exv10w6



 



Exhibit 10.6



TERM SHEET

ATASPACA PROJECT, PERU


This Term Sheet is to confirm our understanding and define the new terms
between Minera del Suroeste S. A. C. (MISOSA), subsidiary of Southwestern
Resources Corporation (SWR) of Vancouver, Canada, and Bear Creek Mining
Company, Sucursal del Perú (BCMC), branch of Bear Creek Mining Company of
Arizona, U. S. A., regarding an option/joint venture to explore the Ataspaca
Project located in the department of Tacna, Peru. Upon acceptance of this Term
Sheet, the parties will be mutually bound to the terms contained herein and
will thereafter execute an appropriate agreement between the parties to embody
the terms agreed upon.


MISOSA has acquired from Mr. Jorge Nelson Rivera Novoa, through a private
contract (Exhibit “B”, which will be considered to be an integral part of this
Term Sheet) the rights to one mineral concession (the “Concession”) as
described in Exhibit “A” (the “Property”), and BCMC desires to participate in
an option/joint venture to explore this Concession.


BCMC and MISOSA agree to the following terms:



	1.	 	To earn an indirect 50% (fifty percent) in the Property (the “Option”)
BCMC must expend, at the discretion of BCMC as it sees fit, US$50,000 in
direct costs within one year thereafter.
	 
	2.	 	BCMC will have exercised the Option upon its notification to MISOSA by
way of an officer’s certificate confirming that BCMC has incurred
US$50,000 in exploration expenditures, as specified in Section 1, and is
not otherwise in default hereunder.
	 
	3.	 	The Management Committee formed under Section 4 will appoint BCMC as
operator (“Operator”) for the period prior to the exercise of the Option
and thereafter provided that BCMC’s interest in the Joint Venture (as
defined in Section 6) is not less than 50%. The Operator will prepare and
deliver to the parties:




	 	a.	 	Programs and budgets, at least annually and in any event within
30 (thirty) days prior to the end of each program, for presentation
to the Management Committee; and
	 
	 	b.	 	Exploration summaries of exploration activities and results
each quarter and a detailed report within 30 (thirty) days of
completion of each program describing exploration activities, results
and any conclusions or recommendations of the Operator.




	4.	 	A Management Committee, which will be formed upon execution of this Term
Sheet, will be responsible for approving work programs and budgets and for
determining the general policies and direction to be adopted by the
Operator. The Management Committee will consist of four (4)
representatives, two (2)



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	 	 	representatives appointed by each party. The two (2) representatives from
each party will be collectively entitled to the number of votes equal to
such party’s percentage interest in the Joint Venture. However, during
the period prior to the exercise of the Option, the representatives
appointed by BCMC will be entitled to 51 (fifty-one) votes and the
representatives appointed by MISOSA will be entitled to 49 (forty-nine)
votes at meetings of the Management Committee. Decisions of the
Management Committee, including a production decision, require a simple
majority of votes.
	 
	5.	 	Unless otherwise specified herein, each of the parties will fund programs
and vote at the Management Committee meetings according to their then
present interest in the Joint Venture. Programs and budgets will be
reviewed and voted upon by the Management Committee within 30 (thirty)
days of presentation to the Management Committee.
	 
	6.	 	Upon BCMC exercising the Option the parties will form a joint venture or
agree upon another appropriate structure pursuant to Section 7 (the “Joint
Venture”) to conduct such further work on the Property as the Management
Committee decides. BCMC’s initial interest in the Joint Venture will be
50% (fifty percent) and MISOSA’s interest 50% (fifty percent).
	 
	7.	 	Prior to the exercise of the Option, BCMC and MISOSA will jointly and in
good faith endeavor to determine the appropriate corporate and transaction
structure in which the Joint Venture and the Property should be held with
a view to maximizing organizational and operational efficiencies and to
minimizing tax and other related legal concerns of BCMC and MISOSA. Such
structure is intended to be implemented prior to the exercise of the
Option. If the parties are unable to agree on a corporate and transaction
structure, then the corporate and transaction structure will be that of
the Joint Venture established under Section 6.
	 
	8.	 	If a party elects in writing not to contribute to a program and budget
approved by the Management Committee within 30 (thirty) days of such
approval or if a party fails to fully contribute to a cash call approved
by the Management Committee within 30 (thirty) days of a specified payment
date, then that party’s interest will be diluted on a straight-line basis
at 100% (one hundred percent) of the rate of expenditure by the
contributing party. Upon dilution of a party’s interest to 10% (ten
percent), that party’s interest will be converted to a 5% (five percent)
interest in net profits from the Property. Net profits means the amount
by which total revenues from the sale of products from the Property exceed
all costs, including any other royalty payments, incurred by the Joint
Venture after the commencement of commercial production. For purposes of
the dilution calculation, MISOSA will be deemed to have expended an amount
equivalent to BCMC’s expenditures hereunder upon exercise of the Option.
If a diluting party is the Operator then upon commencement of dilution of
its interest, such party will be deemed to have resigned as Operator and
the other party will be automatically appointed as Operator.



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	9.	 	If either party (the “Acquiring Party”) acquires any interest in mineral,
surface or water rights (“Acquired Rights”) within 5 (five) kilometers of
the outside boundary of the Concession (the “Area of Interest”) then such
party will offer the Acquired Rights, at cost, to the other party. If the
other party elects within 30 (thirty) days to have the Acquired Rights
held hereunder on behalf of the parties or, after the exercise of the
Option, transferred to the Joint Venture and form part of the Property
then the Acquiring Party will so transfer all its interest in the Acquired
Rights and be reimbursed for its out of pocket expenses. If the Acquired
Rights are acquired prior to the exercise of the Option and MISOSA is the
Acquiring Party, BCMC will reimburse MISOSA for its out of pocket
expenses, which costs will be applied to BCMC’s expenditures under Section
1; or if BCMC is the Acquiring Party then such acquisition costs will be
applied to its expenditures under Section 1. If the other party does not
elect to have the Acquired Rights so transferred then the Acquiring Party
will retain all its interest in such acquired rights and the Acquired
Rights will not be included as part of the Property and will be excluded
from the Area of Interest.
	 
	10.	 	If BCMC elects to abandon any of the mineral concessions comprising the
Property or terminate the agreement prior exercising the Option then it
will return such mineral concessions or the Property, as the case may be,
to MISOSA in good standing free and clear of all liens and encumbrances
and make all payments of taxes (“vigencias”) and expenditures on behalf of
MISOSA required to maintain the Property, including all obligations
specified in Peru’s mining laws relating to maintenance of the Property
and all legal and administrative costs associated therewith (collectively
the “Good Standing Fee”) which become due or are required to be made
during the calendar year in which the abandonment or termination occurs.
	 
	11.	 	If a party wishes to dispose of any or all of its interest in the
Property or Joint Venture it must first offer such interest to the other
party on terms no less favorable and expressed in cash terms, and the
other party will have 60 (sixty) days thereafter to accept such offer.
	 
	12.	 	If any party is prevented from or delayed in performing any obligation
hereunder by any cause beyond its reasonable control, excluding only lack
of financing, then the time for performance of an obligation will be
extended for the period equivalent to the total period of the cause of the
delay. If either party is in default of any of its obligations it will
not lose its rights hereunder unless, within 30 (thirty) days of notice of
default from the other party, the defaulting party fails to take and
pursue reasonable action to cure the default.
	 
	13.	 	Each party agrees that all data and information regarding the Property
will be treated as confidential and will not be disclosed by it to any
third parties, except as required by law.
	 
	14.	 	Any dispute hereunder will be resolved by arbitration by a single
arbitrator in accordance with the rules of, but not necessarily under, the
American Arbitration



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	 	 	Association. The laws of the Republic of Peru will govern this Term Sheet
and any formal agreement.
	 
	15.	 	If the Management Committee is deadlocked on approving a program and
budget then the program will be determined by special arbitration
according to the procedures established under Section 14. In such
arbitration, each party will be entitled to submit to the arbitrator its
proposal for the program and budget and the arbitrator will be entitled to
choose from among the submissions received but will not be entitled to
make any other award. The program and budget chosen by the arbitrator
will be deemed to be a program and budget approved by the Management
Committee.
	 
	16.	 	The parties agree to be mutually bound by the above terms and conditions
which will form the basis for an Option/Joint Venture Agreement between
BCMC and MISOSA regarding the Property, subject to approval of the
Peruvian government regarding a foreign entity acquiring rights to explore
and exploit mineral deposits within the 50 (fifty) kilometer border area.
The parties agree to execute, as soon as possible, a formal option
agreement.
	 
	17.	 	This Term Sheet replaces in its entirety the Term Sheet signed between
SWR and BCMC on August 4th, 2000.




	 	 	 
	Agreed, accepted and confirmed this 23rd

day of May 2002 by MINERA DEL

SUROESTE S. A. C	 	
Agreed, accepted and confirmed this      

day of May 2002 by BEAR CREEK

MINING COMPANY — SUCURSAL DEL

PERU




	 	 	 
	“C. Richard Petersen”	 	
“Andrew T. Swarthout”
	
	 	


	by: C. Richard Petersen

Managing Director	 	
by: Andrew T. Swarthout

President




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