exv10w4



 



Exhibit 10.4




Mr. Notary:


Please enter in your Registry of Public Deeds one recording the Option
Agreement and the Lease Agreement entered into by and between BEAR CREEK MINING
COMPANY – SUCURSAL DEL PERU, with RUC No 20473955939, registered in entry 1,
file No 41289 of the Public Mining Registry, duly represented by it’s general
manager Andrew T. Swarthout, identified with foreign identity card N114755,
whose faculties are registered as entry 1 of file 41289, with registered office
at calle Monteflor No 460, Urbanización Valle Hermoso, Santiago de Surco, Lima
33, hereinafter referred to as “OPTIONEE”; on one side; and, on the other side
JANNETTE VERGARA HERRERA, represented by Jaime Oswaldo Vergara León, identified
with DNI No 08231837, in accordance with the faculties conferred in virtue of
the public deed granted before the notary of Lima Dr. Manuel Reátegui Tomatis
and recorded as entry 1A of file No 228734 of the Public Registry in Lima and
Callao, JAIME OSWALDO VERGARA LEÓN, identified with DNI No 08231837, married to
Carmen Julia Herrera Galdo de Vergara, miner, and CARMEN JULIA HERRERA GALDO DE
VERGARA, identified with DNI No 08231836, married to Jaime Oswaldo Vergara
León, all domiciled at Manuel Fuentes No 073, San Isidro, Lima 27, hereinafter
collectively referred to as the “TITLEHOLDER”; on the following terms and
conditions:


RECITALS



WHEREAS:



	1.	 	The Titleholder has agreed to grant to the Optionee an exclusive and
irrevocable option to acquire 100% of the Mineral Rights within a maximum
term of forty-eight months.
	 
	2.	 	Together with this exclusive and irrevocable option to acquire, the
Titleholder has agreed to lease the Mineral Rights to the Optionee, for
exploration purposes and for a forty-eight month term.



NOW AND THEREFORE, the Parties have agreed as follows:



	1.	 	FIRST: DEFINITIONS
	 
	 	 	For the purposes hereof and of the preceding recitals, the following words
and expressions shall have the following meanings:
	 
	1.1	 	“Exhibits”, means Exhibit “A” “B” and “C” of the agreement hereof.
	 
	1.2	 	“Deposits”, means the sums of money that will be delivered to the
Titleholder under the option agreement and pursuant to Article 1480 and
followings of the Peruvian Civil Code, which sums of



 






 





	 	 	money shall be deducted in full and immediately from the Transfer Price
if the Optionee exercises the Option.
	 
	1.3	 	“Mineral Rights”, means the following mining concessions:




	 	a)	 	Cinco Hermanos, code 8353 of the former Regional Mining
Office of Huancavelica, with an extent of 100 hectares, located in
the district of Paucará, province of Acobamba, department of
Huancavelica, which title to mining concession granted to Jannette
Vergara Herrera was approved by Resolution RJ No 7577-94/RPM dated
November 21, 1994.
	 
	 	b)	 	Jaime 1, code 01-02043-99, with an extent of 600 hectares,
located in the districts of Paucará and Andabamba, province of
Acobamba, department of Huancavelica, which title to mining
concession granted to Jaime Oswaldo Vergara León was approved by
Resolution RJ No0974-2000-RPM dated March 16, 2000; and
	 
	 	c)	 	Julia 1, code 01-02044-99, with an extent of 600 hectares,
located in the districts of Paucará, Acoria and Andabamba, provinces
of Acobamba and Huancavelica, department of Huancavelica, which
title to mining concession granted to Carmen Julia Herrera Galdo de
Vergara was approved by Resolution RJ No 1169-2000-RPM dated March
27, 2000.




	1.4	 	“Agreement”, means this document that contains the Option to Acquire and
Mining Lease Agreements, its Exhibits, as well as any amendments,
clarifications or additions thereto that the Parties may agree from time
to time.
	 
	1.5	 	“Lease Agreement”, means the mining lease agreement relating to the
Mineral Rights, and any amendments, clarifications, or additions thereto
that the Parties may agree from time to time pursuant to Article 166 of
the General Mining Act.
	 
	1.6	 	“Option Agreement”, means the option to acquire the Mineral Rights, and
any amendments, clarifications, or additions thereto that the Parties may
agree from time to time pursuant to Article 165 of the General Mining Act.
	 
	1.7	 	“Transfer Agreement”, means the agreement to be drafted in the form of
Exhibit B hereto, to formalize the transfer of the Mineral Rights from the
Titleholder to the Optionee, subject to the exercise of the Option,
whereby the Optionee becomes the sole and exclusive titleholder of 100% of
the Mineral Rights.



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	1.8 	 	“Deficit”, has the meaning set out in sub-section 3.7.2 (c).
	 
	1.9	 	“Dollars” or “US$”, means the currency of legal tender in the United States of America.
	 
	1.10	 	“Force Majeure”, has the meaning set out in sub-section 6.3.
	 
	1.11	 	“Confidential Information”, has the meaning set out in sub-section 6.7.
	 
	1.12	 	“Exploration Expenditures”, means all the expenses, costs or obligations
paid, incurred, accrued or compromised by or on behalf of the Optionee or
its affiliates, related with the maintenance, exploration and evaluation
of the Mineral Rights, pursuant to sub-section 3.7 and the Exhibit A of
this Agreement.
	 
	1.13	 	“Land Act” means the Law regulating Private Investment in the Development
of Economic Activities in Lands of the National Territory and Peasant and
Native Communities, Law No. 26505, enacted July 18, 1995, and its
regulations, amendments, additions, substitutions, and related laws.
	 
	1.14	 	“General Mining Act” means the Consolidated General Mining Act, approved
by Supreme Decree 014-92-EM dated June 2, 1992, and any regulations,
amendments, additions, substitutions, and related laws.
	 
	1.15	 	“Notice” means any notice, request, order, demand, offer, requirement, or
other communication authorized or required to be made under the Option
Agreement or the Lease Agreement, as set out in sub-section 6.5.
	 
	1.16	 	“Option” means the exclusive, irrevocable and indivisible option granted
to the Optionee according to the terms of the Option Agreement, whereby
the Optionee is entitled to acquire, at its own discretion, 100% of the
Mineral Rights.
	 
	1.17	 	“Optionee” means Bear Creek Mining Company, Sucursal del Perú, or its
successor prior approval given by the Titleholder pursuant to sub-section
6.4.
	 
	1.18	 	“Party” or “Parties” means the Titleholder and the Optionee, and their
successors. As regards to the Optionee, Party or Parties means the
Optionee’s successor prior approval by the Titleholder pursuant to
sub-section 6.4.



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	1.19	 	“Lease Term”, means the term during which the Optionee is entitled to
carry out exploration activities pursuant to sub-section 5.3, including
any extension in accordance with sub-sections 4.2 and 6.3.
	 
	1.20	 	“Option Term” means the term of the Option, during which the Optionee may
exercise the Option pursuant to sub-section 3.3, including any extension
in accordance with sub-sections 4.2 and 6.3.
	 
	1.21	 	“Transfer Price” has the meaning set out in sub-section 3.2.
	 
	1.22	 	“Environmental Regulations” mean the Environmental Regulations for Mining
Exploration Activities approved by Supreme Decree No. 038-98-EM and
published in the official gazette El Peruano on November 30, 1998, and its
extensions, amendments, and related regulations.
	 
	1.23	 	“Titleholder” means Jannette Vergara Herrera, Jaime Oswaldo Vergara León
and Carmen Julia Herrera Galdo de Vergara.



SECOND: REPRESENTATIONS AND WARRANTIES




	2.1	 	The Titleholder hereby represents and warrants that:




	 	a)	 	At the date of signing this Agreement:




	 	 	 	 
	 	(i)	 	Jannette Vergara Herrera is the sole and exclusive
concession holder of the Cinco Hermanos mining concession;
	 
	 	(ii)	 	Jaime Oswaldo Vergara León is the sole and exclusive
concession holder of the Jaime 1 mining concession; and
	 
	 	(iii)	 	Carmen Julia Herrera Galdo de Vergara is the only
and exclusive concession holder of the Julia 1 mining
concession.





	 	b)	 	At the date of signing this Agreement, the Mineral Rights are
free from encumbrances, liens, and there is no legal or
extra-judicial process or agreement publicly recorded or not that
affects or limits the free transferability of the Mining Rights, or
the execution of the Option Agreement or the Lease Agreement; that
the License Fees (“Derecho de Vigencia”) for the years 1999, 2000 and
2001, as the case may be, have been duly paid, having the Titleholder
complied with all the formal obligations applicable to the Mineral
Rights under the General Mining Act and other applicable laws;



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	 	c)	 	In the ordinary course of its business relating to the Mineral
Rights’ title, the Titleholder has complied with all the necessary
legal formalities, and has not infringed any law, regulation or norm
relating to the exercise of mining activities as concession holder,
nor infringed any environmental regulation; and that there are no
adverse environmental conditions that affect or may affect the
Mineral Rights as a result of its past or present activities.
	 
	 	d)	 	It has disclosed to the Optionee all the information related to
the Mineral Rights for the Optionee to carry out an audit to
determine the legal status of the Mineral Rights.
	 
	 	e)	 	During the Option Term, the Titleholder shall not, by action or
inaction, permit or cause any rights of creditors, legal or
extra-judicial actions, liens, charges, or other real or personal
rights to be established or maintained over the Mineral Rights, or
any part or appurtenance thereof, that may affect the Mineral Rights
and/or this Agreement; nor put at risk the validity, existence, or
title to the Mineral Rights.
	 
	 	f)	 	At the time of signing this Agreement and/or executing its
obligations under the Agreement, the Titleholder does not violate,
infringe and/or breaches any other agreement, contract or obligation
with third persons or the Peruvian State.





	2.2	 	The Optionee hereby represents and warrants that:





	 	a)	 	It is a branch of Bear Creek Mining Company, established in
Peru in accordance with the applicable Peruvian laws; and
	 
	 	b)	 	It has sufficient authorization to enter into this Agreement,
given by its principal Bear Creek Mining Company, all of which is
recorded with the Peruvian Public Registry.




THIRD: OPTION AGREEMENT




	3.1	 	Option Agreement





	 	 	Pursuant to Article 165 of the General Mining Act, Jannette Vergara
Herrera, Jaime Oswaldo Vergara León and Carmen Julia Herrera Galdo de
Vergara grant the Optionee an exclusive and irrevocable option to acquire
one hundred percent (100%) of the Mineral Rights (the “Option”), during
the term provided under sub-section 3.3. The option to acquire the Mineral
Rights includes all of the Mineral Rights’ parts and appurtenances as well
as everything that de facto or de jure



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	 	 	pertains thereto, located within their external boundaries, without any
additional consideration other than the agreed herein, except for the two
office buildings used by the Titleholder.





	3.2	 	Transfer Price





	 	 	The consideration for the transfer of the Mineral Rights is US $3,000,000.00 (three million Dollars) (the “Transfer Price”). All amounts
previously delivered as Deposits pursuant to sub-section 3.4.1 shall be
deducted from the Transfer Price.





	3.3	 	Option Term





	 	3.3.1	 	The term of the Option is forty-eight months from the date on
which the formal deed that may arise from this minute is signed by
both Parties (the “Option Term ”).
	 
	 	3.3.2	 	The Option Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Option at
any time by giving Notice of termination to the Titleholder via a
public notary, thirty (30) calendar days in advance.





	3.4	 	Deposits (“Arras de Retractación”)





	 	3.4.1	 	The Optionee undertakes to give as Deposits to the Titleholder the following amounts:




	 	 	 	 
	 	a) US $25,000	 	On the signing date of the public deed
that will arise from this private document.
	 	 	 	 
	 	b) US $50,000	 	On the day following the first six months
counted as of the date of signing of the public deed that will
arise from this private document.
	 	 	 	 
	 	c) US $75,000	 	On the day following the first anniversary
counted as of the date of signing the public deed that will
arise from this private document.
	 	 	 	 
	 	d) US $250,000	 	On the day following the second
anniversary counted as of the date of signing the public deed
that will arise from this private document.



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	 	e) US $350,000	 	On the day following the third
anniversary counted as of the date of signing the public deed
that will arise from this private document.





	 	 	 	 If the Optionee does exercise the Option, the Deposits
delivered to the Titleholder under this sub-section 3.4.1, shall
be deducted in full and immediately from the Transfer Price.
	 
	 	3.4.2	 	Waiver of the right of withdrawal
	 
	 	 	 	The Titleholder hereby waives its right to withdraw its offer
pursuant to Articles 1480, 1481 and 1482 of the Peruvian Civil Code.
	 
	 	3.4.3	 	Requirements for Making the Deposits





	 	 	 	 
	 	(a)	 	The Deposits referred to in sub-sections 3.4.1
(a),(b), (c), (d) and (e) shall be made as long as the
Agreement remains in force.
	 
	 	(b)	 	The delivery of the Deposits shall be suspended due
to Force Majeure. Once the Force Majeure is over the Optionee
will reassume its obligation to deliver the Deposits to the
Titleholder. Notwithstanding the Force Majeure, the Optionee
hereby agrees to deliver to the Titleholder ten percent (10%) of
the Deposits, as advance payment, on the dates agreed under
sub-sections 3.4.1 (a), (b), (c), (d) and (e).
	 
	 	(c)	 	All advance of the Deposits delivered to the
Titleholder pursuant to sub-section 3.4.3 (b) above will be
deducted in full from the first payment once the Force Majeure
is over or from the payment to be made to the Titleholder if the
Agreement is terminated pursuant to sub-section 3.4.4 (b)





	 	3.4.4	 	Consequences of the Failure to Exercise the Option





	 	 	 	 
	 	a)	 	
Failure by the Optionee to exercise the Option shall
cause the Optionee to lose the Deposits in favor of the
Titleholder. The Deposits do not include the VAT or the
Municipal Promotion Tax, as well as any other value added tax or
sales tax that may replace them, which will be borne by the
Optionee.



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	 	b)	 	
If the Optionee decides to terminate the Agreement
Option within the first twelve (12) months following the signing
of the public deed that will arise from this private document,
the Optionee shall pay to the Titleholder, the following amount:





	 	 	 	 
	 	(i)	 	
US$5,000.00 (five thousand and 00/100
dollars) for each full month remaining to complete the
semester, provided that the termination of the Agreement
takes place within the first six months following the
signing the public deed that will arise from this private
document;
	 
	 	(ii)	 	
US$7,500.00 (seven thousand five hundred and
00/100 dollars) for each full month remaining to complete
the second semester, provided that the termination of the
Agreement takes place at any time during the second semester
following the signing the public deed that will arise from
this private document.





	 	3.4.5	 	Indivisibility of the Deposits
	 
	 	 	 	The Deposits will only accrue on the specified dates, and are
indivisible. No claim for delivery of the Deposits or portions
thereof based on the number of days, weeks or months elapsed shall be
therefore admitted, except as provided under sub-sections 3.4.3 (b)
and 3.4.4 (b).
	 
	 	 	 	Failure by the Optionee to deliver the Deposits under sub-sections
3.4.1(a), (b), (c), (d) and (e) will entitle the Titleholder to
deliver a Notice to the Optionee by a public notary, detailing the
Optionee’s default. The Optionee may cure the default within two (2)
calendar days following receipt of the Notice. If the Optionee does
not cure the default, the Titleholder shall be able to terminate the
Agreement, except as provided under sub-section 6.3.
	 
	 	3.4.6	 	Instructions for the Delivery of the Deposits




	 	 	 	 
	 	(a)	 	
The delivery of the Deposits shall be made by a
cashier’s check. The delivery of the cashiers check to the
Titleholder pursuant to the instructions detailed under
sub-sections 3.4.6 (c), (d), (e) and (f) above will be deemed as
full compliance of the payment obligation by the Optionee.



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	 	(b)	 	The Deposits shall be distributed among Jannette
Vergara Herrera, Jaime Oswaldo Vergara Leon and Carmen Julia
Herrera Galdo de Vergara, on a thirty-four percent (34%),
thirty-three percent (33%) and thirty-three percent (33%) basis,
respectively.
	 
	 	(c)	 	Jannette Vergara Herrera hereby instructs the
Optionee to deliver her portion of the Deposits as detailed in
sub-section 3.4.6 (b) to either Jaime Oswaldo Vergara Leon or
Carmen Julia Herrera Galdo de Vergara, being the following
sufficient authorization to be fully observed by the Optionee.
	 
	 	(d)	 	Carmen Julia Herrera Galdo de Vergara hereby
instructs the Optionee to deliver her portion of the Deposits as
detailed in sub-section 3.4.6 (b) to either Jaime Oswaldo
Vergara Leon or to herself, being the following sufficient
authorization to be fully observed by the Optionee.
	 
	 	(e)	 	Jaime Oswaldo Vergara Leon hereby instructs the
Optionee to deliver his portion of the Deposits as detailed in
sub-section 3.4.6 (b) to either Carmen Julia Herrera Galdo de
Vergara or to himself, being the following sufficient
authorization to be fully observed by the Optionee.





	3.5	 	Exercise of the Option





	 	3.5.1	 	The Optionee shall exercise the Option at any time during the
Option Term by giving Notice of its decision to exercise the Option
to the Titleholder, via public notary.
	 
	 	3.5.2	 	Upon the exercise of the Option, the Mineral Rights shall be
automatically transferred to the Optionee. The Parties therefore
agree that the Option Notice delivered by the Optionee will effect
the transfer of the Mineral Rights and will constitute sufficient
title to publicly register the transfer of the Mineral Rights on
behalf of the Optionee.
	 
	 	3.5.3	 	Without prejudice of sub-section 3.5.2, the Titleholder
unconditionally and irrevocably undertakes to issue and deliver all
public and private documents that may be required to formalize the
transfer of the Mineral Rights in favor of the Optionee, within a
maximum of twenty (20) calendar days following receipt of the Notice
thereof. Any delay by the Titleholder in signing the documents that
the Optionee may require upon the exercise of the Option, shall
automatically extend the Lease Term referred to in sub-section 5.3,
until such time as the Titleholder signs the documents in question.



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	3.6	 	Payment of the Transfer Price





	 	(a)	 	The balance of the Transfer Price shall be equal to the
difference between the Transfer Price and the aggregate Deposits
delivered to the Titleholder by the Optionee. This amount shall be
paid to the Titleholder at the time the public deed containing the
Transfer Agreement is signed by the Parties, pursuant to the
instructions detailed under sub-section 3.6 (c) and with the delivery
of the correspondent receipt.
	 
	 	(b)	 	The balance of the Transfer Price shall be paid by certified
check issued by a bank of the national financial system. The delivery
of the cashier’s check to the Titleholder pursuant to the
instructions detailed under sub-sections 3.6 (d), (e) and (f) above
will be deemed as full compliance of the payment obligation by the
Optionee.
	 
	 	(c)	 	The balance of the Transfer Price balance shall be distributed
among Jannette Vergara Herrera, Jaime Oswaldo Vergara Leon and Carmen
Julia Herrera Galdo de Vergara on a thirty-four percent (34%),
thirty-three percent (33%) and thirty-three percent (33%) basis,
respectively.
	 
	 	(d)	 	Jannette Vergara Herrera instructs the Optionee to deliver her
portion of the balance of the Transfer Price as detailed in
sub-section 3.6 (c) to either Jaime Oswaldo Vergara Leon or Carmen
Julia Herrera Galdo de Vergara, being the following sufficient
authorization to be fully observed by the Optionee.
	 
	 	(e)	 	Carmen Julia Herrera Galdo de Vergara hereby instructs the
Optionee to deliver her portion of the balance of the Transfer Price
as detailed in sub-section 3.6 (c) to either Jaime Oswaldo Vergara
Leon or to herself, being the following sufficient authorization to
be fully observed by the Optionee.
	 
	 	(f)	 	Jaime Oswaldo Vergara Leon hereby instructs the Optionee to
deliver his portion of the balance of the Transfer Price as detailed
in sub-section 3.6 (b) to either Carmen Julia Herrera Galdo de
Vergara or to himself, being the following sufficient authorization
to be fully observed by the Optionee.





	3.7	 	Exploration Expenditures





	 	3.7.1	 	The Optionee is committed to make Exploration Expenditures in
the Mineral Rights, as follows:



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	 	(a) US$ 50,000	 	
During the first six months counted as of the date of
signing the contract on surface rights referred to under
section 4 and subject to the approval of the exploration
project pursuant to the Environmental Regulations. This
amount includes a minimum drilling commitment of two
hundred (200) meters.
	 
	 	(b) US$ 150,000	 	
During the second semester of the first year counted as of
the date, of signing the contract on surface rights
referred to under section 4 and subject to the approval of
the exploration project pursuant to the Environmental
Regulations.
	 
	 	(c) US$ 200,000	 	
During the second year following signing of the public
deed that contains this Agreement, provided that the
Optionee has executed the contracts on surface rights
referred to under section 4 and subject to the approval of
the exploration project pursuant to the Environmental
Regulations.
	 
	 	(d) US$ 250,000	 	
During the third year following signing of the public deed
that contains this Agreement, provided that the Optionee
has executed the contracts on surface rights referred to
under section 4 and subject to the approval of the
exploration project pursuant to the Environmental
Regulations.
	 
	 	(e) US$ 350,000	 	
During the fourth year following signing of the public
deed that contains this Agreement, provided that the
Optionee has executed the contracts on surface rights
referred to under section 4 and subject to the approval of
the exploration project pursuant to the Environmental
Regulations.





	 	 	 	The Exploration Expenditures shall be incurred at the Optionee’s
discretion and cost pursuant to this sub-section 3.7 and the Exhibit
“A”. The Optionee has the right to accelerate completion of the
Exploration Expenditures, at its own discretion.
	 
	 	3.7.2	 	Statements




	 	 	 	 
	 	(a)	 	
Within ten (10) days following the expiry of each
anniversary referred to in sub-section 3.7.1 (a) and (b) and
each annual period referred to in sub-section 3.7.1 (c), (d) and
(e), the Optionee shall provide the Titleholder a statement of
the Exploration Expenditures incurred.



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	 	(b)	 	Any and all investment incurred by the Optionee in
excess of the semestral or annual Exploration Expenditure
committed for a given year shall be deemed as an investment on
account for the following semester or year, respectively.
	 
	 	(c)	 	If by any reason, the Optionee does not carry out the
annual Exploration Expenditure for a given period, the balance
between the Exploration Expenditures committed pursuant to
sub-section 3.7.1 and the total amount of the Exploration
Expenditure effectively carried out during such period, will be
a shortfall (“Deficit”). The Option will remain in good standing
provided that the Optionee pays the Deficit within five (5)
calendar days following the submission of the Statement referred
to in sub-section 3.7.2 (a). As regards to the Exploration
Expenditures referred to in sub-section 3.7.1 (e), any Deficit
at the signing of the public deed that formalizes the transfer
of the Mineral Rights. The Deficit will not apply under
sub-section 6.3.
	 
	 	(d)	 	The term to complete the Exploration Expenditures and
to pay the Deficit if any shall be extended pursuant to
sub-sections 4.2. and 6.3 of this Agreement.
	 
	 	(e)	 	The Deficit referred to in sub-section 3.7.2 (c)
shall not be deducted from the Transfer Price.





	3.8	 	Termination of the Option




	 	3.8.1	 	The following are causes of termination of the Option Agreement:




	 	 	 	 
	 	(a)	 	The Optionee’s sole decision to terminate the
Option Agreement pursuant to sub-section 3.3.2;
	 
	 	(b)	 	The expiry of the Option Term, provided that the
Optionee did not exercise the Option;
	 
	 	(c)	 	Failure to pay the Deficit within five (5)
calendar days following the submission of the Statement
referred to in sub-sections 3.7.2 (a) and 3.7.2 (c);
	 
	 	(d)	 	The Parties’ decision to terminate the Option
Agreement.





	 	3.8.2	 	Upon termination of the Option Agreement, the Parties’
obligations, except for those payments already due by the Optionee,
will automatically cease with no further recourse for either Party:





	 	 	 	 
	 	(a)	 	The delivery of Deposits by the Optionee pursuant
to sub-section 3.4.
	 
	 	(b)	 	The Exploration Expenditures pursuant to
sub-section 3.7, and the Deficit referred to in sub-section
3.2.7 (c).



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	 	3.8.3	 	Upon delivery of the termination Notice, or failure to
exercise the Option within the Option Term, the Titleholder shall
issue and deliver a receipt for the aggregate amount of Deposits
received from the Optionee. The receipt shall be issued within twenty
(20) days following delivery of the termination Notice or on the date
of signing of the public deed that formalizes the termination of the
Option, whichever occurs first.





	3.9	 	Authorizations





	 	(a)	 	Jannette Vergara Herrera hereby grants Jaime Oswaldo Vergara
Leon and Carmen Julia Herrera Galdo de Vergara sufficient faculties
so that either of them receives her share of the Deposits referred to
in sub-section 3.4.6 (b), collects her share of the balance of the
Transfer Price referred to in sub-section 3.6 (b), and issues and
delivers all documents that may be required to acknowledge receipt of
these payments.
	 
	 	(b)	 	Jaime Oswaldo Vergara Leon grants Carmen Julia Herrera Galdo de
Vergara sufficient faculties so that either of them receives her
share of the Deposits referred to in sub-section 3.4.6 (b), collects
her share of the balance of the Transfer Price referred to in
sub-section 3.6 (b), and issues and delivers all documents that may
be required to acknowledge receipt of these payments.
	 
	 	(c)	 	Carmen Julia Herrera Galdo de Vergara grants Jaime Oswaldo
Vergara Leon sufficient faculties so that either of them receives her
share of the Deposits referred to in sub-section 3.4.6 (b), collects
her share of the balance of the Transfer Price referred to in
sub-section 3.6 (b), and issues and delivers all documents that may
be required to acknowledge receipt of these payments.




FOURTH: ACCESS AGREEMENTS




	4.1	 	Pursuant to article 7 of the Land Act approved by law No 26505, the
Optionee will enter into agreements with owners of surface lands located
within or outside the external boundaries of the Mineral Rights that may
be deemed necessary to obtain access to the Mineral Rights for performance
of the exploration works.
	 
	4.2	 	Any delay or impediment beyond the scope of the Land Act modified by Law
No 26570, to for entering into access agreements, is a cause of Force
Majeure. The Optionee will inform the Titleholder of the Force Majeure as
soon as reasonably possible. This will allow the Optionee to



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	 	 	suspend the Option Term and the Lease Term referred to in sub-sections 3.3
and 5.34 of this Agreement, respectively. The Titleholder agrees to
provide its full support to the Optionee insofar for this purpose.



FIFTH: LEASE AGREEMENT




	5.1	 	Lease of the Mineral Rights




	 	 	Pursuant to Article 166 of the General Mining Act, the Titleholder hereby exclusively leases the Mineral Rights to the Optionee, for exploration purposes and for the term detailed in sub-section 5.3.





	5.2	 	Consideration for the Lease





	 	 	The Parties hereby agree that the consideration for the mining lease of
each of the mining concessions that comprise the Mineral Rights is
US$100.00 (one hundred and 00/100 Dollars). The aggregate consideration
for the mining lease is therefore US$300.00 (three hundred and 00/100
Dollars), plus the Value Added Tax and the Municipal Promotion Tax. This
amount will be paid at the time public deed that may arise from this
document is signed by the Parties, with no more proof that the
Titleholder’s signature on this document.





	5.3	 	Lease Term





	 	5.3.1	 	The term of the mining lease is forty-eight (48) months
counted as of the date of signing of the public deed that may arise
from this document (“Lease Term”).
	 
	 	5.3.2	 	The Lease Term is mandatory for the Titleholder and voluntary
for the Optionee. The Optionee may therefore terminate the Lease
Agreement at any time by giving Notice of its decision to the
Titleholder via public notary thirty (30) calendar days in advance.
	 
	 	 	 	 The termination of the Option Agreement pursuant to sub-section 3.3.2
will cause the termination of the Lease Agreement.





	5.4	 	Rights and Obligations of the Optionee under the Lease Agreement





	 	5.4.1	 	Exploration Works
	 
	 	 	 	 The Optionee is entitled to:



14






 




	 	 	 	 
	 	(a)	 	Start and carry out exploration works at any time in
accordance with the programs and budgets to be determined by the
Optionee, and apply for the necessary permits and approvals
before the competent authorities.
	 
	 	(b)	 	Apply for or acquire mineral rights in areas adjacent
to the Mineral Rights. If the mineral rights so applied for or
acquired are located within the Area of Interest detailed in
Exhibit “C”, sub-section 5.5.3 (d) will apply.
	 
	 	(c)	 	Obtain from the Mineral Rights the quantities of ores
or other materials that may be deemed appropriate for the
evaluation of the Mineral Rights or for the completion of a
feasibility study, being authorized to dispose of them freely,
at its own discretion. As regards to the portions of cores
and/or samples obtained from drilling operations, the Optionee
is authorized to freely dispose of up to fifty percent (50%)
thereof, keeping control thereof in accordance with the
provisions of the General Mining Ac; if the Optionee does not
exercise the Option, then the Optionee will deliver the
remaining fifty percent (50%) of the cores and/or samples to the
Titleholder.
	 
	 	(d)	 	Jaime Oswaldo Vergara Leon may, at is own cost and in
coordination with the Optionee, authorize his legal or technical
representative to verify compliance of the works performed under
the Agreement, as many times as he may deem convenient and
provided that this Agreement remains in force.





	 	5.4.2	 	Environmental Obligations





	 	 	 	 
	 	(a)	 	The Optionee shall comply with the Environmental
Regulations, and shall be responsible for all emissions,
discharges and waste as a result of the works that the Optionee
or its contractors may carry out in the Mineral Rights while the
Agreement is in place. The Optionee will therefore hold the
Titleholder harmless for the works carried pursuant to this
Agreement, and undertakes to pay any penalty, fine or
compensation that may be required while the Agreement is in
force or even after the Agreement is terminated.
	 
	 	(b)	 	The Titleholder is responsible for all the emissions,
discharges and waste as a result of the works carried out in the
Mineral Rights by the Titleholder, its successors or contractors
prior the signing of the public deed that formalizes this
Agreement. The Titleholder will therefore pay any penalty, fine
or compensation that may result from



15






 




	 	 	 	 
	 	 	 	works carried until the signing of the public deed that
formalizes this Agreement, even if required while this
Agreement is in force, releasing the Optionee from any
responsibility thereof.





	 	 	 	 
	 	(c)	 	If the Optionee is required mitigate any
environmental impact caused the activities carried out by the
Optionee of its contractors, or if due to a court order or
resolution the Optionee is required to pay a fine, penalty or
compensation in favor of the Peruvian State or third parties,
the Optionee shall deliver a Notify to the Titleholder. The
Titleholder has the right to appear in court to protect its
interests.
	 
	 	(d)	 	The Titleholder will provide the Optionee with all
the necessary support in the defense and approval or granting of
permits, approvals, authorizations, easements and access
agreements that the Optionee may require pursuant to section 4
of this Agreement, in order to secure and keep the good
community relations that the Titleholder claims to have with the
Añaylla, Añancusi and Palmira Alta local communities. The
Optionee shall manage the programmes. The Titleholder’s
technical personal may have access to the Mineral Rights, and
upon the Optionee’s, request JVL Exploraciones will carry out
the community relations programmes.
	 
	 	(e)	 	The Titleholder will deliver a Notice to the Optionee
in the case of violation of the Environmental Regulations, or
verification of damages to property or health caused by the
Optionee or its contractors. The Optionee, prior assessment,
will order the rectification or remediation works that may be
required.





	 	5.4.3	 	Licence Fees





	 	 	 	 
	 	(a)	 	The Titleholder is responsible for payment of the
annual Licence Fees for the Mineral Rights until 2002. The
Optionee shall refund to the Titleholder the Licence Fees paid
for the year 2002 at the time the public deed that formalizes
this Agreement is signed.
	 
	 	(b)	 	The Optionee will pay the Licence Fees and the
penalties, as any other payment imposed by Law to keep the
Mineral Rights in good standing as of the year 2003, and as long
this Agreement remains in force, pursuant to article 59 of the
Mining General Act. These payments will be made within the first
ten (10) calendar days of June of the year in question.



16






 




	 	5.4.4	 	Delivery of Documentation





	 	 	 	 
	 	(a)	 	
The Optionee agrees to the following:





	 	 	 	 
	 	(i)	 	Provide the Titleholder reports containing the
results obtained from the Mineral Rights and the planned
programs every two (2) months;
	 
	 	(ii)	 	Provide the Titleholder results of the
technical program, as soon as they are available;
	 
	 	(iii)	 	Provide the Titleholder a copy of the document
acknowledging receipt of payment of the Licence Fees and of
the Annual Consolidated Statement. These documents will be
delivered to the Titleholders within ten (10) days following
payment or submission to the National Institute of Mining
Concessions and Cadastre or to the Ministry of Energy and
Mines, as the case may be; and
	 
	 	(iv)	 	Provide the Titleholder the geological and
laboratory results, which second copy will be directly
delivered to the Titleholder’s address.





	 	(b)	 	Upon receipt, the Titleholder will immediately inform the
Optionee of all notice or communication received, or action taken
with regard to the Mineral Rights.





	5.5	 	Termination of the Lease





	 	5.5.1	 	The following are causes of termination of the Lease Agreement:





	 	 	 	 
	 	(a)	 	The Optionee’s sole decision to terminate the
Lease Agreement pursuant to sub-section 5.3.2;
	 
	 	(b)	 	The termination of the Option Agreement
pursuant to sub-section 3.3.2;
	 
	 	(c)	 	The Parties’ decision to terminate the Option
Agreement;
	 
	 	(d)	 	Failure to pay the annual License Fees and
penalties applicable to the Mineral Rights;
	 
	 	(e)	 	The expiry of the Option Term, provided that
the Optionee did not exercise the Option.





	 	5.5.2	 	Upon termination of the Lease Agreement, the following
obligations shall automatically cease:




	 	 	 	 
	 	(a)	 	To pay the annual Licence Fee applicable to the
Mineral Rights; and
	 
	 	(b)	 	Any other Optionee’s obligation, except for
those referred under sub-section 5.5.3.



17






 




	 	5.5.3	 	Within sixty (60) days following the termination of the Lease
Agreement, the Optionee shall:





	 	 	 	 
	 	(a)	 	Remove all the machinery, equipment, tools,
vehicles and other goods located or placed in the Mineral
rights by the Optionee;
	 
	 	(b)	 	Transfer the Titleholder, at no cost, all fixed
facilities or buildings erected or installed within the
boundary of the Mineral Rights and those required to keep the
mining works in place;
	 
	 	(c)	 	Deliver to the Titleholder copies of reports,
maps, photographs and the record of the drilling programme
excluding interpreted results, even if this information was
already furnished to the Titleholder. The Optionee
specifically disclaims and makes no representation or
warranty, expressed or implied, as to the accuracy,
completeness, usefulness, or reliability of the information
or any portion thereof.
	 
	 	(d)	 	Transfer to the Titleholder, at no cost, all
mining concessions located within the Area of Interest of one
(1) kilometer from the perimeter of the Mineral Rights, as
shown on Exhibit C, applied for or acquired by the Optionee;
and
	 
	 	(e)	 	Deliver to the Titleholder the available fifty
percent (50%) of the drill cores and/or samples obtained from
the Mineral Rights in an orderly manner.





	 	5.5.4	 	The relevant term of sixty (60) days given to the Optionee
pursuant to sub-sections 5.5.3 (a), (b), (c) and (d) may be extended
due to Force Majeure.



SIXTH: COMMON PROVISIONS APPLICABLE TO THE OPTION AGREEMENT AND LEASE AGREEMENT




	6.1	 	Applicable Law





	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.





	6.2	 	Arbitration





	 	6.2.1	 	Any dispute, controversy or claim arising out of or relating
to the execution of the public and private documents relating to the
exercise of the Option and the subsequent formalization of the
transfer of the Mineral Rights shall be settled by the judges and
courts of the Judicial District of Lima — Cercado, to which
jurisdiction the Parties hereby submit to.



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	 	6.2.2	 	Any dispute, controversy or claim arising out of or relating
to the Option Agreement and/or the Lease Agreement, the execution,
object, subscription, validity, interpretation, breach or termination
thereof, except as provided in sub-section 6.2.1, shall be settled by
arbitration of law in accordance with the applicable law. The ruling
shall be final and binding. All Notices relating to the arbitration
process, including the Notice of arbitration and the response
thereto, may be served as provided under sub-section 6.5 of this
Agreement.
	 
	 	6.2.3	 	There shall be one arbitrator appointed by the Parties within
thirty (30) calendar days after receipt of a Notice of arbitration.
If the Parties fail to agree on a single arbitrator within that term,
there shall be three arbitrators. Each Party will appoint one
arbitrator and the two arbitrators so appointed will elect the third
arbitrator, who will preside the arbitration tribunal.
	 
	 	6.2.4	 	If within thirty (30) calendar days after receipt of a Party’s
Notice of appointment of an arbitrator, the other Party has not
notified the first Party of its appointment of an arbitrator, or if
within thirty (30) calendar days of the appointment of the second
arbitrator the Parties have not reached an agreement on the third
arbitrator, the third arbitrator will be chosen by the National
Institute of Mining Petroleum and Energy Law (Instituto Nacional de
Derecho de Minería, Petróleo y Energía). This decision shall be final
and binding.
	 
	 	6.2.5	 	As regards to any intervention of the judiciary that may be
required or specified in the applicable law, the Parties hereby
submit to the jurisdiction of the Judges and Courts of the Judicial
District of Lima — Cercado.





	6.3	 	Force Majeure




	 	6.3.1	 	All the obligations under the Option Agreement and/or the
Lease Agreement may be suspended, and the terms thereof shall be
extended, during any event of force majeure or Act of God
(indistinctly, “Force Majeure”) duly notified to the other Party by
the affected Party. The Notice of Force Majeure shall contain
reasonably full particulars of the event of Force Majeure, the
reasons thereof, and estimated period of suspension, and will be
delivered within ten (10) days following acknowledgment of the event
of Force Majeure. The affected Party shall resume its obligations as
soon as reasonably possible.
	 
	 	6.3.2	 	The terms and contractual obligations under the Agreement
shall be extended during an event of Force Majeure. The Parties
hereby agree as “Force Majeure” such unforeseeable events, actions
or inactions beyond the control of the Parties, and even if



19






 




	 	 	 	foreseeable that can not be avoided including orders, mandates,
instructions or resolutions of government or governmental agencies
restricting or affecting the performance of the proposed works in
the Mineral Rights, judicial, administrative or arbitral decisions
or resolutions of any rank or hierarchy, failure to enter into the
access agreements referred to under section 4 in reasonable terms,
suspension or curtailment of exploration works due to inability of
the Optionee to enter into access agreements in reasonable terms
pursuant to section 4; delay in obtaining approval for the
exploration project or the environmental permit pursuant to the
Environmental Regulations; adverse and severe climatological
conditions that impede or paralyze the works carried out by the
Optionee, other than those considered normal; orders, mandates,
instructions or resolutions of government or governmental agencies
as well as municipal resolutions that restrict or curtail the
activities carried out by the Optionee, affecting the normal
performance of exploration works, as well as any judicial,
administrative or arbitral decisions or resolutions of any rank or
hierarchy that are not the result of an infraction by the
Optionee.
	 
	 	6.3.3	 	Either Party may terminate this Agreement if the event of
Force Majeure exceeds twelve (12) months. The Party who decides to
terminate the Agreement shall deliver a Notice to the other Party.
Notwithstanding, if the Titleholder is the Party who decides to
terminate the Agreement, then the Optionee will have the right to
exercise the Option to acquire the Mineral Rights within thirty (30)
days following receipt of the Notice, pursuant to sub-section 3.6.
	 
	 	6.3.4	 	If the contract term already elapsed plus the extension due
to an event of Force Majeure exceed forty-eight (48) months, then
either Party may terminate this Agreement by giving a Notice to the
other Party. Notwithstanding, if the Titleholder is the Party
decides to terminate the Agreement, then the Optionee will have the
right to exercise the Option to acquire the Mineral Rights within
thirty (30) days following receipt of the Notice, pursuant to
sub-section 3.6.
	 
	 	6.3.5	 	Under no circumstance, the Optionee will be relieved from
its obligation to pay the license fees and penalties applicable to
the Mineral Rights, and to submit the Annual Consolidated Statement
before June 30 of each year.
	 
	 	6.3.6	 	Upon termination of the event of Force Majeure, the Optionee
shall promptly give notice that it has reassumed performance. The
Notice shall contain reasonably full particulars of the length of
the suspension counted in months and days.



20






 




	 	6.3.7	 	The Titleholder will not be responsible for any damage to
the Optionee’s property, works or facilities during the event of
Force Majeure.





	6.4	 	Assignment — Authorizations





	 	6.4.1	 	The Optionee is hereby expressly authorized to assign its
interest in the Option Agreement and/or the Lease Agreement, in
whole or in part, and on the same terms and conditions hereof, at
any time following the first eighteen (18) months from the signature
of the public deed that formalizes this Agreement, and prior the
Titleholder’s approval of the successor’s technical and financial
capacity, and its good commercial practices, pursuant to article
1435 of the Civil Code. In such case, the successor will be subject
to the same terms and conditions hereof. The approval shall not be
unreasonably withheld by the Titleholder. The Titleholder will
confirm the reasons of his/her decision in writing.
The successor shall have a technical and financial capacity equal
to or higher than the Optionee’s capacity at the date of signing
this Agreement. The Optionee will give notice to the Titleholder
of the successor’s technical and financial capacity in writing.
	 
	 	6.4.2	 	The Titleholder hereby authorizes the Optionee to enter into
joint ventures, partnerships and any other collaboration agreements
in order to carry out the operations under the Option Agreement
and/or the Lease Agreement.
	 
	 	6.4.3	 	If the Optionee assigns this Agreement to a third Party, the
Optionee shall:





	 	 	 	 
	 	(a)	 	Pay the Titleholder ten percent (10%) of any
profit that the Optionee may make as a result of the
assignment referred to in sub-section 6.4.1, or of any
transfer of the Mineral Rights, whichever happens first. In
this Agreement, “profit” means the balance of transfer price
less the exploration expenditures incurred by the Optionee;
and
	 
	 	(b)	 	Grant the Titleholder a Net Smelter Returns
Royalty of 1.5 percent (1.5%) from the Mineral Rights.





	6.5	 	Notices





	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with the Option Agreement or
the Lease Agreement shall be in writing, delivered to the addresses
specified below, shall be deemed effective on the date of reception,



21






 




	 	 	receipt acknowledged, or on the date of delivery via notary. Any change of
address, telephone, or facsimile shall be communicated to the other Party
via notary or with acknowledgement of receipt five days prior thereto,
otherwise any Notice addressed to the former address shall be deemed
delivered.





	 	 	 	 	 	 	 	 
	 	a)	 	OPTIONEE:	 	BEAR CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 	Address:	 	Calle Monteflor No. 460, Urbanización Valle

Hermoso, Santiago de Surco, Lima 33 — Perú
	 	Telephone:	 	(511) 3725765
	 	Facsimile:	 	(511) 3728070
	 
	 	b)	 	TITLEHOLDER:	 	JANNETTE VERGARA HERRERA

JAIME OSWALDO VERGARA LEÓN

CARMEN JULIA HERRERA GALDO DE VERGARA
	 	Address:	 	Manuel Fuentes No 073, San Isidro, Lima 27.





	6.6	 	Taxes





	 	 	The Optionee shall bear the cost of the Value Added Tax and the Municipal
Promotion Tax and any other tax that may replace them that may levy the
payments made under this Agreement.
	 
	 	 	Each Party shall responsible for the Income Tax that may levy the
transactions contained in this Agreement.





	6.7	 	Confidentiality





	 	6.7.1	 	All the facts, reports, registers and other information of any
kind developed or acquired by the Titleholder as a result of the
performance of this Agreement shall be kept by the Titleholder as
strictly confidential (“Confidential Information”), and such
Confidential Information shall not be revealed or divulged in other
way to third Parties if there is no prior written consent from the
Optionee.
	 
	 	6.7.2	 	In the event that the Titleholder is required to disclose
Confidential Information to any competent governmental entity and/or
its dependencies, to the extent required by law or in response to a
legitimate request for such Confidential Information, the Titleholder
must immediately send Notice to the Optionee of the requirement and
its terms before the



22






 




	 	 	 	divulgation. The Optionee shall have the right to object, to the
agency concerned, to such disclosure and to seek confidential
treatment of any Confidential Information to be disclosed.





	6.8	 	Expenditures





	 	 	 The Optionee shall bear all notarial and registration fees required to
formalize this Agreement into a public deed and to have it recorded with
the Public Registry.




Mr. Notary: Please add the legal formalities hereto and file notice to the
Public Mining Register for registration of this document. Signed in three
identical counterparts in Lima, on the 19th day of July, 2002.



BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU


 


By: “Andrew Swarthout”




Position: General Manager


 



JANNETTE VERGARA HERRERA


“Jannette Vergara Herrera”






 



JAIME OSWALDO VERGARA LEÓN


“Jaime Oswaldo Vergara León”





 


CARMEN JULIA HERRERA GALDO DE VERGARA


“Carmen Julia Herrera Galdo de Vergara”





23






 


EXHIBIT “A”

Expenditures



Expenditures in Exploration include:




	 	1.	 	Payroll costs comprising salaries, wages and all other benefits
paid to or on account of employees plus associated on-costs covering
payroll taxes, long service leave, superannuation, provident fund,
annual leave, sick leave, workers compensation, public holidays.
	 
	 	2.	 	Overheads comprising all other costs of a general nature not
otherwise in this annex and/or all costs as defined herein but of a
nature that they cannot be specifically allocated directly to the
operations to a maximum of 10% of all other project Expenditure.
	 
	 	3.	 	The cost of food, messing and accommodation for or in
connection with field and camp operations including camp
establishment, additions and improvements.
	 
	 	4.	 	Costs and expenses including sums paid or to be paid to or on
account of contractors and advisors, for or in connection with:





	 	•	 	sampling;
	 
	 	•	 	trenching;
	 
	 	•	 	field surveying;
	 
	 	•	 	geophysics;
	 
	 	•	 	geochemistry;
	 
	 	•	 	aerial mapping and photography;
	 
	 	•	 	chartered aircraft (including helicopters);
	 
	 	•	 	drilling — diamond, percussion and auger;
	 
	 	•	 	laboratory assaying;
	 
	 	•	 	laboratory geochemical (samples);
	 
	 	•	 	metallurgical testing;
	 
	 	•	 	field mapping and investigations;
	 
	 	•	 	Costs in engineering studies; and
	 
	 	•	 	Costs related with the preparation of the feasibility study.





	 	5.	 	The net cost of establishing and maintaining such temporary
field officers and on-site construction offices as may be required
for or in connection with operations, including office supplies,
telephone, telex and telegraph charges and other office operating
costs, and construction, maintenance and operation of store houses,
machine shops and other facilities.



24






 





	 	6.	 	The cost of all expendable materials and stores, light, power,
water, tools and the like.
	 
	 	7.	 	The costs (including acquisition costs and rental, operating
costs and costs of repairs and maintenance) of vehicles and machinery
purchased, hired or otherwise procured for or in connection with
operations.
	 
	 	8.	 	The cost of freight for or in connection with operations.
	 
	 	9.	 	Travelling expenses of employees and contract personnel when
travelling in connection with operations. When these travelling
expenses also relate to other activities carried out, the expenses
will with respect to journeys common to both operations and other
activities be apportioned in proportion to the time spent on
operations and other activities.
	 
	 	10.	 	The costs and expenses of transportation, in the country or
abroad, of personnel and effects to and from points of residence and
the site.
	 
	 	11.	 	Handling charges in relation to equipment, supplies, plant and
machinery, including loading and unloading costs and expenses.
	 
	 	12.	 	Excise, customs and other taxes, duties, levies, royalties (if
any), imposts, deductions and other charges of whatsoever nature
(including agency fees) payable on or in respect of production or
goods purchased for or in connection with operations and all
royalties and other taxes, duties, levies, imposts, and deductions
(with the sole exception of income taxes payable by the parties)
payable to any government or governmental authority in respect of
production or operations.
	 
	 	13.	 	First aid and safety costs and expenses incurred for or in
connection with operations.
	 
	 	14.	 	All insurance coverage reasonably obtained or maintained in
relation to operations.
	 
	 	15.	 	Legal, audit and consulting fees expended solely and
exclusively for or in connection with operations.
	 
	 	16.	 	When used in relation to the operations, depreciation at usual
rates on:





	 	•	 	building;
	 
	 	•	 	vehicles;
	 
	 	•	 	camp accommodation and equipment;
	 
	 	•	 	furniture and fittings;
	 
	 	•	 	drilling equipment;
	 
	 	•	 	geophysical equipment;
	 
	 	•	 	laboratory equipment;
	 
	 	•	 	sundry equipment; and
	 
	 	•	 	other fixtures and chattels.





	 	17.	 	All costs and expenses associated with the acquisition and
maintenance of title to the Mineral Rights area including but not
limited to rents, rates, survey fees and labor



25






 





	 	 	 	exemption fees.
	 
	 	18.	 	Any charge, fee, payment or other consideration payable in
respect of any consent, approval or authority required for the
purposes of this agreement and payments, if any, of compensation.
	 
	 	19.	 	Save and except to the extent, if any, that the same are
recovered under any insurance carried by the Optionee all costs and
expenses reasonably incurred in or in relation to the replacement or
repair of damages or losses incurred by fire, flood, storm, theft,
accident or any other cause.
	 
	 	20.	 	Any other costs incurred or payments made in negotiation
pursuant in connection with surface rights located inside or outside
the boundaries of the Mineral Rights, pursuant to section 4 of this
Agreement, or any payments made to the surface owners or possessors
under such agreements.



26






 



EXHIBIT “B”

TRANSFER OF THE MINERAL RIGHTS



Mr. Notary:



Please enter in your Registry of Public Deeds the Transfer of Mineral Rights
entered into by and between BEAR CREEK MINING COMPANY – SUCURSAL DEL PERU,
registered as entry 1, file No 41289, of the Public Mining Registry, duly
represented by XXXXXX, whose faculties are duly registered with the Public
Registry, domiciled at Calle Monteflor No 460, Urbanización Valle Hermoso,
Santiago de Surco, Lima 33, hereinafter referred to as “OPTIONEE”; and on the
other side JANNETTE VERGARA HERRERA, identified with DNI No xxx, JAIME OSWALDO
VERGARA LEÓN, identified with DNI No 08231837, married to Carmen Julia Herrera
Galdo de Vergara, miner and CARMEN JULIA HERRERA GALDO DE VERGARA, identified
with DNI No 08231836, married to Jaime Oswaldo Vergara León, all domiciled at
Manuel Fuentes No 073, San Isidro, Lima 27; on the following terms and
conditions:



FIRST: BACKGROUND




	1.1	 	To the date of this Agreement, Jannette Vergara Herrera, Jaime Oswaldo
Vergara León and Carmen Julia Herrera Galdo de Vergara are titleholders of
the following mining concessions, hereinafter referred to as “Mineral
Rights”:





	 	(a)	 	Jannette Vergara Herrera is the sole and exclusive
titleholder of the “Cinco Hermanos” mining concession, code 8353 of
the former Mining Regional Office of Huancavelica, with an extent of
100 hectares, located in the district of Paucará, province of
Acobamba, department of Huancavelica, which title to mining
concession granted to Jannette Vergara Herrera was approved by
resolution RJ No 7577-94/RPM on November 21, 1994.
	 
	 	(b)	 	Jaime Oswaldo Vergara León is the sole and exclusive
titleholder of “Jaime 1” mining concession, code 01-02043-99,
located in the districts of Paucará and Andabamba, province of
Acobamba, department of Huancavelica, which title to mining
concession granted to Jaime Oswaldo Vergara León was approved by
resolution RJ No 0974-2000-RPM on March 16, 2000; and
	 
	 	(c)	 	Carmen Julia Herrera Galdo de Vergara is the sole and
exclusive titleholder of the “Julia 1” mining concession, code
01-02044-99, located in the districts of Paucará, Acoria and
Andabamba, provinces of Acobamba and Huancavelica, department of
Huancavelica,



27






 




	 	 	 	which title to mining concession granted to Carmen Julia Herrera
Galdo de Vergara was approved by resolution RJ No 1169-2000-RPM
on March 27, 2000.





	1.2	 	On July 17, 2002, the Optionee, Jannette Vergara Herrera, Jaime Oswaldo
Vergara León and Carmen Julia Herrera Galdo de Vergara entered into an
Option and Lease Agreement, whereby the Optionee was granted the right to
acquire, at its own discretion, one hundred percent (100%) of the Mineral
Rights, during a forty-eight (48) month term.
	 
	1.3	 	The Optionee exercised its option to acquire the Mineral Rights, and
pursuant to sub-section 3.5 of the Option and Lease Agreement, the
Optionee delivered the Notice of exercise of the option via public notary,
which acknowledgment of receipt will be inserted in the public deed that
will arise from this document.




SECOND: PURPOSE OF THE AGREEMENT



The Parties hereby acknowledge the transfer of the Mineral Rights in favor of
the Optionee, including all its parts and appurtenances as well as everything
that de facto or de lure pertains thereto locate within the external boundaries
of the Mineral Rights, without demanding any additional consideration.



THIRD: TRANSFER PRICE




	3.1	 	Pursuant to section 3.2 of the Option and Lease Agreement, the
consideration for the transfer of 100% of the Mineral Rights, is the
amount of US$3,000,000 (three million and 00/100 Dollars).
	 
	3.2	 	Pursuant to sub-section 3.4.1 of the Option and Lease Agreement, the
Deposits delivered to Jannette Vergara Herrera, Jaime Oswaldo Vergara León
and Carmen Julia Herrera Galdo de Vergara are the aggregate amount of
US$XXXX. The balance of the Transfer Price to be paid to the Titleholder
is therefore US$XXXXX.
	 
	 	 	For the purpose of clarity, any amounts paid by the Optionee as Deficit,
shall be deducted from the transfer price nor from the balance of the
transfer price to be paid to Jannette Vergara Herrera, Jaime Oswaldo
Vergara León and Carmen Julia Herrera Galdo de Vergara.




FOURTH: REPRESENTATIONS AND WARRANTIES




	4.1	 	Jannette Vergara Herrera, Jaime Oswaldo Vergara León and Carmen Julia
Herrera Galdo de Vergara hereby represents and warrants that:



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	 	a)	 	On the date of this agreement, the Mineral Rights are in good
standing, free from any liens, encumbrances, charges, and there is no
legal or extra-judicial order or agreement or real or personal right
over the Mineral Rights or any accessory part of it that affects or
limits their free transferability or this Agreement.
	 
	 	b)	 	That in the ordinary course of business relating to the Mineral
Rights or during the exploration and/or exploitation activities
carried out before the execution of the Option and Lease Agreement,
they have not infringed any law, regulation or permit relating to
activities as concession holder, nor infringed any environmental law
or the health safety regulation applicable to the Mineral Rights.
	 
	 	c)	 	That it will defend and hold the Optionee harmless of any
responsibility or obligation, lost, costs, expenses, damages and
demands, including, without limitation, damages to third persons,
damages to property, reclamation costs of damages caused to the
environment and third parties that may result from the activities
carried out by them prior to the execution of the Option and Lease
Agreement.
	 
	 	d)	 	At the time of signing this Agreement and/or executing their
obligations under this Agreement, they do not violate, infringe
and/or breaches any other agreement, contract or obligation; and that
fully agree with the execution of the Option and Lease Agreement, as
well as with the terms of this Agreement.





	4.2	 	The Optionee hereby represents and warrants that it is a branch duly
established under the laws of Peru and that has full power and authority
to execute this Agreement.




FIFTH: OTHER PROVISIONS




	5.1	 	Applicable Law





	 	 	The Parties hereby agree to be bound by the terms and conditions of this
Agreement and, if needed, by the provisions of the General Mining Act and
the Civil Code.





	5.2	 	Arbitration





	 	5.2.1	 	Any dispute, controversy or claim arising out of or relating
to the Transfer Agreement, the execution, object, subscription,
validity, interpretation, breach or termination thereof, shall be



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	 	 	 	settled by arbitration of law in accordance with the applicable law.
The ruling shall be final and binding. All Notices relating to the
arbitration process, including the Notice of arbitration and the
response thereto may be served as provided under sub-section 5.3 of
this Agreement.
	 
	 	5.2.2	 	There shall be one arbitrator appointed by the Parties within
thirty (30) calendar days after receipt of a Notice of arbitration.
If the Parties fail to agree on a single arbitrator within that term,
there shall be three arbitrators. Each Party will appoint one
arbitrator and the two arbitrators so appointed will elect the third
arbitrator, who will preside the arbitration tribunal.
	 
	 	5.2.3	 	If within thirty (30) calendar days after receipt of a Party’s
Notice of appointment of an arbitrator, the other Party has not
notified the first Party of its appointment of an arbitrator, or if
within thirty (30) calendar days of the appointment of the second
arbitrator the Parties have not reached an agreement on the third
arbitrator, the third arbitrator will be chosen by the National
Institute of Mining Petroleum and Energy Law (Instituto Nacional de
Derecho de Minería, Petróleo y Energía). This decision shall be final
and binding.
	 
	 	5.2.4	 	As regards to any intervention of the judiciary that may be
required or specified in the applicable law, the Parties hereby
submit to the jurisdiction of the Judges and Courts of the Judicial
District of Lima — Cercado.





	5.3	 	Notices




	 	 	All notices, offers, summons, petitions, and communications in general
(“Notice”) between the Parties in connection with this Agreement shall be
in writing, delivered to the addresses specified below, and considered
effective on the date of reception, receipt acknowledged, or on the date
of delivery via notary. If not received on a business day, the notice
shall be considered received the following business day. Any change of
address, telephone, or facsimile shall be communicated to the other Party
via notary or with acknowledgement of receipt five days prior thereto,
otherwise any Notice addressed to the former address shall be deemed
delivered.





	 	 	 	 	 	 	 	 
	 	a)	 	OPTIONEE:	 	BEAR CREEK MINING COMPANY SUCURSAL DEL PERÚ
	 	Address:	 	Calle Monteflor No. 460, Urbanización Valle

Hermoso, Santiago de Surco, Lima 33 – Perú
	 	Telephone:	 	(511) 3725765
	 	Facsimile:	 	(511) 3728070



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	 	b)	 	TITLEHOLDER:	 	JANNETTE VERGARA HERRERA

JAIME OSWALDO VERGARA LEÓN

CARMEN JULIA HERRERA GALDO DE VERGARA
	 	Address:	 	Manuel Fuentes No 073, San Isidro, Lima





	5.4	 	Expenditures





	 	 	The Optionee shall bear the cost of all the notarial and registration fees
required to formalize this agreement into a public deed and to have it
registered with the Public Registry.




Mr. Notary: Please add the legal introduction and conclusion, inserting the
Notice of exercise of the Option, hereto and file notice to the Public Mining
Register for registration of this document. Signed in Lima, on the XXXX day of
XXXXX, XXXX.



BEAR CREEK MINING COMPANY, SUCURSAL DEL PERU

JANNETTE VERGARA HERRERA

JAIME OSWALDO VERGARA LEÓN

CARMEN JULIA HERRERA GALDO DE VERGARA



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