Exhibit 4.2

TAMBO GRANDE MINING PROJECT


                     OPTION AGREEMENT FOR THE INCORPORATION

                               OF A STOCK COMPANY











CEPRI-MINERO PERU S.A. - CENTROMIN PERU S.A.

Lima, May 17 , 1999


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                                                                               2


                                TABLE OF CONTENTS

Introduction

Clause One:        Background

Clause Two:        Definitions

Clause Three:      Purpose

Clause Four:       Term of the Option

Clause Five:       Feasibility Study

Clause Six:        Financing Plan

Clause Seven:      Supervision of Agreement

Clause Eight:      Requirements for exercising the Option

Clause Nine:       Representations and Warranties of the Optionee

Clause Ten:        Representations and Warranties of Minero Peru

Clause Eleven:     Environment

Clause Twelve:     Assignment of Contractual Position

Clause Thirteen:   Force Majeure

Clause Fourteen:   Governing Law and Domicile

Clause Fifteen:    Interpretation of the Agreement

Clause Sixteen:    Arbitration

Clause Seventeen:  Termination of the Agreement

Clause Eighteen:   Arbitration

Clause Nineteen:   Termination of the Agreement

Clause Twenty:     Elements and Conditions of the Agreement for the
                   Incorporation of a Stock Company


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                                                                               3


                            TRANSFER OPTION AGREEMENT

To the Notary,

Kindly  enter in your  Register  of  Public  Deeds,  one  evidencing  an  Option
Agreement for the  Incorporation of a Stock Company to conduct mining activities
in the  concessions  which make up the Tambo Grande Mining  Project,  granted by
Empresa  Minera  del  Peru  S.A.  (hereinafter  MINERO  PERU),  with  Taxpayer's
Registration Number 10009561,  with registered address at Av. La Poesia 155, San
Borja,  Peru, acting by and through its General Manager,  Engineer Angel ALVAREZ
ANGULO,  identified by Voter  Registration  Card 07276927,  in accordance with a
Power of Attorney  registered  on Entry No.  02007339 of the  Register of Bodies
Corporate of the Lima and Callao  Registry  Office,  duly authorized by Board of
Directors  Resolution  of April 29, 1999; in favor of Manhattan  Minerals  Corp.
(hereinafter "the OPTIONEE"), acting by and through Dr. Miguel GRAU MALACHOWSKI,
identified by Voter Registration Card No. 08243249, and Dr. Juan Carlos ESCUDERO
VELANDO,  identified by Voter  Registration Card No. 08273043,  with domicile at
Av. Santa Maria  110-140,  Miraflores,  in  accordance  with a Power of Attorney
registered  in Entry 1., Card 16301 of the  Register of  Individuals  and Bodies
Corporates and Mandates of the Mining Registry.

The Agreement is made under the following terms and conditions:

CLAUSE ONE:     BACKGROUND
----------

1.1  Supreme Decree  019-78-EM/DGM  of November 22, 1978 declared an area of 100
     Km2 in the District of Tambo Grande,  Province and  Department of Piura,  a
     National  Reserve Area for a period of five (5) years,  assigning it to the
     Institute of Geology and Mining - INGEOMIN  for the purposes of  performing
     prospecting  and  exploration  works  jointly  with  Bureau  de  Recherches
     Geologiques et Min1&res of France (hereinafter BRGM).

1.2  Decree Law 22672 declared the national need to explore and develop the area
     referred to in Supreme Decree 019-78-EM/DGM of November 22, 1978.

1.3  Supreme  Decree  021-79-EM/DGM  of September  10,  1979,  approved the Base
     Agreement  entered  into by and  between  the  Ministry of Energy and Mines
     (MEM) and BRGM, with the purpose of  prospecting,  exploring and eventually
     developing  the Tambo Grande area,  District of Tambo Grande,  Province and
     Department  of  Piura,  on  the  basis  of a  pre-feasibility  study  to be
     conducted by BRGM.

1.4  Supreme  Decree  016-81-EM/SG  of  July 3,  1981  approved  the  Additional
     Agreement amending the Base Agreement. Among other purposes, this amendment
     changed the  contributions  of the parties and provided for the preparation
     of a feasibility study of the Tambo Grande deposit through a Special Mining
     Company to be incorporated by MINERO PERU and COFRAMINES, to which BRGM had
     assigned all its rights, interests and obligations.

1.5  At the request of MINERO PERU, Government's Special Rights were constituted
     over the area  referred to in Point 1.1 above,  by  Ministerial  Resolution
     352-81EM/SG  of


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                                                                               4


     August 25, 1981,  assigning  these special mining rights to MINERO PERU for
     the  sole  purposes  related  to the  Base  Agreement  and  the  Additional
     Agreement.

1.6  Pursuant to provisions of Article 5.1 of the Base Agreement and Point 5c of
     the  Background and Prior  Formalities  of the Additional  Agreement to the
     Base  Agreement,  the Tambo Grande Special  Rights  assigned to MINERO PERU
     were to be made available, by Contract, to the Special Mining Company to be
     incorporated  by  MINERO  PERU and  COFRAMINES  in order to  undertake  the
     exploration works and the Feasibility Study.

1.7  Law 25284 of November 30, 1990 declared as a national need, the exercise of
     mining   activities  in  the  Tambo  Grande  Special  Rights,   which  were
     constituted  and assigned to MINERO PERU.  It also  authorized  BRGM and/or
     entities or companies  to which BRGM may assign its rights and  obligations
     in the Tambo Grande  project,  to  participate  in the  aforesaid  project.
     Article 7 of the said law  provided  for the  transfer of the  Government's
     Special Rights on the Tambo Grande  polymetallic  deposit,  to the Regional
     Government of the Grau Region.

1.8  On February 26, 1996, COFRAMINES formalized the reversion in favor of BRGM,
     of the rights assigned by the latter.

1.9  Through a letter dated November 8, 1996,  BRGM requested that a Ministerial
     Resolution  be issued  approving  the  assignment  of all its rights in the
     Tambo Grande Project to BRGM S.A.

1.10 According to the letter  referred to in Point 1.9 above,  the petition made
     by  BRGM  was  considered  to  be a  request  for  the  assignment  of  its
     contractual  position  in  the  Base  Agreement  and  Additional  Agreement
     referred  to in Points  1.3 and 1.4  hereof,  respectively,  involving  the
     assignment of its interests and  responsibilities  to BRGM S.A., except for
     the  Government's   Special  Rights,  now  known  as  Tambo  Grande  Mining
     Concessions.

1.11 Ministerial  Resolution  047-97-EM/SG  of February 12,  1997,  approved the
     assignment of the contractual  position undertaken by BRGM in favor of BRGM
     S.A.,  stipulated  by the  Base  Agreement  and  the  Additional  Agreement
     referred  to in  Points  1.3 and 1.4 of the  said  Ministerial  Resolution,
     involving interests and  responsibilities in the Tambo Grande Project,  but
     excluding the transfer of the Tambo Grande Mining Concessions,  transferred
     to the Regional Government of the Grau Region, in accordance with Article 7
     of Law 25284.

1.12 Through  resolution  adopted on  December 1, 1998,  the Private  Investment
     Promotion Commission (COPRI) approved the Private Investment Promotion Plan
     for the Tambo Grande  Mining  Project.  Said  resolution  was  confirmed by
     Supreme Resolution N(degree) 149-98-EM dated December 31, 1998.

1.13 Pursuant  to Article  20 of  Legislative  Decree  674,  through  resolution
     adopted  on  December  1, 1998,  COPRI  approved  to order the  Provisional
     Regional  Administration  Council  of Piura to  transfer  the Tambo  Grande
     mining  concessions  mentioned  in Point


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                                                                               5


     3.2 below, to MINERO PERU. Said transfer was formalized through Public Deed
     dated March 1, 1999,  granted  before Dr.  Miguel  Zuniga  Jimenez,  Notary
     Public in and for Piura,  and was  registered  in Entry 2 of Books  012291,
     12292, 012299,  012300,  12301, 12302, 12303, 012304,  012305 and 012306 of
     the Public Registry of Trujillo.

1.14 Through  resolutions  adopted on the meetings of January 19 and January 26,
     1999,  the Special  Privatization  Committee  of MINERO PERU (CEPRI  MINERO
     PERU)   and  the   Private   Investment   Promotion   Commission   (COPRI),
     respectively,  approved the assignment of the contractual  position of BRGM
     S.A. in favor of Manhattan  Minerals  Corp.  with respect to the agreements
     referred  to in Points 1.3 and 1.4 above,  as well as the Option  Agreement
     for the  Incorporation  of a Stock Company and its Annex, the Agreement for
     the Incorporation of a Stock Company.

     COPRI agreed that the aforementioned approval would be formalized through a
     Supreme Decree,  for which purpose,  and as stipulated in Article 71 of the
     Constitution,   Manhattan   Minerals   Corp.   should   first   obtain  the
     authorization  to acquire the Mining  Concessions  since they were  located
     within 50 km. of the border.

1.15 On February 5, 1999,  Manhattan Minerals Corp. requested the aforementioned
     authorization  from the  Ministry  of Energy  and Mines and on May 7, 1999,
     Supreme Decree  014-99-EM was published,  which declared the need to invest
     in mining  activities in the Mining  Concessions  and authorized  Manhattan
     Minerals Corp. to acquire the Mining Concessions from MINERO PERU S.A.

1.16 On May 15, 1999, Supreme Decree 015-99-EM was published, which approved the
     Option  Agreement for the  Incorporation  of a Stock Company and its Annex,
     the Agreement for the Incorporation of a Stock Company,  to be entered into
     by and between  Manhattan  Minerals  Corp.  and MINERO  PERU S.A.,  already
     approved by CEPRI MINERO PERU and COPRI as indicated in point 1.14 above.

CLAUSE TWO:     DEFINITIONS
----------

2.1  Mining  Concessions:  All those  referred to in Points 3.2 of the Agreement
     with no exceptions  whatsoever,  and which comprise the Tambo Grande Mining
     Project.

2.2  Agreement of  Incorporation  of a Stock Company:  This is the Agreement for
     the Incorporation of a Stock Company,  whereby EMTG is incorporated,  which
     corporate purpose and objective will be the development of the Tambo Grande
     Mining Project. This agreement is included as Annex A hereof.

2.3  Option  Agreement  for the  Incorporation  of a Stock Company or Agreement:
     This document, including Annex A.

2.4  Agreements: Those referred to in Clause One, Points 1.3 and 1.4.

2.5  Supreme Decree: The Supreme Decree issued by the Peruvian Government, which
     approves this Agreement.


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                                                                               6


2.6  EMTG: Empresa Minera Tambo Grande S.A., to be incorporated  pursuant to the
     Agreement  for the  Incorporation  of a Stock Company in the event that the
     OPTIONEE exercises the option referred to in the Agreement.

2.7  Feasibility  Study:  Document  prepared  by the  OPTIONEE  as a  result  of
     exploration   work  conducted  and  studies   carried  out  in  the  Mining
     Concessions which make up the Tambo Grande Mining Project.  This study will
     be useful in  determining  whether or not the  OPTIONEE.  will exercise the
     option and proceed with the  development  of the Project.  The  Feasibility
     Study will be prepared in accordance with Clause Five hereof.

2.8  Financing Plan: This is the document which supports the manner in which the
     OPTIONEE will obtain and dispose of the funds necessary for the development
     of the Project.  This document  will be prepared in accordance  with Clause
     Six hereof.

2.9  Parties: MINERO PERU and the OPTIONEE.

2.10 Tambo Grande Mining  Project or Project:  The Tambo Grande  Mining  Project
     consisting of the undertaking of the necessary studies and the construction
     of the required  infrastructure  in accordance with the Feasibility  Study,
     for the development of the Mining Concessions.

CLAUSE THREE:   PURPOSE
------------

3.1  MINERO  PERU  hereby  grants to the  OPTIONEE  an option to  celebrate  the
     Agreement of  Incorporation  of a Stock Company to be named EMTG,  with the
     purpose of undertaking  the development of the Tambo Grande Mining Project.
     The right to  exercise  the option  shall be subject to  compliance  of the
     terms hereof.

3.2  The Mining  Concessions  which make up the Tambo Grande Mining  Project are
     registered  in the  name of  MINERO  PERU  in the  Mining  Registry  of the
     Trujillo Regional office, with the following details:

--------------------------------------------------------------------------------
|Name of Concession |      Code   |    Area   | Registration in Mining Registry|
|-------------------|-------------|-----------|--------------------------------|
|                   |             |           |      Entry   |    Volume       |
|                   |             |   (Ha)    |              |                 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 1     |  610070-A   |           |     002      |            01230|
|                   |             |   1000    |              |    6            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 2     |  610070-B   |           |     002      |            01230|
|                   |             |   1000    |              |    5            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 3     |  610070-C   |           |     002      |            01230|
|-------------------|-------------|-----------|--------------|-----------------|
|                   |             |   1000    |              |    4            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 4     |  610070-D   |           |     002      |            01230|
|-------------------|-------------|-----------|--------------|-----------------|
|                   |             |   1000    |              |    3            |
--------------------------------------------------------------------------------


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|-------------------|-------------|-----------|--------------|-----------------
|Tambo Grande 5     |  610070-E   |           |     002      |            01230|
|                   |             |   1000    |              |    2            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 6     |  610070-F   |           |     002      |            01230|
|                   |             |   1000    |              |    1            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 7     |  610070-G   |           |     002      |            01230|
|                   |             |   1000    |              |    0            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 8     |  610070-H   |           |     002      |            01229|
|                   |             |   1000    |              |    1            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 9     |  610070-1   |           |     002      |            1229 |
|                   |             |   1000    |              |    2            |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 10    |  610070-J   |           |     002      |            1229 |
|                   |             |   1000    |              |    9            |
|-------------------|-------------|-----------|--------------|-----------------|
|Total Area         |             |   10000   |              |
--------------------------------------------------------------------------------

3.3  The Mining Concessions  referred to in Point 3.2 above shall be contributed
     by MINERO PERU to EMTG as stipulated in the Agreement of Incorporation of a
     Stock Company.

     The valuation of the Mining  Concessions  contributed  shall be made taking
     into  account  the  market  value  of  Mining   Concessions   with  similar
     characteristics  in Peru, as at the date of the exercise of the option, and
     the  Feasibility  Study,  and  shall  be made  according  to  international
     standards generally accepted for mining concessions valuation procedures.

3.4  MINERO  PERU  is the  owner  of  existing  studies  related  to the  Mining
     Concessions as at the date of execution of the Agreement.

     MINERO  PERU  hereby  agrees to submit the said  studies on the date of the
     execution  of the  Agreement  so that they may be taken  into  account,  if
     applicable, in the design and preparation of the Feasibility Study.

3.5  As prescribed in the Agreement of  Incorporation  of a Stock  Company,  the
     OPTIONEE  hereby agrees to contribute to EMTG,  the  Feasibility  Study and
     Financing  Plan  stipulated  in  Clauses  Five  and  Six of the  Agreement,
     respectively.

     The valuation of the  Feasibility  Study and Financing Plan shall take into
     consideration  any costs  incurred by the  OPTIONEE  while  performing  the
     above-mentioned studies.


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CLAUSE FOUR:    EXERCISE AND TERM OF THE OPTION
-----------

4.1  The  option  referred  to in Point 3 .1 shall be subject to a term of three
     (3) years, counted as from the date of execution of the Agreement.

     During the term stipulated in the preceding paragraph, the OPTIONEE, either
     directly or through its Peruvian  subsidiary,  is authorized by MINERO PERU
     to undertake  exploration  activities  and technical  studies in the Mining
     Concessions  which make up the Tambo  Grande  Mining  Project  described in
     Point 3.2 above. To this effect, the OPTIONEE shall have the responsibility
     for  negotiating  with  landowners.  MINERO PERU hereby agrees to cooperate
     with whatever may be necessary to allow the OPTIONEE to have access and use
     of the land.

     Furthermore,  the OPTIONEE, or its Peruvian subsidiary, may extract as much
     mineral  as it may  consider  convenient  in order to carry  out the  tests
     necessary for the undertaking of the studies that would lead to determining
     and measuring the exploitation facilities. To this effect, it may install a
     pilot plant for the treatment of the said mineral.

4.2  The OPTIONEE  may  exercise  its option  rights at any time within the term
     prescribed in Point 4.1 above,  and must communicate its decision to MINERO
     PERU by  notarial  letter,  enclosing  seven (7) copies of the  Feasibility
     Study and Financing Plan,  written in the Spanish  language,  together with
     the information prescribed in Point 4.9 below.

     The  exercise  of the option  shall be subject  to the  condition  that the
     OPTIONEE complies with the requirements outlined in Clause Eight hereof.

4.3  The  OPTIONEE may waive its right to the option at any time within the term
     stipulated  in Point  4.1.  In this case,  the  OPTIONEE  hereby  agrees to
     communicate its decision to MINERO PERU by notarial letter,  subject to the
     provisions of Points 4.4 and 4.5 below.

4.4  As from  the time  when  the  communication  referred  to in  Point  4.3 is
     received by MINERO PERU,  the Agreement  shall be considered  automatically
     terminated  and the Parties and the Peruvian  Government  will thus be free
     from  any and all  commitments  and  obligations  deriving  both  from  the
     Agreement and the prior Agreements.

     The OPTIONEE shall have sixty (60) days from the date of the  communication
     referred to in Point 4.4, to remove all equipment,  machinery, material and
     all other  elements which may be movable or removable and which it may have
     used during the execution of the Agreement, whether its property or that of
     third parties.

     Furthermore,  the OPTIONEE shall deliver to MINERO PERU,  free of any cost,
     all studies it may have  undertaken  up to that time,  as well as any fixed
     installations  that the OPTIONEE may have  installed or built and which may
     not be removed without destructing or affecting the Mining Concessions; and
     it shall return all studies and documents  received in accordance  with the
     provisions of Point 3.4.


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                                                                               9


4.5  The  OPTIONEE  hereby  commits  to  deliver  to MINERO  PERU the  following
     documents  corresponding to the area of the Mining  Concessions and related
     areas,  which may have been prepared in compliance  with the obligations of
     the Agreement:

     (a)  All geological,  geophysical and metallurgical reports and feasibility
          studies;

     (b)  All  drill  cores,   petrographical   sections  and   certificates  of
          laboratory tests existing at MINERO PERU;

     (c)  Topographical  and  cadastre  plans,  aerial  photographs  and similar
          items;

     (d)  Any other necessary  technical  records which may be in the possession
          of the OPTIONEE and which are the property of MINERO PERU.

4.6  The  provisions of Points 4.4 and 4.5 shall also be applicable in the event
     that the OPTIONEE  does not exercise its option at the end of the three (3)
     year term of the option.

4.7  Any  payments  made by the  OPTIONEE  during  the  term  of the  Agreement,
     whatever  their  nature and use,  as well as any  expenses  or  investments
     incurred,  shall not be  reimbursed  to the  OPTIONEE by MINERO PERU or the
     Peruvian Government, under any circumstances whatsoever.

4.8  Once the option has been  exercised by the OPTIONEE,  the Parties must sign
     the   preliminary   deed  and  public  deed   enclosing  the  Agreement  of
     Incorporation of a Stock Company within thirty (30) days following  receipt
     of the communication referred to in Point 4.2 above.

4.9  At the same time it exercises the option,  the OPTIONEE  shall appoint four
     (4) regular  members and four (4)  alternate  members to comprise the first
     Board of Directors, as well as the General Manager.

     On  the  other  hand,  within  five  (5)  days  following  receipt  of  the
     communication referred to in Point 4.2 of the Agreement,  MINERO PERU shall
     appoint one (1) regular member and one (1) alternate member to comprise the
     first  Board of  Directors.  In the event that MINERO PERU does not appoint
     its regular  member and alternate  member within the  prescribed  term, the
     company shall be incorporated with the directors appointed by the OPTIONEE,
     leaving the  appointment of the fifth  director by MINERO PERU pending.  To
     this  effect,  the  parties  hereby  agree  to  convene  the  corresponding
     Shareholders, Meeting at the request of MINERO PERU.

CLAUSE FIVE:    FEASIBILITY STUDY
-----------

5.1  The OPTIONEE hereby agrees that during the term of the Agreement,  directly
     or through its Peruvian  subsidiary,  and at its own cost and risk, it will
     prepare the  Feasibility  Study of the Project.  In the  preparation of the
     Feasibility  Study, the OPTIONEE shall be subject to the minimum  standards
     prescribed herein.


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                                                                              10


     The preparation of the Feasibility  Study shall be the sole  responsibility
     of the OPTIONEE.

     For the  preparation of the Feasibility  Study,  the OPTIONEE shall hire an
     internationally  renowned  consulting firm selected from the list appearing
     in Point 5.4.

5.2  The Feasibility Study must determine the total investment  required by EMTG
     for the  development  of the  Project  within a maximum  period of four (4)
     years.

5.3  The Feasibility  Study shall be prepared in accordance  with  international
     standards normally accepted by the mining industry, financial institutions,
     investors and regulators.

     The  Feasibility  Study must include the  following  information,  which at
     least must be organized as set forth below:

     (a)  Introduction

     (b)  Executive Summary

     (c)  Mining and surface properties

     (d)  Geological resources

     (e)  Mining

     (f)  Metallurgy

     (g)  Accessory infrastructure and processing facilities

     (h)  Disposal of tailings

     (i)  Port facilities

     (j)  Energy

     (k)  Access roads

     (l)  External facilities

     (m)  Environmental assessment

     (n)  Technical commentary

     (o)  Capital costs

     (p)  Operating costs

     (q)  Execution plan


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                                                                              11


     (r)  Marketing

     (s)  Financial analysis

5.4  The Feasibility Study shall be prepared by one of the following  consulting
     companies previously approved by MINERO PERU for these purposes:

     -    Bechtel Corporation

     -    Behre Dolbear & Company

     -    Fluor Daniel Wright

     -    Kilborn SNC-Lavalin Engineering

     -    Jacobs Engineering Group Inc., J.E. Mincorp

     -    Kvaerner Metals Davy Ltd.

     -    H.A. Simons Ltd.

     -    Steffen Robertson Kirsten

5.5  In the  procurement of economic  resources  required for the preparation of
     the  Feasibility  Study,  the OPTIONEE  shall not,  directly or indirectly,
     commit in any manner  whatsoever,  the Mining Concessions which make up the
     Tambo Grande Mining  Project,  or the natural  resources of the said Mining
     Concessions.

CLAUSE SIX:     FINANCING PLAN
----------

6.1  Within the term prescribed in Point 4.1 above,  with the  participation  of
     one of the  consulting  companies  listed in Point 6.2 below,  the OPTIONEE
     shall  prepare,  directly or through third parties and at its own cost, the
     Financing Plan that would make possible the development of the Project. The
     Financing Plan shall include the financial and economic aspects  determined
     in the  Feasibility  Study and both must be delivered to MINERO PERU at the
     time the option is exercised.

6.2  The Financing Plan shall be prepared by the OPTIONEE with the assistance of
     one of the  following  consulting  companies,  which  have been  previously
     approved by MINERO PERU for these purposes:

     -    N.M. Rothschild & Sons

     -    CIBC Wood Gundy - Nesbit Burns

     -    First Marathon Securities


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                                                                              12


6.3  The  Financing  Plan shall be  prepared  in  accordance  with high  quality
     international standards usually accepted in the mining industry,  financial
     institutions   and   regulators.   The  Financing   Plan  shall  take  into
     consideration all regular and usual funding sources available,  directly or
     through third parties, including but without being limited to loans, bonds,
     leasing, conditional sales, financing against production and future mineral
     sales.

6.4  The Financing  Plan shall identify the sources to be selected for financing
     the  development  of the  Project  on the  part  of  EMTG.  All  debts  and
     obligations  shall be  assumed by EMTG and paid with its own funds and cash
     flows,  and guaranteed by its assets.  The Financing  Plan shall  determine
     real and personal guaranties to be granted by EMTG and/or its shareholders,
     with EMTG and/or its shareholders being under the obligation to ensure that
     they are duly constituted and formalized.

6.5  The Financing Plan shall determine the percentage of the investment for the
     development of the Project, that will be funded by capital contributions to
     be made by the OPTIONEE in favor of EMTG,  and the  percentage to be funded
     by third parties, in accordance with the Feasibility Study. Such percentage
     shall take into consideration the provisions of Point 9.14 of the Agreement
     of Incorporation of a Stock Company.

6.6  The Financing Plan to be prepared by the OPTIONEE shall reflect the optimum
     financing structure for the development of the Project, at least taking the
     following into consideration:

     (a)  Estimated proven, probable and possible reserves.

     (b)  Annual rate of production anticipated for the Project and the duration
          of production.

     (c)  EMTG cash flows projected for the Project.

     (d)  Availability and cost of all financing  alternatives provided by third
          parties.

     (e)  Internal rate of return on the equity invested in the capital stock of
          EMTG and the net present value of that investment.

6.7  Waiving  its rights to the  option  shall  release  the  OPTIONEE  from the
     obligation of preparing the Financing Plan prescribed in this Clause.

CLAUSE SEVEN:   SUPERVISION OF AGREEMENT
------------

7.1  The OPTIONEE hereby agrees to report on a semi-annual  basis, on activities
     undertaken in compliance with the obligations deriving from the Agreement.

     In the said reports,  the OPTIONEE  must describe at a reasonable  level of
     detail,  progress made in the obligations being  implemented.  Furthermore,
     the OPTIONEE  must also  include any  additional  information  requested by
     MINERO PERU.


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                                                                              13


7.2      During the term of the option, the OPTIONEE is obliged to allow MINERO
         PERU to inspect its operations, upon receipt of seven (7) days advance
         notice.

CLAUSE EIGHT:   REQUIREMENTS FOR THE EXERCISE OF THE OPTION
------------

8.1  Within the term of the option,  but before exercising it, the OPTIONEE must
     provide  evidence to MINERO PERU that it has  complied  with the  following
     requirements:

     (a)  That it operates a mining complex with an average  treatment  capacity
          of 10 000 tons of ore per day; and

     (b)  That it has net equity (net  assets) in an amount  equal to or greater
          than US$100 000 000.

8.2  The OPTIONEE shall comply with the  requirements  outlined in Point 8.1, a)
     and b) above,  by submitting  the  corresponding  certificates  issued by a
     mining consulting  company and an auditing firm,  respectively.  Both firms
     must be internationally well known.

     The submission of the said  certificates  must be made at the time when the
     option is exercised.  MINERO PERU must evaluate said  documentation  within
     ten (10) days following receipt thereof. Once the term of ten (10) days has
     expired without MINERO PERU issuing an opinion, it shall be understood that
     the OPTIONEE has complied with the requirements for exercising the option.

8.3  Notwithstanding  the  provisions of Point 8.2 above,  it is agreed that the
     OPTIONEE has  complied  with the  requirements  outlined in Point 8.1, if a
     company or the  parent  company of a company  which has  complied  with the
     requirements of Point 8.1 a) and b) above (either  referred  hereinafter as
     the PARENT COMPANY), directly or indirectly owns at least 25% of the shares
     or interest in: (1) the OPTIONEE;  (2) the parent  company of the OPTIONEE;
     or (3) any subsidiary of the parent company of the OPTIONEE.

     In the  event  that the  OPTIONEE  exercises  the  right  conferred  in the
     preceding  paragraph,  the  PARENT  COMPANY  shall  jointly  and  severally
     guarantee  compliance with any and all obligations of the OPTIONEE and EMTG
     deriving from the Agreement and the Agreement of  Incorporation  of a Stock
     Company, and for such purpose it shall sign the corresponding documents.

CLAUSE NINE:    REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
-----------

9.1  The OPTIONEE hereby represents and warrants the following:

     (a)  That it has  obtained  all  permits  and  approvals  required  for the
          execution of the Agreement.

     (b)  That it will  obtain all permits  and  authorizations  required by the
          corresponding  authorities in Peru to carry out the Feasibility  Study
          and the Financing Plan.


<PAGE>


                                                                              14


     (c)  That because it has visited the location of the Mining Concessions, it
          knows their surroundings and the environmental reality, It also hereby
          declares that it knows that the town of Tambo Grande is located in the
          Mining Concessions and knows the current legal situation thereof.

     (d)  That it assumes  responsibility for any environmental damage caused by
          the activities included in and deriving from the implementation of the
          Agreement,  independently from whether or not it exercises the option,
          even if it waives its right to exercise  it. In  addition,  it assumes
          responsibility  for any  damages  caused by the  activities  developed
          under the Agreements.

     (e)  That upon exercising the option, it does so after having conducted the
          necessary  evaluations  on the basis of  information  obtained  by its
          Feasibility Study and taking into account the Financing Plan.

          Accordingly,  the OPTIONEE shall not file any claims of responsibility
          against MINERO PERU or the Peruvian Government.

          The  OPTIONEE  hereby  recognizes  that  neither  MINERO  PERU nor the
          Peruvian  Government  have assumed any  commitments,  except for those
          expressly  assumed  herein,  which may  affect  the  execution  of the
          obligations  deriving  from the Agreement or which may become a reason
          for the  suspension  or extension of the term  prescribed in Point 4.1
          above.

     (f)  That it commits to comply with all  obligations  set forth by Peruvian
          legislation during the term of the option.

     (g)  That  even  though  MINERO  PERU is  responsible  for the  payment  of
          Standing Fees of the Mining  Concessions,  the OPTIONEE hereby commits
          to make the  funds  available  to  MINERO  PERU for the  corresponding
          payment. The said funds shall be delivered twenty (20) days before the
          expiry of the last day for payment,  with MINERO PERU agreeing to make
          the payment within the following ten (10) days.

          In the event that the  OPTIONEE  does not comply with  delivering  the
          amount of the Standing Fees in the manner  prescribed in the foregoing
          paragraph,  MINERO  PERU shall  make the  payment.  In such case,  the
          OPTIONEE  will  automatically  be in arrears,  with  arrears  interest
          accruing as from the date of non-compliance at the legal interest rate
          fixed by the Central Reserve Bank.

     (h)  Without  prejudice to the  stipulations  contained in Clause Five, the
          Feasibility   Study  shall   determine   the  technical  and  economic
          feasibility  of  the  Project,  considering  for  this  purpose  every
          reasonable technical and economic alternative  available and proposing
          the best  thereof  for the  development  of the  Project,  within  the
          maximum  term of four (4) years  mentioned in Point 9.1 of Annex A. In
          addition,   the  Feasibility  Study  must  evaluate  every  technology
          reasonably  available,  as well  as the  technological  and  financial
          possibilities required for attaining an optimum technical and economic
          solution for the development of the


<PAGE>


                                                                              15


          Project.   Furthermore,  it  must  determine  the  optimum  processing
          capacity,  considering mining, technical and economic factors, for the
          Project development and production.

9.2  The OPTIONEE hereby represents and warrants that MINERO PERU shall not have
     any  responsibility  towards any third parties the OPTIONEE may contract or
     subcontract in complying with the obligations  deriving from the Agreement.
     Furthermore,  MINERO PERU shall not assume any responsibility with workers,
     employees or staff members of the OPTIONEE.

CLAUSE TEN:     REPRESENTATIONS AND WARRANTIES OF MINERQ PERU
----------

MINERO PERU hereby represents and warrants the following:

     (a)  That  it is the  owner  of the  Mining  Concessions,  which  are  duly
          registered  on the Cards and  entries  described  in Point 3.2, in the
          Register of Mining Concessions of the Mining Registry, free and exempt
          from any liens and encumbrances.  The entire Mining Concessions are in
          full force, as the corresponding  standing fees have been paid and all
          obligations  prescribed by law have been complied with  completely and
          on time. The Mining Concessions are free of any liens,  limitations or
          encumbrances  which may restrict their free use or which may give rise
          to  situations  which may  prevent  the  OPTIONEE  from  carrying  out
          exploration work, and, if the option is exercised, from exploiting the
          Mining  Concessions  in partnership  with MINERO PERU,  except for the
          provisions of Law 25284 and surface rights belonging to third parties.

     (b)  The Mining Concessions shall not be encumbered nor assigned during the
          term of the Agreement,

     (c)  The Mining  Concessions  are not  undergoing  any legal or arbitration
          proceedings and no pending actions, suits, claims or proceedings exist
          with respect thereto.

     (d)  That it has no knowledge  of any  environmental  damage  produced as a
          consequence of exploration activities carried out previously.

     (e)  That  it has no  knowledge  of  situations  which  would  prevent  the
          OPTIONEE  from  complying  with the  objective to perform  exploration
          works and prepare the  Feasibility  Study,  or from the development of
          the Project.

     (f)  It will make the Mining  Concessions  available to the OPTIONEE on the
          date the Agreement is executed.

     (g)  The Mining  Concessions  have  preferential  and final  title over any
          claims or requests from third parties.

     (h)  MINERO PERU will  cooperate  with the OPTIONEE in the  procurement  of
          authorizations,  permits and rights-ofway  necessary for the execution
          of the obligations contained in the Agreement.


<PAGE>


                                                                              16


     (i)  The guaranties referred to in Points a), b), d) and g) of this Clause,
          shall be in force and  remain in effect to the time when  MINERO  PERU
          makes  the  contribution  of  the  Mining   Concessions  to  EMTG,  in
          accordance with the provisions of the Agreement of  Incorporation of a
          Stock Company.

CLAUSE ELEVEN:  ENVIRONMENT
-------------

11.1 The  OPTIONEE  hereby  declares  that it  knows  the  legislation  in force
     applicable to environmental issues and the obligations resulting therefrom.

11.2 The OPTIONEE hereby commits to comply with the environmental legislation in
     force, including provisions referring to communities.

11.3 The  OPTIONEE  hereby  commits to adopt all  necessary  measures to prevent
     contamination of the  environment;  and in the event that the nature of its
     operations  may cause  contamination,  it hereby agrees to adopt  pertinent
     measures  for  the  necessary  and  immediate  repair,  as  well  as  other
     reasonable  actions for restoration or for mitigation of the damage caused,
     in accordance with legislation in force.

11.4 During  the term  prescribed  in Point  4.1,  the  OPTIONEE  must adopt the
     necessary prevention and repair measures, as well as those necessary at the
     time of abandonment of the installations upon expiry of the Agreement.

11.5 Within  thirty  (30) days prior to  commencement  of the field  works,  the
     OPTIONEE shall submit to MINERO PERU for its information,  an environmental
     study  which  will  include  all  the  locations   where  it  will  conduct
     exploration works.

11.6 All expenses and investments to be incurred by the OPTIONEE during the term
     of the Agreement in relation with the environment,  including  communities,
     shall be at the sole cost and risk of the OPTIONEE.

CLAUSE TWELVE:  ASSIGNMENT OF CONTRACTUAL POSITION
-------------

12.1 During the term of the Agreement,  the OPTIONEE may assign its  contractual
     position or the rights and obligations deriving from the Agreement, subject
     to the prior consent of MINERO PERU. Notwithstanding the aforesaid,  MINERO
     PERU will  necessarily  consent to the  assignment,  provided  the assignee
     meets the  requirements  referred to in  paragraphs a) and b) of Point 8.1.
     Compliance with these  requirements  shall be  substantiated  in accordance
     with the provisions of Point 8.2. In this case, the provisions of Point 8.3
     shall not be applied.

12.2 The OPTIONEE expressly  consents in advance,  for MINERO PERU to totally or
     partially  assign its  contractual  position in the  Agreement to any other
     government  company or body  whenever it deems it  pertinent.  The assignee
     shall be obliged to abide by all the provisions established herein.

     MINERO PERU shall inform the OPTIONEE of the assignment,  through  notarial
     letter.  As from  the  date  of  receipt  of the  said  communication,  all
     obligations  and rights of


<PAGE>


                                                                              17


     MINERO PERU  originated by or derived from the Agreement,  shall be assumed
     by the assignee.

     Any assignment  carried out by MINERO PERU,  shall not affect the rights of
     the OPTIONEE in any manner.

CLAUSE THIRTEEN: FORCE MAJEURE
---------------

13.1 The Parties shall not be responsible for noncompliance  with an obligation,
     or partial,  untimely or defective  compliance  thereof,  during the period
     when the said obligation is affected by an act of God or force majeure. The
     OPTIONEE must provide evidence to MINERO PERU that said events prevented it
     from adequately complying with the obligation.

     Acts of God or force  majeure are defined as those  events which are beyond
     reasonable  control and which may not be  anticipated  by the  Parties;  or
     those which, having been anticipated, could not be reasonably prevented.

13.2 The Party whose  obligation is affected shall notify the other Party within
     five (5) days following the  occurrence of the event of force majeure,  and
     must  substantiate  it by  describing  the  manner in which it will  affect
     performance  of the  corresponding  obligation.  The  Party  receiving  the
     communication shall answer in writing, indicating whether or not it accepts
     the reasons for the occurrence,  within seven (7) days following receipt of
     the aforesaid communication.

     In all cases,  the Party affected by acts of God or force majeure shall use
     its best efforts to provide a timely and complete  solution,  in accordance
     with the common  intention of the Parties  contained in the Agreement.  The
     affected  Party  must at all times  continue  with the  performance  of the
     contractual obligations which have not been affected by such event.

     The affected Party must restart compliance with the affected obligations as
     soon as the said event or events disappear. To this effect, it shall send a
     notice to the other Party within five (5) days following the  disappearance
     of the said event. The Parties may cooperate with each other in solving the
     existing circumstances.

13.3 The period  during  which the  effects  of the act of God or force  majeure
     affect  compliance with any contractual  obligation,  shall be added to the
     term set forth for  compliance  with the said affected  obligation,  and if
     necessary, to the term of the option.

     In the latter  case,  MINERO  PERU must  expressly  approve in writing  the
     extension of the term through notarial letter delivered to the OPTIONEE.

     In the event of  discrepancies  with respect to the  existence of an act of
     God or force majeure,  the issue shall be submitted to  arbitration  and be
     resolved  within thirty (3Q) calendar days  following the date on which the
     arbitrators learn of the circumstances.


<PAGE>


                                                                              18


CLAUSE FOURTEEN: GOVERNING LAW AND DOMICILE
---------------

14.1 The  Agreement  shall be governed,  interpreted  and executed in accordance
     with the laws of the Republic of Peru.

14.2 For the purposes of the execution of the  Agreement,  the parties  indicate
     that their  domicile  in Peru  shall be as  described  in the  introductory
     section hereof.

14.3 Any change in the  domicile of any of the  Parties  shall bear no effect on
     the other unless it has been communicated by notarial letter.

14.4 For the  purposes  hereof,  it shall be  understood  that  knowledge of all
     communications,  requirements  and  notices  shall take place when the said
     communications arrive to the domicile of the addressee.

14.5 The OPTIONEE hereby  irrevocably and  unconditionally  waives all rights to
     claims through  diplomatic  channels in relation  herewith.  However,  this
     shall not affect the right of the OPTIONEE to claim for benefits granted by
     MIGA  or  similar   benefits   deriving   from   international   agreements
     guaranteeing investments,  which it may have entered into or may enter into
     in the future with the Peruvian Government.

CLAUSE FIFTEEN:  INTERPRETATION OF AGREEMENT
--------------

15.1 This Agreement has been prepared in the Spanish  language and  accordingly,
     all interpretations  hereof version and according to shall be based on that
     Peruvian legal provisions.

15.2 Clause  headings used in the Agreement  are merely  illustrative  and shall
     only serve as reference, as they shall have no effect on the interpretation
     hereof.

15.3 All references to a clause in the Agreement refer to the entire text of the
     clause of the  Agreement.  References  made in the  Agreement  to a clause,
     include all points  forming part thereof and  references to a point include
     all paragraphs thereof.

CLAUSE SIXTEEN:  ARBITRATION
--------------

16.1 Any disputes which may arise or derive from the Agreement,  including those
     regarding  claims  for  nullity or  invalidity,  which may not be solved by
     mutual  agreement  of  the  Parties,   shall  be  solved  by  a  final  and
     unappealable  award  issued  by  the  Arbitration  Court  of  the  National
     Institute of Mining and Petroleum Law, in accordance  with the  Arbitration
     Rules of the  National  Institute  of Mining and  Petroleum  Law,  to which
     regulations the Parties hereby unconditionally submit.

16.2 One Party  submitting a dispute to arbitration  shall suffice for the other
     Party to be automatically bound by the arbitration.


<PAGE>


                                                                              19


16.3 The beginning and continuation of an arbitration  process shall not inhibit
     the Parties from ongoing  compliance with obligations which are not subject
     to  arbitration  or which  would  not be  affected  by the  results  of the
     arbitration.

16.4 The Parties hereby agree that  arbitrators  may not, during the arbitration
     process,  suspend the execution of the  Agreement at any time,  nor suspend
     compliance with the obligations hereof,  except those obligations which are
     subject to  arbitration  or which  would be  affected by the results of the
     arbitration, including the term referred to by Point 4.1 hereof.

16.5 There shall be three (3) arbitrators. One shall be appointed by each of the
     Parties and the third one by the arbitrators  appointed by the Parties.  In
     the event that thirty (30) days have elapsed since the  appointment  of the
     arbitrators  by  the  Parties,  and  the  third  arbitrator  has  not  been
     appointed,  any of the Parties may request the National Institute of Mining
     and  Petroleum  Law to appoint  the third  arbitrator  within ten (10) days
     following the date when it learns of the request.

16.6 In  order  to  solve  the  substantive  part  of the  litigation,  dispute,
     difference or claim submitted to arbitration,  the arbitrators  shall apply
     the internal  substantive laws of the Republic of Peru.  Arbitration  shall
     take place in the City of Lima, Peru.

16.7 The Parties hereby agree and declare that the  arbitration  award is final,
     binding and immediately enforceable.  Thus, they hereby waive all rights of
     appeal,  appeal for  reversal and any other  objection  to the  arbitration
     award.

     The Parties  hereby commit to carry out all acts  necessary for the conduct
     of the arbitration process until its completion and enforcement.

16.8 The maximum term for the  arbitration  process shall be sixty (60) business
     days,  counted as from the date of installation of the arbitration court or
     similar act. Due to any  justifiable  reasons,  the  arbitration  court may
     extend the term for an additional period of sixty (60) days.

16.9 In the event that the obliged  Party does not comply  with the  arbitration
     award, it must be enforced in any place in or outside Peru by a lower court
     judge or  equivalent,  to whom the Parties shall submit with no limitations
     or prior formalities.

16.10In  the  event  that  the  arbitration  deals  with  non-compliance  of the
     obligation  indicated in Point 9.1(8),  one of the  companies  mentioned in
     Point 5.4, other than the company responsible for preparing the Feasibility
     Study, shall act as arbitrator.

CLAUSE SEVENTEEN: TERMINATION OF THE AGREEMENT
----------------

17.1 Whenever  one of the Parties  fails to comply  with any of the  obligations
     stipulated  in the  Agreement  due to  reasons  other than an act of God or
     force  majeure,  or any  matter  which  may be  pending  in an  arbitration
     process, the other Party shall notify the Party in default, informing it of
     the  non-compliance  and its  intention to terminate  the  Agreement on the
     expiry  of a sixty  (60)  day  term,  unless  within  this  term,  the said
     non-compliance is


<PAGE>


                                                                              20


     stopped,  corrected,  or to the  satisfaction of the other Party, it can be
     demonstrated that it is in process of correction.

     If the Party receiving a notice of  non-compliance  questions or denies the
     existence  thereof,  the said Party may refer the issue to arbitration,  in
     accordance  with the  provisions  of Clause  Six  within  thirty  (80) days
     following  receipt of the notice.  In these cases,  the sixty (60) day term
     shall be  suspended  until the  arbitration  award is  communicated  to the
     Parties.   The   Agreement   shall   terminate   if  once  a  condition  of
     non-compliance has been confirmed, it is not stopped, corrected, or, to the
     satisfaction of the other Party,  it cannot be  demonstrated  that it is in
     process of correction.

17.2 The option referred to in Point 3.1 above shall expire if the OPTIONEE does
     not exercise  this right within the term  prescribed in Point 4.1. Once the
     option has expired, the Agreement shall be automatically terminated, unless
     the Parties agree to renew it.

17.3 By mutual agreement, the Parties may resolve to invalidate the Agreement at
     any time.

     Upon  termination  of the  Agreement,  all  rights and  obligations  of the
     Parties  specified in the Agreement shall have no effect and the provisions
     of Points 4.4 and 4.5 shall apply.

     Furthermore, the termination of the Agreement releases the Parties from the
     obligations  deriving  from the  Agreements;  therefore,  MINERO  PERU will
     freely dispose of the Mining Concessions.

CLAUSE EIGHTEEN: EXPENSES AND TAXES
---------------

18.1 Expenses related to the conversion of the preliminary deed of the Agreement
     into a Public Deed and its  registration in the Mining Registry shall be at
     the account and cost of the OPTIONEE.

18.2 At its own cost and risk, the OPTIONEE shall be responsible for contracting
     all insurance policies necessary to protect the assets of MINERO PERU which
     may be affected by the operations to be performed by the OPTIONEE under the
     Agreement.

18.3 All taxes  applicable as a consequence of the Agreement shall be assumed by
     the Party responsible according to law.

CLAUSE NINETEEN: FINAL PROVISIONS
---------------

19.1 The Parties  hereby agree and declare that this Agreement  substitutes  the
     Agreements in all their contents and scope.  To this effect,  from the date
     of subscription of the Agreement,  neither the OPTIONEE nor MINERO PERU may
     invoke the  substituted  Agreements in their own name or on behalf of third
     parties.

19.2 In accordance  with the provisions of the first  paragraph of Article 62 of
     the  Political  Constitution  of Peru,  Article  1357 of the Civil Code and
     Article  39 of  Legislative  Decree 757 -  Framework  Law for the Growth of
     Private Investment, once approved by the


<PAGE>


                                                                              21


     corresponding  Supreme  Decree,  this  Agreement  may  not  be  amended  or
     unilaterally invalidated by any of the Parties.

19.3 This Agreement  shall be effective on the date of execution  thereof by the
     parties and must be registered in the Mining Registry.

19.4 By mutual  agreement,  the Parties may amend the Contract due to reasonable
     causes; in such case, amendments must be approved by the Board of Directors
     or  equivalent  body of each of the  Parties,  and no  legal  provision  or
     government authorization confirming or aproving the said amendments will be
     required.

CLAUSE TWENTY:  ELEMENTS AND CONDITIONS OF THE AGREEMENT OF INCORPORATION OF A
-------------   STOCK COMPANY

The  elements  and  conditions  referred  to in points  6.1,  6.2 and 9.1 of the
Agreement of  Incorporation of a Stock Company shall be established on the basis
of the studies to be conducted under the Agreement.

Kindly add all other clauses  required by law and forward the pertinent  notices
to the Mining Registry.

Lima, May 17, 1999

----------------------
GC-RM/MANHAT.028


<PAGE>


TAMBO GRANDE MINING PROJECT



                                     ANNEX A

               AGREEMENT FOR THE INCORPORATION OF A STOCK COMPANY











CEPRI-MINERO PERU S.A. - CENTROMIN PERU S.A.

Lima, May 17 , 1999


<PAGE>


                                                                               2


TABLE OF CONTENTS

Introduction

Clause One:             Background

Clause Two:             Definitions

Clause Three:           Incorporation and Purpose of the Stock Company

Clause Four:            Domicile of the Company

Clause Five:            Duration of the Company

Clause Six:             Capital Stock and Shares

Clause Seven:           Appointment of First Board of DIrectors

Clause Eight:           Appointment of the General Manager

Clause Nine:            Investment Commitment

Clause Ten:             Compensation for the account of EMTG

Clause Eleven:          Solution of Disputes

Clause Twelve:          Interpretation

Clause Thirteen:        By-laws


<PAGE>


                                                                               3


                                     ANNEX A

Attached to the Option Agreement for the Incorporation of a Stock Company

               AGREEMENT FOR THE INCORPORATION OF A STOCK COMPANY

To the Notary:

Kindly  enter  in  your  Register  of  Public  Deeds,   the  AGREEMENT  FOR  THE
INCORPORATION OF A STOCK COMPANY entered into by and between: Empresa Minera del
Peru S.A., as party of the first part,  hereinafter  referred to as MINERO PERU,
with Taxpayer's  Registration No. 10009561,  registered on Card No. 14047 of the
Book of Contracting  Companies and Other Bodies Corporate of the Mining Registry
of Lima,  with  registered  address at ,  _________________ Peru,  acting by and
through its General Manager, ______________________, duly authorized by Board of
Directors'  Resolution No.  _______,  dated  __________________,  to be inserted
herein; and as party of the second part,  Manhattan Minerals Corp.,  hereinafter
referred to as MANHATTAN,  with Taxpayer's  Registration No. _______,  acting by
and through  Mr.  ______________  identified  by Voter's  Registration  Card No.
________,  with registered  address at  ________________________,  authorized by
Power of Attorney  registered in Entry ______,  Card No. ______,  of the Book of
Contracting Companies and Other Bodies Corporate of the Mining Registry.

The Agreement is made under the following terms and conditions:

                            ARTICLES OF INCORPORATION
                            -------------------------

CLAUSE ONE:     BACKGROUND
----------

1.1  Supreme Decree  019-78-EM/DGM  of November 22, 1978 declared an area of 100
     Km2 in the District of Tambo Grande,  Province and  Department of Piura,  a
     National  Reserve Area for a period of five (5) years,  assigning it to the
     Institute of Geology and Mining  -INGEOMIN  for the purposes of  performing
     prospecting  and  exploration   work  jointly  with  Bureau  de  Recherches
     Geologiques et Minieres of France (hereinafter BRGM).

1.2  Decree Law 22672 declared the national need to explore and develop the area
     referred to in Supreme Decree 019-78-EM/DGM of November 22, 1978.

1.3  Supreme  Decree  021-79-EM/DGM  of September  10,  1979,  approved the Base
     Agreement  entered  into by and  between  the  Ministry of Energy and Mines
     (MEM) and BRGM with the purpose of  prospecting,  exploring and  eventually
     developing  the Tambo Grande area,  District of Tambo Grande,  Province and
     Department  of  Piura,  on  the  basis  of a  pre-feasibility  study  to be
     conducted by BRGM.

1.4  Supreme  Decree  016-81-EM/SG  of  July 3,  1981  approved  the  Additional
     Agreement amending the Base Agreement. Among other purposes, this amendment
     changed the  contributions  of the parties and provided for the preparation
     of a feasibility study of the Tambo Grande deposit through a Special Mining
     Company to be incorporated by


<PAGE>


                                                                               4


     MINERO  PERU and  COFRAMINES,  to which BRGM had  assigned  all its rights,
     interests and obligations.

1.5  At the request of MINERO PERU, Government's Special Rights were constituted
     over the area  referred to in Point 1.1 above,  by  Ministerial  Resolution
     352-81EM/SG  of August 25, 1981,  assigning  these special mining rights to
     MINERO PERU for the sole  purposes  related to the Base  Agreement  and the
     Additional Agreement.

1.6  Pursuant to provisions of Article 5.1 of the Base Agreement and Point 5c of
     the  Background and Prior  Formalities  of the Additional  Agreement to the
     Base  Agreement,  the Special Rights over the Tambo Grande area assigned to
     MINERO PERU were to be made available,  by Contract,  to the Special Mining
     Company  to be  incorporated  by  MINERO  PERU and  COFRAMINES  in order to
     undertake the exploration work and the Feasibility Study.

1.7  Law 25284 of November 30, 1990 declared as a national need, the exercise of
     mining   activities  in  the  Tambo  Grande  Special  Rights,   which  were
     constituted  and assigned to MINERO PERU.  It also  authorized  BRGM and/or
     entities or companies  to which BRGM may assign its rights and  obligations
     in the Tambo Grande  project,  to  participate  in the  aforesaid  project.
     Article 7 of the said law  provided  for the  transfer of the  Government's
     Special Rights on the Tambo Grande  polymetallic  deposit,  to the Regional
     Government of the Grau Region.

1.8  On February 26, 1996, COFRAMINES formalized the reversion in favor of BRGM,
     of the rights assigned by the latter.

1.9  Through a letter dated November 8, 1996,  BRGM requested that a Ministerial
     Resolution  be issued  approving  the  assignment  of all its rights in the
     Tambo Grande Project to BRGM S.A.

1.10 According to the letter  referred to in Point 1.9 above,  the petition made
     by  BRGM  was  considered  to  be a  request  for  the  assignment  of  its
     contractual  position  in  the  Base  Agreement  and  Additional  Agreement
     referred  to in Points  1.3 and 1.4  hereof,  respectively,  involving  the
     assignment of its interests and  responsibilities  to BRGM S.A., except for
     the  Government's   Special  Rights,  now  known  as  Tambo  Grande  Mining
     Concessions.

1.11 Ministerial  Resolution  047-97-EM/SG  of February 12,  1997,  approved the
     assignment of the contractual  position undertaken by BRGM in favor of BRGM
     S.A.,  stipulated  by the  Base  Agreement  and  the  Additional  Agreement
     referred  to  in  Points  1.3  and  1.4  above,   involving  interests  and
     responsibilities in the Tambo Grande Project, but excluding the transfer of
     the Tambo Grande Mining Concessions, transferred to the Regional Government
     of the Grau Region, in accordance with Article 7 of Law 25284.

1.12 Through  resolution  adopted on  December 1, 1998,  the Private  Investment
     Promotion Commission (COPRI) approved the Private Investment Promotion Plan
     for the Tambo Grande  Mining  Project.  Said  resolution  was  confirmed by
     Supreme Resolution N(degree) 149-98-EM dated December 31, 1998.


<PAGE>


                                                                               5


1.13 Pursuant  to Article  20 of  Legislative  Decree  674,  through  resolution
     adopted  on  December  1, 1998,  COPRI  approved  to order the  Provisional
     Regional  Administration  Council  of Piura to  transfer  the Tambo  Grande
     Mining  Concessions  mentioned  in Point 3.2 below,  to MINERO  PERU.  Said
     transfer was formalized  through  Public Deed dated March 1, 1999,  granted
     before Dr. Miguel Zuniga Jimenez,  Notary Public in and for Piura,  and was
     registered in Entry 2 of Books 012291, 12292, 012299, 012300, 12301, 12302,
     12303, 012304, 012305 and 012306 of the Public Registry of Trujillo.

1.14 Through  resolutions  adopted on the meetings of January 19 and January 26,
     1999,  the Special  Privatization  Committee  of MINERO PERU (CEPRI  MINERO
     PERU)   and  the   Private   Investment   Promotion   Commission   (COPRI),
     respectively,  approved the assignment of the contractual  position of BRGM
     S.A. in favor of Manhattan  Minerals  Corp.  with respect to the agreements
     referred  to in Points 1.3 and 1.4 above,  as well as the Option  Agreement
     for the  Incorporation  of a Stock Company and its Annex, the Agreement for
     the Incorporation of a Stock Company.

     The  aforementioned  approval would be formalized through a Supreme Decree,
     for which  purpose,  and as stipulated  in Article 71 of the  Constitution,
     Manhattan  Minerals Corp.  should first obtain the authorization to acquire
     the Mining Concessions since they were located within 50 km. of the border.

1.15 On February 5, 1999,  Manhattan Minerals Corp. requested the aforementioned
     authorization  from the  Ministry  of Energy  and Mines and on May 7, 1999,
     Supreme Decree  014-99-EM was published,  which declared the need to invest
     in mining  activities in the Mining  Concessions  and authorized  Manhattan
     Minerals Corp. to acquire the Mining Concessions from MINERO PERU S.A.

1.16 On May 15, 1999, Supreme Decree 015-99-EM was published, which approved the
     Option  Agreement for the  Incorporation  of a Stock Company and its Annex,
     the Agreement for the Incorporation of a Stock Company,  to be entered into
     by and between  Manhattan  Minerals  Corp.  and MINERO  PERU S.A.,  already
     approved by CEPRI MINERO PERU and COPRI as indicated in Point 1.14 above.

1.17 Through Public Deed dated May 31, 1999, granted before Dr. Miguel R. ZUNIGA
     JIMENEZ,  Notary Public in and for Piura,  MANHATTAN and MINERO PERU signed
     the Option  Agreement  for the  Incorporation  of a Stock  Company  and its
     Annex, as referred to in Points 1.14 and 1.16 of the Agreement.  The Option
     was duly exercised  through  Notarial Letter dated  __________________,  in
     compliance with Point 4.2 of the said Option Agreement.

1.18 The option,  as referred  to in Point 4.2 of the Option  Agreement,  having
     been validly  exercised,  the  Agreement for the  Incorporation  of a Stock
     Company has been duly perfected between MINERO PERU and MANHATTAN, with the
     purpose of developing the Tambo Grande Mining Project.


<PAGE>


                                                                               6


CLAUSE TWO:     DEFINITIONS
----------

2.1  MINING  CONCESSIONS:  All those listed in Point 6.2a)  hereof,  without any
     exceptions whatsoever.

2.2  AGREEMENT: This document.

2.3  OPTION  AGREEMENT  FOR THE  INCORPORATION  OF A  STOCK  COMPANY  OR  OPTION
     AGREEMENT:  The Agreement  entered into by and between MANHATTAN and MINERO
     PERU,  granted by Public  Deed  dated May 31,  1999,  before Dr.  Miguel R.
     ZUNIGA JIMENEZ, Notary Public in and for Piura.

2.4  AGREEMENTS:  Those listed in Clause One: Background,  in Points 1.3 and 1.4
     of the Option Agreement.

2.5  DAYS: Working days.

2.6  EMTG: EMPRESA MINERA TAMBO GRANDE S.A.

2.7  FEASIBILITY  STUDY:  The document  prepared as a result of explorations and
     studies carried out in the Mining Concessions belonging to the Tambo Grande
     Mining Project and which was prepared in accordance  with the provisions of
     the Option Agreement.

2.8  PARTIES: MINERO PERU and MANHATTAN.

2.9  TAMBO GRANDE MINING  PROJECT OR PROJECT:  The Tambo Grande Mining  Project,
     which includes  carrying out the necessary  studies and construction of the
     infrastructure  required  according  to the  Feasibility  Study,  with  the
     purpose of developing the Mining Concessions.

CLAUSE THREE:   INCORPORATION AND PURPOSE OF THE STOCK COMPANY
------------

3.1  MINERO PERU and  MANHATTAN  agree to  incorporate  a stock  company  called
     EMPRESA MINERA TAMBO GRANDE S.A., which may use the abbreviation EMTG S.A.

3.2  EMTG shall have as its  object,  the  carrying  out of all mining  industry
     activities in accordance  with Article VI of the  Preliminary  Title of the
     Uniform  Text  of the  General  Mining  Law,  approved  by  Supreme  Decree
     014-92-EM  and/or any substitute  regulations.  Mining industry  activities
     shall be  carried  out in the  Mining  Concessions,  which form part of the
     Tambo Grande Mining Project.

CLAUSE FOUR:    DOMICILE OF THE COMPANY
-----------

EMTG is domiciled in the City of Lima, and may establish  branches,  agencies or
offices in any other place within the territory of the Republic of Peru.


<PAGE>


                                                                               7


CLAUSE FIVE:    DURATION OF THE COMPANY
-----------

EMTG has an indefinite life and shall commence  operations  immediately after it
is registered in the Book of Contracting Companies and Other Bodies Corporate of
the Lima  Regional  Office of the  Mining  Registry.  Nevertheless,  those  acts
carried  out  before  this  date  in the  name of the  Company  are  subject  to
registration thereof and must be ratified by the Board of Directors within three
(3) months following commencement of operations.

CLAUSE SIX:     CAPITAL STOCK AND SHARES
----------

6.1  The  capital  stock  of  EMTG  is S/.  ___________________  Nuevos  Soles),
     represented by Class A shares and  ___________________  Class B shares, all
     having a face value of S/.  1,00 each,  fully  subscribed  and paid up. The
     capital,  class,  title and  percentage of shares have been  established in
     accordance with the provisions contained in this clause.

     Class A shares  represent  75% of the capital stock and shall be originally
     owned by MANHATTAN.  Class B shares, in turn,  represent 250 of the capital
     stock and shall be originally owned by MINERO PERU.

6.2  The contribution and subscription of the shares is made by the shareholders
     in the following amounts and proportions:

     (a)  MINERO PERU contributes the following Mining Concessions to EMTG:

--------------------------------------------------------------------------------
| Name of Concession  |   Code No.   |  Area (Hectares)  |  Mining    Registry |
|                     |              |                   |  Entry      Volume  |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 1   |   610070-A   |       1 000       |   002      012306   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 2   |   610070-B   |       1 000       |   002      012305   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 3   |   610070-C   |       1 000       |   002      012304   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 4   |   610070-D   |       1 000       |   002      012303   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 5   |   610070-E   |       1 000       |   002      012302   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 6   |   610070-F   |       1 000       |   002      012301   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 7   |   610070-G   |       1 000       |   002      012300   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 8   |   610070-H   |       1 000       |   002      012291   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 9   |   610070-1   |       1 000       |   002      012292   |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 10  |   610070-J   |       1 000       |   002      012299   |
|---------------------|--------------|-------------------|---------------------|
|Total Area           |              |       10 000      |                     |
--------------------------------------------------------------------------------

The  said  mining  concessions  have  been  valued  at  S/  ______________,   as
established in Point 3.3 of the option Agreement.


<PAGE>


                                                                               8


     (b)  MANHATTAN  shall  contribute  to EMTG the  Feasibility  Study  and the
          Financing  Plan  referred  to in  Clauses  Five and Six of the  Option
          Agreement, the value of which is S/ ___________________, in accordance
          with the stipulations in Point 3.5 of the Option Agreement.

6.3  Any capital  contribution to EMTG, made by Class A shareholders,  including
     that referred to in paragraph b) of Point 6.2,  shall be distributed in the
     following form: 75% of the  contribution  shall be represented by shares in
     favor of Class A shareholders,  and the remaining 25% shall correspond to a
     supplementary premium in favor of Class B shareholders.  This premium shall
     be capitalized and the shares issued to Class B shareholders.

     For  its  part,  any  capital   contribution  to  EMTG,  made  by  Class  B
     shareholders,  including  that  referred to in  paragraph  a) of Point 6.2,
     shall be distributed in the following form: 250 of the  contribution  shall
     be  represented  by  shares  in  favor  of  Class B  shareholders,  and the
     remaining 75% shall be a  supplementary  premium for Class A  shareholders.
     The  supplementary  premium shall be capitalized  and the resulting  shares
     shall be issued in favor of Class A shareholders.

6.4  Class A and Class B shares have the same rights, except as indicated in the
     following paragraph:

     Insofar as MINERO PERU is  titleholder  of Class B shares  representing  at
     least ten percent (10%) of EMTG shares, the affirmative vote of MINERO PERU
     shall be required to adopt the following resolutions:

     (a)  Transfer of mining concessions and rights.

     (b)  Entering  into  agreements  with  subsidiaries,  affiliates  or parent
          companies and companies related to MANHATTAN.

     (c)  Amendments  to the By-laws  which may  represent  an  amendment to the
          Articles of Incorporation.

     The aspects to which the foregoing point refers,  may only be dealt with in
     a Shareholders'  General  Meeting,  which must be called expressly for such
     purpose.  If MINERO PERU, as Class B shareholder  does not attend the first
     meeting,  the  resolutions  will be adopted in the second  meeting by those
     shares  which are  represented  therein  and will be fully  binding  on the
     Company.  In no case may the Shareholders'  Meeting delegate the discussion
     and approval of the aforementioned issues to the Board of Directors.

6.5  If MINERO PERU becomes owner of Class B shares  representing  less than ten
     percent (10%) of the capital  stock of EMTG,  the  restrictions  and rights
     stipulated  in Point 6.4 above shall be null and void,  as a matter of law,
     the titleholders of Class B shares being obliged to formalize the amendment
     to the Articles of Incorporation mentioned in Point 6.4 above.


<PAGE>


                                                                               9


6.6  MANHATTAN recognizes the right of MINERO PERU to not be obliged to make any
     other capital  contribution to EMTG, in addition to that indicated in Point
     6.2 a).

     It is the  responsibility  of MANHATTAN,  as a Class A shareholder,  and of
     future Class A shareholders, to obtain through EMTG the necessary resources
     to develop  the Tambo  Grande  Mining  Project  and to  contribute  to EMTG
     capital the required funds in order for MINERO PERU to keep its interest at
     twentyfive  percent  (25%) of the  capital  stock  during the life of EMTG,
     except if MINERO PERU transfers all or some of its Class B shares, in which
     case the transferred  shares shall be automatically  converted into Class A
     shares,  persisting the obligation to keep the  stockholding  percentage of
     MINERO  PERU,  only with  respect to the Class B shares  which  MINERO PERU
     still owns.

     The  aforementioned  share  conversion  shall  not be made if  MINERO  PERU
     transfers  its  shares  to a  state-owned  company  or any  other  Peruvian
     Government body.

6.7  MINERO PERU, in addition to the  representation  corresponding to it in the
     Shareholders' Meeting, shall participate actively in the Board of Directors
     of  the  Company,  in  accordance  with  the  cumulative  voting  mechanism
     regulated by the Business  Corporations Act and with at least one director,
     provided  that it holds  Class B shares  representing  at least ten percent
     (10%) of EMTG capital stock.

6.8  The  parties are obliged to pledge  their  shares in EMTG if the  Financing
     Plan  referred  to in Clause  Six of the Option  Agreement  calls for this,
     expressly  authorizing  EMTG to constitute  such pledge or guarantee on its
     behalf  and   representation,   through  its   General   Manager  or  other
     representative.  This  agreement  constitutes  a  Power  of  Attorney  with
     Representation  in accordance with the provisions of Articles 1790 and 1806
     of the Civil Code,  and the  attorney  shall not  receive any  compensation
     whatsoever with respect to this.

     Without  prejudice to the  stipulations  in the  foregoing  paragraph,  the
     Parties agree that if any of them fail to constitute  the aforesaid  pledge
     or guarantee,  this may be constituted by the Arbitration Court referred to
     in Clause Eleven, being expressly authorized for this by virtue of the said
     clause.

CLAUSE SEVEN:   APPOINTMENT OF THE FIRST BOARD OF DIRECTORS
------------

The first EMTG Board of  Directors  shall  consist  of five (5)  directors,  the
following persons having been appointed:

Regular Directors:

1.  ..............     a  .............    Citizen, identified by  .............
2.  ..............     a  .............    Citizen, identified by  .............
3.  ..............     a  .............    Citizen, identified by  .............
4.  ..............     a  .............    Citizen, identified by  .............
5.  ..............     a  .............    Citizen, identified by  .............



<PAGE>


                                                                              10


Alternate Directors

6.  ..............     a  .............    Citizen, identified by  .............
7.  ..............     a  .............    Citizen, identified by  .............
8.  ..............     a  .............    Citizen, identified by  .............
9.  ..............     a  .............    Citizen, identified by  .............
10................     a  .............    Citizen, identified by  .............


CLAUSE EIGHT:   APPOINTMENT OF GENERAL MANAGER
------------

The   General   Manager   shall   be   Mr.   ________________,   identified   by
________________,  and he shall enjoy the powers  indicated in Article 37 of the
By-laws and any other powers conferred upon him by the Shareholders'  Meeting or
the Board of Directors.

CLAUSE NINE:    INVESTMENT COMMITMENT
-----------

9.1  MANHATTAN is hereby  expressly  committed before MINERO PERU to ensure that
     EMTG shall invest, during a period of not more than four years, a sum equal
     to hereinafter  called the Investment  Commitment,  for the development and
     implementation  of the  Project,  which  sum has been  determined  from the
     Feasibility  Study in  accordance  with the  provisions of paragraph one of
     Point 5.2 of the Option Agreement.

     The period of four (4) years  referred to in this clause,  shall be counted
     from  the  date  of  execution  of the  Public  Deed  resulting  from  this
     Agreement.

     This term of four (4) years shall be divided  into four annual  periods for
     the purposes stipulated in Point 9.2.

9.2  For the purposes of evidencing the investment  being carried out during the
     four year period, for the development of the Project, MANHATTAN must submit
     to MINERO PERU, within sixty (60) days following the end of each one of the
     annual  periods  referred  to in  Point  9.1,  a  sworn  statement  of  the
     investment made by EMTG in the respective  annual period,  which investment
     must be duly recorded according to accounting  standards generally accepted
     in Peru and countersigned by a firm of independent internationally renowned
     auditors selected by MINERO PERU from a minimum of three (3) firms proposed
     by MANHATTAN.  The auditors'  fees shall be for the account of MINERO PERU.
     The  auditing  firm  will  be the  same  during  the  whole  period  of the
     investment commitment, unless the Parties mutually agree otherwise.

     MANHATTAN shall formulate its proposal for auditing firms as referred to in
     the  foregoing  paragraph,  within  four (4) months  following  the date of
     signing  hereof,  and MINERO PERU must select the auditing  firm within two
     (2) months following the receipt of the proposal from MANHATTAN.

9.3  In the event that at the end of the four (4) year  period,  an amount  less
     than the Investment  Commitment indicated in Point 9.1 has been invested in
     accordance  with the opinion of the auditing  firm selected by MINERO PERU,
     MANHATTAN  must pay in cash to


<PAGE>


                                                                              11


     MINERO PERU, thirty percent (30%) of the difference  between the Investment
     Commitment  and the  investment  actually made during the said period.  The
     payment of this  sanction  shall be made within  fifteen  (15) working days
     following the request in writing from MINERO PERU.

     The  payment  of this  sanction  shall  fully  satisfy  the  obligation  of
     MANHATTAN and shall,  consequently,  free it from completing the Investment
     Commitment.

     Notwithstanding what has been expressed in the previous paragraphs,  and at
     the request of any of the Parties,  the result of the audit  carried out to
     determine the investment made by EMTG during the four (4) year period,  may
     be checked by either of the other two auditing firms proposed as stipulated
     in Point  9.2.  The  opinion  of this  auditing  firm  shall  be final  and
     unappealable by whoever requested the checking,  with the other party being
     able to request  that the  investment  made  should be checked by the third
     auditing firm. The decision of this firm shall be final,  unappealable  and
     mandatory for both parties. In any of these cases, the fees of the auditing
     firm shall be paid by the party requesting the audit.

9.4  The period  foreseen in Point 9.1 shall be suspended if, during the time of
     performance  of the Investment  Commitment,  an act of God or force majeure
     occurs,  or in case of arbitration,  provided that the assumptions of Point
     11.6 are met.

     Acts of God or force  majeure are defined as those  events which are beyond
     the reasonable control and which may not be anticipated by the Parties,  or
     those which having been anticipated,  could not be reasonably  prevented by
     the Parties.

     The  suspension  shall  continue as long as the act of God or force majeure
     stops or prevents  MANHATTAN and/or EMTG from complying with the Investment
     Commitment.

9.5  Should an act of God or force majeure occur,  MANHATTAN must send a written
     notice to MINERO PERU as soon as is reasonably possible, informing it about
     the incident and indicating the aspects of the Investment  Commitment  that
     will be affected.

     MANHATTAN must continue with the  performance of the Investment  Commitment
     in those aspects which are not affected by the act of God or force majeure.

     MINERO PERU shall reply in writing indicating whether or not it accepts the
     reason for the  occurrence,  within five (5) days following  receipt of the
     aforementioned communication. In the event of any discrepancy regarding the
     existence  of an act of God or force  majeure,  it shall  be  submitted  to
     arbitration in accordance with Clause Eleven hereof.

     The guarantee  stipulated in Point 9.9 must be maintained in force and must
     be renewed in accordance with Point 9.10.


<PAGE>


                                                                              12


9.6  For the  purposes  of this  Clause,  the entire  funds used by EMTG for the
     development  of the Project  shall be  considered  as  investment  counting
     towards compliance with the Investment Commitment of MANHATTAN.

     Without  prejudice  to the  foregoing,  investments  made  under any of the
     following  headings  shall  be  considered  as  funds  used by EMTG for the
     development of the Project:

     (a)  Technical and/or financial feasibility studies.

     (b)  Exploration and development.

     (c)  Construction  work and  equipment  destined for the  exploitation  and
          processing of ore.

     (d)  Construction  of  infrastructure  work  for  transport,   receipt  and
          dispatch; and for supply and distribution of water and energy, as well
          as sewage and environmental control.

     (e)  Acquisition of surface land,  rights of way and other rights over real
          property,  as well as  construction  of  civil  infrastructure  works,
          including offices and housing.

     (f)  Import  duties  and all  taxes  paid by EMTG  in  complying  with  the
          Investment Commitment,  which are incorporated into the assets and are
          not recoverable as tax credit.

     (g)  Insurance and freight charges.

     (h)  Financial costs which correspond strictly to the preoperative stage.

     The above list is for all purposes illustrative and not specific.

9.7  If any of the disbursements allocated to pay some of the items mentioned in
     Point 9.6 above are  registered  as expenses in EMTG  accounting  or exceed
     what is a reasonable  market  value,  under no  circumstances  will they be
     considered as investment.

9.8  Investments made in domestic currency shall be converted,  for the purposes
     of this Clause,  into US Dollars at the selling  exchange rate published by
     the  Superintendency  of Banking and  Insurance in the Official  Gazette El
     Peruano, on the date of their entry in the accounting books.

9.9  As guarantee of compliance with the Investment Commitment,  MANHATTAN shall
     provide MINERO PERU,  upon signing of the Agreement,  with an  irrevocable,
     unconditional,  joint letter of guarantee, for automatic execution, without
     the benefit of excursion,  issued by a bank in favor of MINERO PERU for US$
     __________  (____________  US Dollars).  The letter of  guarantee  shall be
     valid for a period of not less than fourteen  (14) months  counted from the
     date of execution  hereof.  The amount of the guarantee shall be equivalent
     to 300 of the Investment  Commitment  indicated in Point 9.1. The guarantee
     indicated in the foregoing  paragraph  shall be renewed upon expiry of


<PAGE>


                                                                              13


     each of the  annual  periods  referred  to in  Point  9.1,  under  the same
     conditions,  for a period of not less than  twelve  (12)  months and for an
     amount  equivalent  to 30%  of  the  remaining  amount  of  the  Investment
     Commitment.  The remaining  amount of the  Investment  Commitment  shall be
     evidenced in the sworn statement of investment stipulated in Point 9.2.

     These renewals shall be carried out until full completion of the Investment
     Commitment indicated in Point 9.1.

     If MANHATTAN  refuses to renew the  guarantee in the form  indicated in the
     foregoing  paragraph,  MINERO  PERU  shall be  entitled  to  foreclose  the
     guarantee  which  is  due,  thus  freeing  MANHATTAN  from  its  Investment
     Commitment.

9.10 Notwithstanding  the provisions of Point 9.9, the Parties hereby agree that
     MANHATTAN shall have complied with the Investment  Commitment,  if in spite
     of not  having  complied  with the said  Commitment,  the  Project is fully
     completed  within  the term  established  in Point  9.1 and  therefore,  no
     sanction  whatsoever  shall be applicable  and MINERO PERU shall return the
     bank guarantee to MANHATTAN.

     For these purposes,  the company that prepared the Feasibility Study or any
     of the other companies  referred to in Point 5.4 of the Option  Agreement -
     at the  choice of MINERO  PERU - shall  verify in situ  whether  or not the
     development   of  the  Project  has  been  complied  with  in  the  manner,
     characteristics  and  specifications  indicated by the  Feasibility  Study,
     issuing the corresponding  completion certificate,  as the case may be. The
     costs for in situ verification by the selected  company,  shall be borne by
     MANHATTAN.

     In the event that MINERO PERU,  following  receipt of a communication  from
     MANHATTAN  stating that the Project has been  completed,  fails to select a
     company to confirm  whether or not this is true,  within 15 days  following
     receipt of the said communication,  the selection will be made by MANHATTAN
     and the result of the  verification  carried  out shall be  compulsory  for
     MINERO PERU.

9.11 MANHATTAN  hereby  declares to know  Article 5 of Law 25284 and  guarantees
     that  the  open  pit or  underground  mining  methods  to be used  will not
     physically  affect  the town of  Tambo  Grande,  nor  cause  damage  to its
     population. In addition, the tailings will be located in special dump areas
     so as not  to  affect  the  agriculture  areas  in the  Project's  zone  of
     influence, under responsibility of MANHATTAN.

9.12 The obligation  agreed by MANHATTAN by virtue of this Clause is independent
     of its  condition as EMTG  shareholder  or of the number of shares which it
     may hold;  therefore,  the  obligation  fully  persists,  even if MANHATTAN
     transfers  the whole or part of its  shareholding,  unless it  assigns  its
     contractual  position in this  Agreement in accordance  with the provisions
     contained  in  Article  1435 of the  Civil  Code.  Once the  assignment  is
     approved,  MANHATTAN  shall be  exempted  from  each and  every  one of the
     obligations hereunder.


<PAGE>


                                                                              14


9.13 MANHATTAN  consents in advance to any  assignment of  contractual  position
     made by MINERO PERU to a Peruvian state-owned company or any other Peruvian
     Government body.

9.14 The Parties hereby expressly agree that EMTG shall mantain a Liabilities to
     Capital ratio not greater than 1,5 to 1.

     The Liabilities to Capital ratio may be changed at the request of MANHATTAN
     provided it is sustained  on  reasonable  grounds and  represents a greater
     benefit  for EMTG.  MINERO  PERU shall not  refuse to comply  with the said
     request unless the change affects its interests,  in which case the refusal
     must be sustained on reasonable grounds.

CLAUSE TEN:     COMPENSATION FOR THE ACCOUNT OF EMTG
----------

10.1 EMTG  undertakes to pay  compensation to MINERO PERU, as from the beginning
     of  commercial  operation  for  any  sale,  exchange  of ore  or any  other
     mechanism  used  for the  transfer  of the  same,  in  accordance  with the
     following table, as per LME grade "A" Settlement quotation:

     Up to US$ 0,60 per lb of copper                                   None
     More than US$ 0,60 to US$ 0,70 per lb of copper                   1,0%
     More than US$ 0,70 to US$ 0,80 per lb of copper                   2,0%
     More than US$ 0,80 to US$ 0,90 per lb of copper                   3,0%
     More than US$ 0,90 to US$ 1,00 per lb of copper                   3,5%
     More than US$ 1,00 to us$ 1,10 per lb of copper                   4,0%
     More than US$ 1,10 to US$ 1,20 per lb of copper                   4,5%
     More than US$ 1,20 per lb of copper                               5,0%

The net sales value shall be  determined  as a function of the  settlements  for
sale  of  the  production  from  the  Concessions  subject  matter  hereof  less
deductions  for smelting and refining  costs,  any taxes arising in the country,
chargeable to the  operation or to local or export sales,  currently in force or
to be created and actually applied,  as well as discounts usually  deductible by
law and for losses due to  impurities,  as well as transport  expenses  from the
mine to the port of  shipment  and from.  the  Peruvian  port of shipment to the
point of  destination  of the products,  and any expenses on account of broker's
fees and sales commission,  insurance expenses from the warehouse in the port of
shipment to the warehouse in the port of destination in the case of exports,  as
well as expenses incurred in sample taking. All of these concepts must be in the
range of costs  prevailing in the market,  duly  governed,  in addition,  by the
principle  that  compensation  will be paid  atthe time and in the form in which
payment is made for the products.

10.2 The  compensation  indicated in Point 10.1 constitutes an obligation on the
     Tambo Grande Mining  Concessions  mentioned in Point 6.2 during the life of
     the Project.  Said  obligation  must be recorded in the Mining  Concessions
     Register of the Mining Register.

10.3 Compensation  shall be paid by EMTG to MINERO PERU in US dollars,  over the
     final sales  settlement  and within the first five (5) calendar days of the
     month following the month when the sales were made.


<PAGE>


                                                                              15


10.4 Failure to comply with timely  payments shall accrue  interest at the LIBOR
     rate plus five percent (5%). This due will be charged automatically.

CLAUSE ELEVEN:  SOLUTION OF DISPUTES
-------------

11.1 Any disputes  which result or arise from the  interpretation,  application,
     validity and execution of the Articles of Incorporation and/or By-laws, and
     which cannot be solved  between the Parties,  shall be solved by means of a
     final and  unappealable  award,  issued by an  arbitration  court  from the
     National  Institute  of Mining and  Petroleum  Law in  accordance  with the
     Arbitration Rules of the said Institute,  to which rules the parties hereto
     unconditionally submit.

11.2 The arbitration shall be de jure.

11.3 One party  submitting a dispute to arbitration  shall suffice for the other
     party to be automatically bound by the arbitration.

11.4 There  shall be three (3)  arbitrators  and each party shall  appoint  one,
     while the third,  who shall preside over the  arbitration  court,  shall be
     appointed by the two arbitrators  chosen by the Parties.  In the event that
     thirty (30) days have elapsed since the  appointment of the  arbitrators by
     the Parties, and the third arbitrator has not been appointed, either of the
     two Parties may request the National  Institute of Mining and Petroleum Law
     to appoint the third  arbitrator  within ten (10) days  following  the date
     when it learns of such request.

11.5 The arbitrators  shall apply the internal  substantive laws of the Republic
     of Peru. The arbitration shall take place in the City of Lima, Peru.

11.6 The Parties hereby agree that under no  circumstances  may the  arbitrators
     interrupt  the  execution  of  this  Agreement  nor  compliance   with  the
     obligations  contained  hereunder,  while the  arbitration  procedure is in
     process, except for those obligations submitted to arbitration or which may
     be affected by the arbitration procedure.

11.7 The Parties hereby agree and declare that the  arbitration  award is final,
     binding and immediately enforceable.  Thus, they hereby waive all rights of
     appeal,  appeal for  reversal and any other  objection  to the  arbitration
     award.

11.8 The  maximum  term for the  arbitration  process  shall be one  hundred and
     twenty (120) business days, counted as from the date of installation of the
     arbitration  court or similar  act.  Due to any  justifiable  reasons,  the
     arbitration court may extend the term.

CLAUSE TWELVE:  INTERPRETATION
-------------

12.1 In case of conflict the Articles of  Incorporation  shall  prevail over the
     By-laws.

12.2 By mutual  agreement,  the Parties may amend the Contract due to reasonable
     causes; in such case, amendments must be approved by the Board of Directors
     or  equivalent  body of each of the  Parties,  and no  legal  provision  or
     government  authorization  confirming or approving the said amendments will
     be required.


<PAGE>


                                                                              16


CLAUSE THIRTEEN: BY-LAWS
---------------

The Company shall be ruled by the following By-laws.

                                     BY-LAWS
                                     -------

                                    TITLE ONE

                 NAME, PURPOSE, REGISTERED OFFICE AND EXISTENCE

ARTICLE 1: NAME OF THE CORPORATION

The name of the corporation is Empresa Minera Tambo Grande S.A., but it may also
use the abbreviation EMTG S.A.

ARTICLE 2: CORPORATE PURPOSE

The purpose of the  corporation is to carry out mining  activities in accordance
with Article VI of the  Preliminary  Title,  Single  Uniform Text of the General
Mining Law, approved by Supreme Decree 014-92-EM. The mining activities shall be
carried out in the Mining  Concessions  which  comprise the Tambo Grande  Mining
Project.

ARTICLE 3: REGISTERED OFFICE OF THE CORPORATION

The registered office of the corporation is in the City of Lima. The corporation
may  establish  branches,  agencies  or  offices in any other  place  within the
Republic of Peru.

ARTICLE 4: EXISTENCE OF THE CORPORATION

The corporation is organized on a perpetual basis and shall begin its operations
after being registered in the Book of Contractual  Corporations and Other Bodies
Corporate of the Regional Registry Office in and for Lima of the Public Registry
of Mines.  Notwithstanding  the foregoing,  those acts  performed  previously on
behalf of the  corporation  shall be  subject  to its  registration  and must be
ratified  by  the  Board  of  Directors   within  three  (3)  months   following
commencement of its operations.

                                    TITLE TWO

                            CAPITAL STOCK AND SHARES

ARTICLE 5: CAPITAL STOCK

The  capital  stock  of  the  corporation  adds  up  to  S/.   _________________
(_________________ Million Nuevos Soles), represented by ________ Class A shares
and ________ Class B shares, with a face value of S/.1.00 each, fully subscribed
and  paid-up.  The  capital  stock,  class,  title  ownership  and  stockholding
percentage have been duly established in the Articles of Incorporation.


<PAGE>


                                                                               2


ARTICLE 6: RIGHTS OF SHARES

Without prejudice to the rights and obligations  contemplated in the Articles of
Incorporation  for Class A and B shares,  any and all  shares  entitled  to vote
confer upon their legitimate holders the status of shareholders and at least the
following rights:

(a)  To participate  in the profit sharing and the net worth  resulting from the
     liquidation;

(b)  To intervene and vote in the Shareholders' Meetings;

(c)  To control, in the form established by Law and these By-laws, the corporate
     management;

(d)  To participate in the election of the Board of Directors;

(e)  To leave the  corporation  in the cases and in the manner  provided  for by
     Law.

Except for the special rights inherent in the Class B shares as indicated in the
Articles of  Incorporation  and these  By-laws,  all shares  establish  the same
rights and obligations  for their holders.  Any and all shares of the same class
shall enjoy the same rights and assume the same obligations.

ARTICLE 7: OWNERSHIP OF SHARES

The corporation  considers holder of a share the person appearing as such in the
Share Register.  In case of litigation with respect to the ownership of a share,
the  exercise of the  shareholder's  rights by the person  registered  as holder
thereof in the  corporation  shall be accepted,  except for a court order on the
contrary.

ARTICLE 8: SHARE REGISTER

The  corporation  shall  keep a Share  Register  to enter the  creation,  issue,
transfer,  split-off,  split-up or split of shares, creation of rights and liens
thereon, share transfer restrictions and shareholders'  agreements or agreements
with  third  parties  regarding  the shares or aimed at the  exercise  of rights
inherent therein.

ARTICLE 9: CONTENTS OF SHARE CERTIFICATES

Share certificates shall contain the following information:

(a)  The name of the corporation, its registered office, its existence, the date
     of the public  deed of its  articles of  incorporation  and the name of the
     Notary Public executing the same, as well as details of the registration of
     the corporation with the corresponding Registry;

(b)  The capital stock amount and the face value of each share;

(c)  The class of shares represented by the certificate;


<PAGE>


                                                                               3


(d)  The  number of shares  represented  by the  certificate  and the rights and
     obligations inherent in the shares;

(e)  The amount  partially  paid-up for each share,  or the indication  that the
     share has been fully paid-up;

(f)  Any lien or charge imposed upon the share;

(g)  Any transfer restriction on the shares represented by the certificate;  and
     h) Date of issue and number of certificate.

Each Share  Certificate  shall be  countersigned by two (02) Directors or by one
(O1) Director and the General Manager.

ARTICLE 10: INTERIM SHARE CERTIFICATES

No share  certificates  or shares may be issued  before the  corporation  or the
corresponding  capital  stock  increase is duly  registered  with the  pertinent
Registry.  However,  if the  share  meets  the legal  subscription  and  payment
requirements,  interim certificates may be issued, expressly indicating that the
registration of the corporation or of the  corresponding  capital stock increase
is pending.

                                   TITLE THREE

                            BODIES OF THE CORPORATION

                             Shareholders' Meetings

ARTICLE 11: GENERAL PROVISION

The Shareholders'  Meeting is the highest-ranking  authority in the corporation.
When duly  called and if the  required  quorum is present  and  pursuant  to the
Articles of Incorporation and these By-laws, the Shareholders'  Meeting resolves
any and all  matters  within  its  competence.  Any and all  shareholders,  even
dissenters and those not attending the Shareholders'  Meeting,  shall be subject
to the resolutions adopted thereby, without prejudice to the rights of challenge
and removal granted by Law to shareholders. It is presumed that each shareholder
is fully aware, due to his capacity as such, of the provisions  contained in the
Articles of Incorporation and these Corporate By-laws.

ARTICLE 12: VENUE OF THE SHAREHOLDERS' MEETING

The  Shareholders'  Meetings  shall take place in the  corporation's  registered
office or in any other place within the country or abroad.

ARTICLE 13: CALL TO THE SHAREHOLDERS' MEETING

The  Shareholders'  Meeting  shall be  called  by the  Board of  Directors  when
provided for by Law or these  By-laws,  or when the Board of Directors  deems it
convenient  for  the  corporate  interest


<PAGE>


                                                                               4


or when requested by shareholders representing at least ten percent (10%) of the
subscribed shares entitled to vote.

ARTICLE 14: CALL TO A SHAREHOLDERS' MEETING AT THE REQUEST OF THE SHAREHOLDERS

Whenever one or more shareholders representing at least ten percent (10%) of the
subscribed shares entitled to vote request,  by means of a notarial letter, that
a  Shareholders'  Meeting  be held,  the Board of  Directors  must  publish  the
corresponding  notice  within  fifteen (15) days  following  receipt of the said
request,  which must  indicate  the  matters to be dealt with as proposed by the
said shareholders.

The  Shareholders'  Meeting shall be held within fifteen (15) days following the
date of publication of the pertinent notice.

ARTICLE 15: ANNUAL REGULAR SHAREHOLDERS' MEETING

The Shareholders' Meeting shall be compulsorily held at least once a year within
three (3) months following the end of each fiscal year in order to:

(a)  Issue an opinion on the corporate  management  and the economic  results of
     the previous  fiscal year,  as  contained  in the  corresponding  financial
     statements;

(b)  Decide on the profit sharing, if any;

(c)  Elect the Board of Directors' members and fix their compensations;

(d)  Decide on all other matters contained in the notice;

(e)  Designate  the  independent  auditors  to be in  charge  of  reviewing  the
     financial statements.

ARTICLE 16: OTHER DUTIES OF THE SHAREHOLDERS' MEETING

In  addition,  the  Shareholders'  Meeting  shall  also deal with the  following
matters:

(a)  Remove  the Board of  Directors'  members  and elect the  persons  who will
     replace them;

(b)  Amend the Corporate By-laws;

(c)  Increase  or reduce  the  capital  stock.  The  Shareholders'  Meeting  may
     delegate  to the  Board of  Directors  the  faculty  to  agree  on  capital
     increases  within the parameters  established in Article 206 of the General
     Corporations' Act;

(d)  Issue bonds;

(e)  Agree on the  disposal  in one single  act,  of assets with a book value in
     excess of fifty percent (50%) of the capital stock;

(f)  Order special inquiries and audits;


<PAGE>


                                                                               5


(g)  Agree  on  the  transformation,   merger,   break-up,   reorganization  and
     dissolution of the corporation, and decide on its liquidation;

(h)  Decide on the  matters  with  respect  to which the Law,  the  Articles  of
     Incorporation  and these  By-laws order its  intervention  and on any other
     matter which is in the corporate interest.

ARTICLE 17: REQUIREMENTS TO CALL A MEETING

Notices for all Shareholders' Meetings must be published in the Official Gazette
El Peruano and in another daily of wide  circulation in Lima. In the case of the
Annual Regular Shareholders'  Meeting, the notice must be published at least ten
(10) calendar days in advance of the date fixed therefor. In all other cases, it
must be published at least three (3) days in advance,  unless otherwise provided
for by Law.

The notice indicates the venue,  date and time of the  Shareholders'  Meeting as
well as the matters to be dealt with  therein.  Likewise,  it may  indicate  the
place,  date and time that it will be held on second and third call,  if this is
the case.

The  Shareholders'  Meeting  may only deal  with the  matters  indicated  in the
notice, except for~the cases permitted by Law.

ARTICLE 18: SECOND CALL

If a duly called  Shareholders'  Meeting is not held upon the first call and the
date for a second call has not been  indicated  in the  notice,  the second call
shall be made subject to the same  publication  requirements  as those set forth
for the first call,  indicating  that it is a second call,  within ten (10) days
following  the date of the  meeting  not held  and at  least  three  (3) days in
advance of the second meeting.

ARTICLE 19: ATTENDANCE TO THE SHAREHOLDERS' MEETING

The holders of shares entitled to vote and registered in their name in the Share
Register  up to two (2) days prior to the  Shareholders'  Meeting can attend the
same and exercise their rights therein.

If the Directors and the General Manager are not  shareholders,  they may attend
the Shareholders' Meeting, with the right to speak but not to vote.

The Shareholders' Meeting or the Board of Directors may authorize the attendance
of officers,  professionals  and technicians  working for the corporation or for
other persons interested in the good running of the corporate matters,  with the
right to speak but not to vote.

ARTICLE 20: REPRESENTATION IN THE SHAREHOLDERS' MEETINGS

Any and all shareholders  entitled to participate in the Shareholders'  Meetings
may be represented therein by another person.


<PAGE>


                                                                               6

The said  representation  must be  evidenced in writing and shall be special for
each Shareholders' Meeting,  except in the case of powers of attorney granted by
means of a public  deed.  Special  powers  of  attorney  for each  Shareholders'
Meeting may be sent by fax.

Powers of attorney must be registered with the corporation at least  twenty-four
(24) hours before the date fixed for the Shareholders' Meeting.

The  representation  in the Shareholders'  Meeting may be revoked.  The personal
attendance of the  represented  shareholder to the  Shareholders'  Meeting shall
imply the revocation of the special power of attorney  granted or the suspension
for such  meeting of the power of attorney  conferred by means of a public deed.
The provisions contained in this paragraph shall not apply to irrevocable powers
of  attorney  or express  agreements  set forth by the By-laws or to other cases
permitted by Law.

ARTICLE 21: QUORUM

The quorum is counted and  established  at the  beginning  of the  Shareholders'
Meeting.  Once  the  quorum  has  been  verified,   the  Chairman  declares  the
Shareholders' Meeting open.

Shares  belonging to shareholders  that have entered the  Shareholders'  Meeting
after it has been opened shall not be counted in order to establish  the quorum,
but they may be used to exercise the right to vote.

ARTICLE 22: SIMPLE QUORUM

The  Shareholders'  Meeting shall be  considered  validly open in the first call
when at least fifty percent (50%) of the subscribed  shares entitled to vote are
represented therein.

The attendance of any number  whatsoever of subscribed  shares  entitled to vote
shall be enough in the second call.

ARTICLE 23: QUORUM AND SPECIAL MAJORITIES

In order to adopt any  resolution  whatsoever  in a  Shareholders'  Meeting that
deals with any of the matters  mentioned in the Articles of  Incorporation,  the
stipulations contained in the Articles of Incorporation shall apply.

ARTICLE 24: CHAIRMAN AND SECRETARY OF THE SHAREHOLDERS' MEETING

The Shareholders' Meeting shall be presided over by the Chairman of the Board of
Directors or, in his absence, by the Vice Chairman or, in absence of the latter,
by any person to be designated by the Shareholders'  Meeting from the attendants
thereto.  The General  Manager of the corporation  shall serve as Secretary.  In
case of absence or  impediment  of the  latter,  the  person  designated  by the
Shareholders' Meeting shall serve as Secretary.


<PAGE>


                                                                               7


ARTICLE 25: SPECIAL SHAREHOLDERS' MEETINGS

In view that  there are  different  classes  of shares in the  corporation,  the
resolutions of the Shareholders'  Meeting affecting the special rights of any of
the  said  classes  must  be  approved  in a  separate  meeting  by the  Special
Shareholders' Meeting of the affected class.

The Special Shareholders' Meeting shall be governed by the provisions regulating
the Shareholders'  Meeting,  if applicable,  and may be called together with the
Shareholders' Meeting.

ARTICLE 26: MINUTES OF THE SHAREHOLDERS' MEETINGS

The  Shareholders'  Meeting as well as the  resolutions  adopted therein must be
recorded in minutes,  which shall  contain a summary of the meeting and shall be
entered  in a  minutes  book or in loose  sheets  kept  according  to the  legal
requirements.

The minutes of each meeting shall state the place, date and time of the meeting;
the  indication  whether the meeting is held upon a first or a second call;  the
names  of  the  shareholders  or  shareholders'  representatives  attending  the
meeting;  the number and class of shares held by them;  the names of the persons
who served as Chairman and  Secretary;  the dates and form of the  notices;  the
method  and  outcome  of the  voting;  the  resolutions  adopted;  and any other
information required by Law.

                              Corporate Management
                              --------------------

ARTICLE 27: ADMINISTRATORS

The corporation is managed by the Board of Directors and the General Management.

                               Board of Directors
                               ------------------

ARTICLE 28: THE BOARD OF DIRECTORS

The Board of Directors is composed of five (5)  members.  In addition,  five (5)
alternate  Directors  may be  elected  to replace  the  regular  ones in case of
vacancy, absence or impediment thereof.

ARTICLE 29: NUMBER OF DIRECTORS, DURATION AND ELECTION OF THE BOARD OF DIRECTORS

Directors,  both regular and alternate, are elected by the Shareholders' Meeting
for a one-year term and may be reelected on an indefinite basis. Directors shall
continue  holding their positions even if the period for which they were elected
has already expired, until a new election is carried out.

ARTICLE 30: PLACE OF MEETINGS

The meetings of the Board of Directors may be held in the  registered  office or
any other place within the country or abroad. They shall be presided over by the
Chairman  of the  Board of  Directors  and,  in his  absence,  by the  alternate
Director  thereof.  In case of absence  of


<PAGE>


                                                                               8


both of them,  the meeting shall be presided over by the person to be designated
by the Board of Directors.  The General  Manager or any person  appointed by the
Board of Directors shall serve as Secretary.

ARTICLE 31: CALL AND REPRESENTATIVES

The Board of  Directors  shall meet when called by the  Chairman or requested by
any of its members or by the  General  Manager.  The meeting  shall be called at
least  ten  (10)  days  in  advance  by  means  of  a  notice   delivered   with
acknowledgment of receipt or by letter, fax or telex,  indicating the matters to
be dealt with.

Any Director  may submit for the  consideration  of the Board of  Directors  the
matters deemed convenient for the corporate interest.

In the event that both the  regular  Director  and his  alternate  are unable to
attend the meeting, any other alternate Director may replace them.

ARTICLE 32: QUORUM

The  quorum  of the Board of  Directors  shall be  composed  of three (3) of its
members.  Each  Director  shall be  entitled to one vote.  Resolutions  shall be
adopted with the favorable vote of at least two (2) Directors.

ARTICLE 33: COMPENSATION OF DIRECTORS

The position of Director shall be remunerated and the corresponding amount shall
be fixed by the Shareholders'  Meeting.  The sharing of profits for the Board of
Directors may only be made from the net profits and, if applicable, after taking
the legal reserve corresponding to the pertinent fiscal year.

ARTICLE 34: RESOLUTIONS

Resolutions to be adopted by the Board of Directors shall be recorded in minutes
kept in a book  authenticated  pursuant  to Law.  When  due to any  circumstance
whatsoever,  the minutes of a meeting may not be recorded in the pertinent book,
a special document will be issued for this purpose and shall be then transcribed
in the said book.

ARTICLE 35: BOARD OF DIRECTORS' DUTIES

The Board of Directors enjoys the management and legal representation  faculties
required  to  administer  the  corporation  in  accordance  with  its  corporate
purposes,  except for the matters assigned to the Shareholders'  Meeting whether
by Law or these By-laws.

The Board of Directors enjoys the following faculties, among others:

(a)  To elect its Chairman;

(b)  To regulate its own proceedings;


<PAGE>


                                                                               9


(c)  To accept the  resignation of its members and call the alternate  Directors
     to fill any vacancies;

(d)  To entrust one or more of the  Directors  with the solution or execution of
     certain matters, without prejudice to the powers it may grant to any person
     whatsoever;

(e)  To appoint the General Manager and the top-ranking officials,  fixing their
     duties and compensation;

(f)  To annually submit before the shareholders the annual report, the financial
     statements and the profit sharing proposal, if any;

(g)  To  decide  on the  filing,  continuation,  abandonment  or  settlement  of
     judicial and/or  administrative  proceedings and the submission of disputes
     to arbitration;

(h)  To  declare  dividends  when  authorized  by the  Shareholders'  Meeting to
     distribute  them;  and i) To enter into any and all kind of  contracts  and
     commitments  and take decisions on any and all kind of  businesses,  except
     for those corresponding to the Shareholders' Meeting.

                                   Management
                                   ----------

ARTICLE 36: APPOINTMENT

The  corporation  shall  have  a  General  Manager  appointed  by the  Board  of
Directors. The General Manager shall hold such position for an indefinite period
and may be removed by the Board of Directors at any moment,  without  indicating
the reason therefor.

ARTICLE 37: DUTIES

The General Manager shall have the following duties:

(a)  To  perform  and  execute  any  usual  acts and  contracts  related  to the
     corporate purpose;

(b)  To represent the  corporation,  enjoying the general and special powers set
     forth in the Civil Procedural Code;

(c)  To attend the Board of Directors'  meetings with the right to speak but not
     to vote, except in the case of private meetings;

(d)  To attend  the  Shareholders'  Meetings  with the right to speak but not to
     vote, unless otherwise decided by the Shareholders' Meeting;

(e)  To designate  and remove the officers and  employees  and suspend them from
     their duties, informing thereof to the Board of Directors;

(f)  To submit the general expenses budget before the Board of Directors for its
     approval;


<PAGE>


                                                                              10


(g)  To supervise the  administration,  being  responsible  for  controlling the
     employees' work and the various corporate activities;

(h)  To issue  certificates  and  authentications  regarding the contents of the
     corporate books and records;

(i)  To  serve as  Secretary  in the  Shareholders'  Meetings  and the  Board of
     Directors' meetings;

(j)  To open current  accounts and draw checks against the  corporation's  funds
     kept on said accounts,  under the signature system approved by the Board of
     Directors;

(k)  To endorse the checks drawn to the order of the corporation to be deposited
     in the checking accounts kept thereby with banks;

(l)  All  other   faculties   agreed  to  be  granted  to  him  whether  by  the
     Shareholders' Meeting or the Board of Directors.

                                    TITLE IV

                            AMENDMENT TO THE BY-LAWS;
                      CAPITAL STOCK INCREASE AND REDUCTION

ARTICLE 38: AMENDMENTS TO THE BY-LAWS

The following is required to amend these By-laws:

(a)  The notice for the  Shareholders'  Meeting  shall  clearly  and  accurately
     indicate the matters which amendment shall be proposed to the Shareholders'
     Meeting; and

(b)  The  corresponding  resolution  shall be adopted  with the  presence of the
     required quorum and the majority vote established by Law.

ARTICLE 39: INCREASE THROUGH NEW CONTRIBUTIONS

A capital  increase  through  new  contributions  or through  capitalization  of
credits  against the corporation  requires that all subscribed  shares have been
fully paid-up.

ARTICLE 40: INCREASE OR REDUCTION ORDERED BY LAW

In case the law  requires  that the capital  stock  amount be amended,  the said
amount and the face value of the shares shall be considered  amended by Law when
the  Shareholders'  Meeting  approve the financial  statements  reflecting  said
amendment to the capital  stock  amount,  without  changing  each  shareholder's
interest.  The certified copy of the corresponding minutes is enough to register
such amendment.


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                                                                              11


ARTICLE 41: PREEMPTIVE RIGHT FOR SUBSCRIPTION

In the case of capital increases due to new  contributions,  shareholders  shall
enjoy a preemptive right for the  subscription,  on a prorata basis with respect
to the  shares  held  by  them,  of the  new  shares  which  creation  has  been
authorized. By virtue of a resolution adopted by the Shareholders' Meeting, this
right  may  be  evidenced  in  an  instrument  called  preemptive   subscription
certificate,  which may be freely transferred among shareholders and acquired by
them in  proportion  to the  shares  held by  them.  In case no  shareholder  is
interested  in the  subscription  of the  new  shares  or all of  them  are  not
subscribed, they may be transferred to third parties.

ARTICLE 42: CAPITAL REDUCTION

The capital reduction resolution must contain the amount by which the capital is
reduced,  the  manner in which the said  reduction  is  carried  out,  the funds
against  which  it is made  and  the  procedure  whereby  it is  performed.  The
reduction must affect all  shareholders on a prorata basis with respect to their
interest in the capital stock, without modifying their stockholding  percentage.
The said resolution must be published three (3) times every five (5) days.

ARTICLE 43: REDUCTION DUE TO REFUND OF CONTRIBUTIONS

In case the capital  reduction  implies a  contribution  refund or the exemption
from any  liability  dividends or any other amount owed for  contributions,  the
said  reduction  may only be carried out once thirty (30) days have elapsed from
the last publication of the notice described in article 43 above and provided no
third party opposes the reduction.

ARTICLE 44: REDUCTION DUE TO LOSSES

A capital  reduction is  compulsory  when as a result of losses,  the capital is
decreased by more than fifty  percent  (500),  and those losses are not overcome
after one fiscal  year,  unless the  corporation  has legal  reserves  or freely
disposable reserves,  new contributions are made, or the shareholders assume the
said losses by an amount offsetting the same.

                                     TITLE V

                     FINANCIAL STATEMENTS AND PROFIT SHARING

ARTICLE 45:  Within a maximum term of ninety (90)  calendar  days  following the
closing date of each fiscal year, the Board of Directors must prepare the annual
report,  the financial  statements and the profit sharing  proposal,  if any, to
submit them before the Shareholders' Meeting for their approval.

ARTICLE  46:  The  financial  statements  shall be  prepared  and  submitted  in
accordance  with the  applicable  legal  provisions  and pursuant to  accounting
principles generally accepted in Peru,  consistently and appropriately  applied,
in order to supply all information  required to meet the Peruvian accounting and
tax laws. The corporation  shall provide their  shareholders with any additional
financial information  reasonably requested by them, delivering them free copies
of the documents indicated by Law.


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                                                                              12


The financial statements of the corresponding fiscal year shall be subject to an
independent  audit to be performed by certified  public  accountants,  acting as
agents in Peru of internationally renowned auditing firms.

ARTICLE 47:  Dividends  may only be paid against  profits  actually  obtained or
freely  disposable  reserves  in the form,  manner  and time  determined  by the
Shareholders'  Meeting, which may delegate to the Board of Directors the faculty
to resolve  the  allocation  of  interim  dividends,  subject to the  provisions
contained in the General  Corporations' Act and the Policy for the Allocation of
Dividends approved by the Shareholders' Meeting.

                                    TITLE VI

           DISSOLUTION, LIQUIDATION AND TERMINATION OF THE CORPORATION

ARTICLE 48: The corporation shall be dissolved due to the causes provided for by
Law or when resolved by a Shareholders' Meeting specially called to such effect.

ARTICLE 49: The  corporation so dissolved  shall maintain its legal status while
the  liquidation is carried out. The  Shareholders'  Meeting shall designate the
liquidators and the alternates thereof and establish their attributions.

ARTICLE 50: Once the corporate assets have been distributed,  the termination of
the corporation shall be entered in the pertinent Registry.

Kindly  add,  Mr.  Notary,  all other  clauses  required  by Law and forward the
pertinent  notices to the Mining  Registry of Lima, to file the  reservation  of
registration  priority in the name of the corporation and of this  Incorporation
Agreement.

Lima, May 17, 1999

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RM/MANHAT027