule B]

 
1

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

 
 
[itgcbb1.jpg]

 
B-1

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

 

 
[itgcbb2.jpg]

 
B-2

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

 

 
[itgcbb3.jpg]

 
B-3

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

 

[itgcbb4.jpg]
 
[End of Exhibit B of Schedule B]
 

 
B-4

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SCHEDULE C
 
NET SMELTER RETURNS ROYALTY AGREEMENT
 
Payor: 
International Gold Corp.

 
Recipient: 
Lode-Star Gold, Inc.

 
1           Definitions.  The following definitions shall apply to this
Schedule.
 
1.1           “Gold Production” means the quantity of refined gold outturned to
Payor’s account by an independent third party refinery for gold produced from
the Property during the month on either a provisional or final settlement basis.
 
1.2           “Gross Value” shall be determined on a month basis and have the
following meanings with respect to the following Minerals.
 
1.2.1 Gold
 
(a)          If Payor sells gold concentrates, dore or ore, then Gross Value
shall be the value of the gold contained in the gold concentrates, dore and ore
determined by utilizing: (1) the mine weights and assays for such gold
concentrates, dore and ore; (2) a reasonable recovery rate for the refined gold
recoverable from such gold concentrates, dore and ore (which shall be adjusted
annually to reflect the actual recovery rate of refined metal from such gold
concentrates, dore and ore); and (3) the Monthly Average Gold Price for the
month in which the gold concentrates, dore and ore were sold.
 
(b)          If Payor produces refined gold (meeting the specifications of the
London Bullion Market Association, and if the London Bullion Market Association
no longer prescribes specifications, the specifications of such other
association generally accepted and recognized in the mining industry) from
Minerals, and if Section 1.2.1(a) above is not applicable, then for purposes of
determining Gross Value, the refined gold shall be deemed to have been sold at
the Monthly Average Gold Price for the month in which it was refined.  The Gross
Value shall be determined by multiplying Gold Production during the month by the
Monthly Average Gold Price.
 
1.2.2 Silver
 
(a)          If Payor sells silver concentrates, dore or ore, then Gross Value
shall be the value of the silver contained in the silver concentrates, dore and
ore determined by utilizing: (1) the mine weights and assays for such silver
concentrates, dore and ore; (2) a reasonable recovery rate for the refined
silver recoverable from such silver concentrates, dore and ore (which shall be
adjusted annually to reflect the actual recovery rate of refined metal from such
silver concentrates, dore and ore); and (3) the Monthly Average Silver Price for
the month in which the silver concentrates, dore and ore were sold.

 
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(b)          If Payor produces refined silver (meeting the specifications for
refined silver subject to the New York Silver Price published by Handy & Harman,
and if Handy & Harman no longer publishes such specifications, the
specifications of such other association or entity generally accepted and
recognized in the mining industry) from Minerals, and if Section 1.2.2(a) above
is not applicable, the refined silver shall be deemed to have been sold at the
Monthly Average Silver Price for the month in which it was refined.  The Gross
Value shall be determined by multiplying Silver Production during the month by
the Monthly Average Silver Price.
 
1.2.3 All Other Minerals
 
(a)           If Payor sells any concentrates, dore or ore of Minerals other
than gold or silver, then Gross Value shall be the value of such Minerals
determined by utilizing: (1) the mine weights and assays for such Minerals; (2)
a reasonable recovery rate for the Minerals (which shall be adjusted annually to
reflect the actual recovery rate of recovered or refined metal or product from
such Minerals); and (3) the monthly average price for the Minerals or product of
the Minerals for the month in which the concentrates, dore or ore was sold.  The
monthly average price shall be determined by reference to the market for such
Minerals or product which is recognized in the mining industry as authoritative
and reflective of the market for such Minerals or product.
 
(b)           If Payor produces refined or processed metals from Minerals other
than refined gold or refined silver, and if Section 1.2.3(a) above is not
applicable, then Gross Value shall be equal to the amount of the proceeds
received by Payor during the month from the sale of such refined or processed
metals.  Payor shall have the right to sell such refined or processed metals to
an affiliated party, provided that such sales shall be considered, solely for
purposes of determining Gross Value, to have been sold at prices and on terms no
less favorable than those that would be obtained from an unaffiliated third
party in similar quantities and under similar circumstances.
 
1.3           “Minerals” means gold, silver, platinum, antimony, mercury,
copper, lead, zinc, and all other mineral elements and mineral compounds which
are contemplated to exist on the Property or which are discovered on the
Property and which can be extracted, mined or processed by any other method
presently known or subsequently developed or invented.
 
1.4           “Monthly Average Gold Price” means the average London Bullion
Market Association Afternoon Gold Fix, calculated by dividing the sum of all
such prices reported for the month by the number of days for which such prices
were reported during that month.  If the London Bullion Market Association
Afternoon Gold Fix ceases to be published, all such references shall be replaced
with references to prices of gold for immediate sale in another established
market selected by Payor, as such prices are published in Metals Week magazine,
and if Metals Week magazine no longer publishes such prices, the prices of such
other association or entity generally accepted and recognized in the mining
industry.
 
1.5           “Monthly Average Silver Price” means the average New York Silver
Price as published daily by Handy & Harman, calculated by dividing the sum of
all such prices reported for the month by the number of days in such month for
which such prices were reported.  If the Handy & Harman quotations cease to be
published, all such references shall be replaced with references to prices of
silver for immediate sale in another established market selected by Payor as
published in Metals Week magazine, and if Metals Week magazine no longer
publishes such prices, the prices of such other association or entity generally
accepted and recognized in the mining industry.
 
 
 
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1.6           “Net Smelter Returns” means the Gross Value of all Minerals, less
the following costs, charges and expenses paid or incurred by Payor with respect
to the refining and smelting of such Minerals:
 
1.6.1 Charges for smelting and refining (including sampling, assaying and
penalty charges), but not any charges or costs of agglomeration, beneficiation,
crushing, extraction, milling, mining or other processing; and
 
1.6.2 Actual costs of transportation (including freight, insurance, security,
transaction taxes, handling, port, demurrage, delay and forwarding expenses
incurred by reason of or in the course of such transportation) of concentrates
or dore metal from the Property to the smelter or refinery, but not any charges
or costs of transportation of Minerals or ores from any mine on the Property to
an autoclave, concentrator, crusher, heap or other leach process, mill or plant
which is not a smelter or refinery.
 
1.7           “Property” means the real property described in the agreement to
which this Schedule is attached and made a part.
 
1.8           “Silver Production” means the quantity of refined silver outturned
to Payor's account by an independent third-party refinery for silver produced
from the Property during the month on either a provisional or final settlement
basis.
 
2           Payment Procedures.
 
2.1           Accrual of Obligation.  Payor’s obligation to pay the royalty
shall accrue and become due and payable upon the sale or shipment from the
Property of unrefined metals, dore metal, concentrates, ores or other Minerals
or Minerals products or, if refined metals are produced, upon the outturn of
refined metals meeting the requirements of the specified published price to
Payor's account.
 
2.2           Futures or Forward Sales, Etc.  Except as provided in Sections
1.2.1(a), 1.2.2(a) and 1.2.3(a) (regarding sales of unprocessed gold and silver
and sales of Minerals other than gold and silver), Gross Value shall be
determined irrespective of any actual arrangements for the sale or other
disposition of Minerals by Payor, specifically including but not limited to
forward sales, futures trading or commodities options trading, and any other
price hedging, price protection, and speculative arrangements that may involve
the possible delivery of gold, silver or other metals produced from Minerals.
 
 
 
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2.3           Monthly Calculations and Payments.  Net Smelter Returns royalties
shall be determined on a monthly basis.  Payor shall pay Recipient each monthly
royalty payment on or before the last business day of the month immediately
following the month in which the royalty payment obligation accrued.  Payor
acknowledges that late payment by Payor to Recipient of royalty payments will
cause Recipient to incur costs, the exact amount of which will be difficult to
ascertain.  Accordingly, if any amount due and payable by Payor is not received
by Recipient within ten (10) days after such amount is due, then Payor shall pay
to Recipient a late charge equal to ten percent (10%) of such overdue
amount.  Recipient's acceptance of such late charge shall not constitute a
waiver of Payor's default with respect to such overdue amount, nor present
Recipient from exercising any of Recipient's other rights and remedies.  If any
amount payable by Payor remains delinquent for a period in excess of thirty (30)
days, Payor shall pay to Recipient, in addition to the late payment, interest
from and after the due date at the statutory interest rate.
 
2.4           Statements.  At the time of payment of the royalty, Payor shall
accompany such payment with a statement which shows in detail the quantities and
grades of refined gold, silver or other metals or dore, concentrates or ores
produced and sold or deemed sold by Payor in the preceding month; the Monthly
Average Gold Price and Monthly Average Silver Price, as applicable; costs and
other deductions, and other pertinent information in detail to explain the
calculation of the payment with respect to such month.  Payment shall be made to
the address provided in the agreement to which this Schedule is attached for
purposes of notices or by wire transfer to an account which Recipient
designates.
 
2.5           Inventories and Stockpiles.  Payor shall include in all monthly
statements a description of the quantity and quality of any gold or silver dore
that has been retained as inventory for more than ninety (90) days.  Recipient
shall have thirty (30) days after receipt of the statement to either: (a) elect
that the dore be deemed sold, with Gross Value to be determined as provided in
Sections 1.2.1(b), with respect to gold, and 1.2.2(b), with respect to silver,
as of such 30th day utilizing the mine weights and assays for such dore and
utilizing a reasonable recovery rate for refined metal and reasonable deemed
charges for all deductions which Payor is authorized to take, or (b) elect to
wait until such time as the royalty payment otherwise would become payable
pursuant to Sections 1.2.1(b) and 1.2.2(b).  Payor's failure to respond within
such time shall be deemed to be an election to use the methods described in
Sections 1.2.1(b) and 1.2.2(b).
 
2.6           Audit.  Upon reasonable notice and at a reasonable time, Recipient
shall have the right to audit and examine Payor’s accounts and records relating
to the calculation of the Net Smelter Returns royalty payments.  If such audit
determines that there has been a deficiency or an excess in the payment made to
Recipient, such deficiency or excess shall be resolved by adjusting the next
monthly royalty payment due Recipient.  Recipient shall pay all costs of such
audit unless a deficiency of three percent (3%) or more of the royalty payment
due for the calendar month in question is determined to exist.  All books and
records used by Payor to calculate the royalty payments shall be kept in
accordance with generally accepted accounting principles applicable to the
mining industry.
 
[End of Schedule C]

 
 
 
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