exv10w9



 







Exhibit 10.9




CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND

MINE OPERATING AGREEMENT



between


CANYON RESOURCES CORPORATION


and


NEW HORIZON URANIUM CORPORATION


EFFECTIVE DATE: January 23, 2006



 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE I	 	DEFINITIONS AND CROSS-REFERENCES	 	 	1	 
	 
	 	1.1	 	Definitions	 	 	1	 
	 
	 	1.2	 	Cross-References	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II	 	NAME, PURPOSES AND TERM	 	 	1	 
	 
	 	2.1	 	General	 	 	1	 
	 
	 	2.2	 	Name	 	 	2	 
	 
	 	2.3	 	Purposes	 	 	2	 
	 
	 	2.4	 	Limitation	 	 	2	 
	 
	 	2.5	 	Term	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III	 	REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES	 	 	3	 
	 
	 	3.1	 	Representations and Warranties of Both Participants	 	 	3	 
	 
	 	3.2	 	Representations and Warranties of Canyon	 	 	3	 
	 
	 	3.3	 	Disclosures	 	 	5	 
	 
	 	3.4	 	Record Title	 	 	5	 
	 
	 	3.5	 	Loss of Title	 	 	5	 
	 
	 	3.6	 	Royalties, Production Taxes and Other Payments Based on Production	 	 	6	 
	 
	 	3.7	 	Indemnities/Limitation of Liability	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV	 	RELATIONSHIP OF THE PARTICIPANTS	 	 	8	 
	 
	 	4.1	 	No Partnership	 	 	8	 
	 
	 	4.2	 	Federal Tax Elections and Allocations	 	 	8	 
	 
	 	4.3	 	State Income Tax	 	 	8	 
	 
	 	4.4	 	Tax Returns	 	 	8	 
	 
	 	4.5	 	Other Business Opportunities	 	 	8	 
	 
	 	4.6	 	Waiver of Rights to Partition or Other Division of Assets	 	 	9	 
	 
	 	4.7	 	Transfer or Termination of Rights to Properties	 	 	9	 
	 
	 	4.8	 	Implied Covenants	 	 	9	 
	 
	 	4.9	 	No Third Party Beneficiary Rights	 	 	9	 






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	 	 	 	 	 	 	Page	 
	ARTICLE V	 	CONTRIBUTIONS BY PARTICIPANTS	 	 	9	 
	 
	 	5.1	 	Participants’ Initial Contributions	 	 	9	 
	 
	 	5.2	 	Failure to Make Initial Contribution	 	 	11	 
	 
	 	5.3	 	Additional Contributions	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI	 	INTERESTS OF PARTICIPANTS	 	 	13	 
	 
	 	6.1	 	Initial Participating Interests	 	 	13	 
	 
	 	6.2	 	Changes in Participating Interests	 	 	13	 
	 
	 	6.3	 	Elimination of Minority Interest	 	 	14	 
	 
	 	6.4	 	Continuing Liabilities Upon Adjustments of Participating Interests	 	 	15	 
	 
	 	6.5	 	Documentation of Adjustments to Participating Interests	 	 	15	 
	 
	 	6.6	 	Grant of Lien and Security Interest	 	 	16	 
	 
	 	6.7	 	Subordination of Interests	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII	 	MANAGEMENT COMMITTEE	 	 	16	 
	 
	 	7.1	 	Organization and Composition	 	 	16	 
	 
	 	7.2	 	Decisions	 	 	17	 
	 
	 	7.3	 	Meetings	 	 	17	 
	 
	 	7.4	 	Action Without Meeting in Person	 	 	18	 
	 
	 	7.5	 	Matters Requiring Approval	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	MANAGER	 	 	18	 
	 
	 	8.1	 	Appointment	 	 	18	 
	 
	 	8.2	 	Powers and Duties of Manager	 	 	19	 
	 
	 	8.3	 	Standard of Care	 	 	23	 
	 
	 	8.4	 	Resignation; Deemed Offer to Resign	 	 	24	 
	 
	 	8.5	 	Payments To Manager	 	 	25	 
	 
	 	8.6	 	Transactions With Affiliates	 	 	25	 
	 
	 	8.7	 	Activities During Deadlock	 	 	25	 






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	 	 	 	 	 	 	Page	 
	ARTICLE IX	 	PROGRAMS AND BUDGETS	 	 	25	 
	 
	 	9.1	 	Initial Program and Budget	 	 	25	 
	 
	 	9.2	 	Operations Pursuant to Programs and Budgets	 	 	25	 
	 
	 	9.3	 	Presentation of Programs and Budgets	 	 	25	 
	 
	 	9.4	 	Review and Adoption of Proposed Programs and Budgets	 	 	26	 
	 
	 	9.5	 	Election to Participate	 	 	26	 
	 
	 	9.6	 	Recalculation or Restoration of Reduced Interest Based on Actual Expenditures	 	 	27	 
	 
	 	9.7	 	Pre-Feasibility Study Program and Budgets	 	 	28	 
	 
	 	9.8	 	Completion of Pre-Feasibility Studies and Selection of Approved Alternatives	 	 	30	 
	 
	 	9.9	 	Programs and Budgets for Feasibility Study	 	 	31	 
	 
	 	9.10	 	Development Programs and Budgets; Project Financing	 	 	31	 
	 
	 	9.11	 	Expansion or Modification Programs and Budgets	 	 	32	 
	 
	 	9.12	 	Budget Overruns; Program Changes	 	 	32	 
	 
	 	9.13	 	Emergency or Unexpected Expenditures	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X	 	ACCOUNTS AND SETTLEMENTS	 	 	33	 
	 
	 	10.1	 	Monthly Statements	 	 	33	 
	 
	 	10.2	 	Cash Calls	 	 	33	 
	 
	 	10.3	 	Failure to Meet Cash Calls	 	 	33	 
	 
	 	10.4	 	Cover Payment	 	 	34	 
	 
	 	10.5	 	Remedies	 	 	34	 
	 
	 	10.6	 	Audits	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI	 	DISPOSITION OF PRODUCTION	 	 	36	 
	 
	 	11.1	 	Taking In Kind	 	 	36	 
	 
	 	11.2	 	Failure of Participant to Take In Kind	 	 	36	 
	 
	 	11.3	 	Hedging	 	 	36	 






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	 	 	 	 	 	 	Page	 
	ARTICLE XII	 	WITHDRAWAL AND TERMINATION	 	 	37	 
	 
	 	12.1	 	Termination by Expiration or Agreement	 	 	37	 
	 
	 	12.2	 	Termination by Deadlock	 	 	37	 
	 
	 	12.3	 	Withdrawal	 	 	37	 
	 
	 	12.4	 	Continuing Obligations and Environmental Liabilities	 	 	37	 
	 
	 	12.5	 	Disposition of Assets on Termination	 	 	37	 
	 
	 	12.6	 	Non-Compete Covenants	 	 	38	 
	 
	 	12.7	 	Right to Data After Termination	 	 	38	 
	 
	 	12.8	 	Continuing Authority	 	 	38	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII	 	ACQUISITIONS WITHIN AREA OF INTEREST	 	 	39	 
	 
	 	13.1	 	General	 	 	39	 
	 
	 	13.2	 	Notice to Non-Acquiring Participant	 	 	39	 
	 
	 	13.3	 	Option Exercised	 	 	39	 
	 
	 	13.4	 	Option Not Exercised	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIV	 	ABANDONMENT AND SURRENDER OF PROPERTIES	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XV	 	SUPPLEMENTAL BUSINESS AGREEMENT	 	 	 	 
	 
	 	15.1	 	Supplemental Business Agreement	 	 	40	 
	 
	 	15.2	 	Subdivided Area of Interest	 	 	41	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XVI	 	TRANSFER OF INTEREST; PREEMPTIVE RIGHT	 	 	41	 
	 
	 	16.1	 	General	 	 	41	 
	 
	 	16.2	 	Limitations on Free Transferability	 	 	41	 
	 
	 	16.3	 	Preemptive Right	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XVII	 	DISPUTES	 	 	44	 
	 
	 	17.1	 	Governing Law	 	 	44	 
	 
	 	17.2	 	Venue	 	 	44	 
	 
	 	17.3	 	Alternative Dispute Resolution	 	 	44	 
	 
	 	17.4	 	Fees and Costs	 	 	45	 






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	 	 	 	 	 	 	Page	 
	ARTICLE XVIII	 	CONFIDENTIALITY, OWNERSHIP, USE AND DISCLOSURE OF INFORMATION	 	 	45	 
	 
	 	18.1	 	Business Information	 	 	45	 
	 
	 	18.2	 	Participant Information	 	 	45	 
	 
	 	18.3	 	Permitted Disclosure of Confidential Business Information	 	 	46	 
	 
	 	18.4	 	Disclosure Required By Law	 	 	46	 
	 
	 	18.5	 	Public Announcements	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIX	 	GENERAL PROVISIONS	 	 	47	 
	 
	 	19.1	 	Notices	 	 	47	 
	 
	 	19.2	 	Gender	 	 	48	 
	 
	 	19.3	 	Currency	 	 	48	 
	 
	 	19.4	 	Headings	 	 	48	 
	 
	 	19.5	 	Waiver	 	 	48	 
	 
	 	19.6	 	Modification	 	 	48	 
	 
	 	19.7	 	Force Majeure	 	 	49	 
	 
	 	19.8	 	Rule Against Perpetuities	 	 	49	 
	 
	 	19.9	 	Further Assurances	 	 	49	 
	 
	 	19.10	 	Entire Agreement; Successors and Assigns	 	 	50	 
	 
	 	19.11	 	Memorandum	 	 	50	 
	 
	 	19.12	 	Counterparts	 	 	50	 
	 
	 	 	 	 	 	 	 	 
	EXHIBIT A	 	ASSETS AND AREA OF INTEREST	 	 	 	 
	EXHIBIT B	 	ACCOUNTING PROCEDURES	 	 	 	 
	EXHIBIT C	 	TAX MATTERS	 	 	 	 
	EXHIBIT D	 	DEFINITIONS	 	 	 	 
	EXHIBIT E	 	PRODUCTION ROYALTY	 	 	 	 
	EXHIBIT F	 	INITIAL PROGRAM AND BUDGET	 	 	 	 






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CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT




          This CONVERSE URANIUM PROJECT EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
(“Agreement”) is made as of January 23, 2006
(“ Effective Date”) between Canyon Resources Corporation, a Delaware corporation
(“Canyon”), with an office located at 14142 Denver West Parkway, Suite 250, Golden, CO 80401 and
New Horizon Uranium Corporation, a British Columbia corporation
(“ Horizon”), with an office located at 2221 East Street, Suite 200, Golden, Colorado 80401.




RECITALS




          A. Canyon owns or controls certain Properties and other Assets located in or concerning
Converse and Niobrara Counties, State of Wyoming, which Properties and other Assets are described
further in Exhibit A and defined in Exhibit D.




          B. Horizon wishes to participate with Canyon in the exploration, evaluation and if justified
the development and mining of mineral resources within the Properties, and Canyon is willing to
grant such rights to Horizon.




          NOW THEREFORE, in consideration of the covenants and conditions contained herein, Canyon and
Horizon agree as follows:




ARTICLE I

DEFINITIONS AND CROSS-REFERENCES




          1.1 Definitions. The terms defined in Exhibit D and elsewhere shall have the defined meaning
wherever used in this Agreement, including in Exhibits.




          1.2 Cross-References. References to “Exhibits,” “Articles,” “Sections” and “Subsections”
refer to Exhibits, Articles, Sections and Subsections of this Agreement. References to
“Paragraphs” and “Subparagraphs” refer to paragraphs and subparagraphs of the referenced Exhibits.




ARTICLE II

NAME, PURPOSES AND TERM




          2.1 General. Canyon and Horizon hereby enter into this Agreement for the purposes hereinafter
stated. All of the rights and obligations of the Participants in connection with the Assets or the
Area of Interest and all Operations shall be subject to and governed by this Agreement.




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          2.2 Name. The Assets shall be managed and operated by the Participants under the name of the
“Converse Joint Venture”. The Manager shall accomplish any registration required by applicable
assumed or fictitious name statutes and similar statutes.




          2.3 Purposes. This Agreement is entered into for the following purposes and for no others,
and shall serve as the exclusive means by which each of the Participants accomplishes such
purposes:





	 	(a)	 	to conduct Exploration within the Area of Interest,
	 
	 	(b)	 	to acquire additional real property and other interests within the Area of Interest
including contractual rights of access and use of land, water, and utilities,
	 
	 	(c)	 	to evaluate the possible Development and Mining of the Properties, and, if justified, to
engage in Development and Mining,
	 
	 	(d)	 	to engage in Operations on the Properties,
	 
	 	(e)	 	to engage in marketing Products, to the extent provided by Article XI,
	 
	 	(f)	 	to complete and satisfy all Environmental Compliance obligations and Continuing
Obligations affecting the Properties, and
	 
	 	(g)	 	to perform any other activity necessary, appropriate, or incidental to any of the
foregoing.





          2.4 Limitation. Unless the Participants otherwise agree in writing, the Operations shall be
limited to the purposes described in Section 2.3, and nothing in this Agreement shall be construed
to enlarge such purposes or to change the relationships of the Participants as set forth in Article
IV.




          2.5 Term. The term of this Agreement shall be for thirty (30) years from the Effective Date
and for so long thereafter as Products are produced from the Properties on a continuous basis, and
thereafter until all materials, supplies, equipment and infrastructure have been salvaged and
disposed of, any required Environmental Compliance is completed and accepted and the Participants
have agreed to a final accounting, unless the Business is earlier terminated as herein provided.
For purposes hereof, Products shall be deemed to be produced from the Properties on a “continuous




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basis” so long as production in commercial quantities is not halted for more than one year for
reasons other than Force Majeure as provided for in Section 19.7.




ARTICLE III

REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES




          3.1 Representations and Warranties of Both Participants. As of the Effective Date, each
Participant warrants and represents to the other that:




               (a) it is a corporation duly organized and in good standing in its state or province of
incorporation and it shall become qualified to do business and shall be in good standing in those
states where necessary in order to carry out the purposes of this Agreement within thirty (30)
calendar days following the Effective Date;



               (b) it has the capacity to enter into and perform this Agreement and all transactions
contemplated herein and that all corporate, board of directors, shareholder, surface and mineral
rights owner, lessor, lessee and other actions required to authorize it to enter into and perform
this Agreement have been properly taken;



               (c) it will not breach any other agreement or arrangement by entering into or performing this
Agreement;



               (d) it is not subject to any governmental order, judgment, decree, debarment, sanction or Laws
that would preclude the permitting or implementation of Operations under this Agreement; and



               (e) this Agreement has been duly executed and delivered by it and is valid and binding upon it
in accordance with its terms.



          3.2 Representations and Warranties of Canyon. As of the Effective Date, Canyon makes the
following representations and warranties to Horizon:




               (a) Canyon does not own any of the Properties in fee simple.



               (b) With respect to those Properties in which Canyon holds an interest under leases or other
contracts: (i) Canyon is in exclusive possession of such Properties; (ii) Canyon has not received
any notice of default of any of the terms or provisions of such leases or other contracts; (iii)
Canyon has the authority under such leases or other contracts to perform fully its obligations
under this Agreement; (iv) to Canyon’s knowledge, such leases and other contracts are valid and are
in good standing; (v) Canyon has no knowledge of any act or omission or any condition on the
Properties which could be considered or construed as a default under any such lease or other



3









 




contract; and (vi) to Canyon’s knowledge, such Properties are free and clear of all Encumbrances or
defects in title except for those specifically identified in Paragraph 1.1 of Exhibit A.




               (c) Canyon has delivered to or made available for inspection by Horizon all Existing Data in
its possession or control, and true and correct copies of all leases or other contracts relating to
the Properties.



               (d) With respect to unpatented mining claims located by Canyon that are included within the
Properties, except as provided in Paragraph 1.1 of Exhibit A and subject to the paramount title of
the United States: (i) the
unpatented mining claims were properly laid out and monumented; (ii) all required location and
validation work was properly performed; (iii) location notices and certificates were properly
recorded and filed with appropriate governmental agencies; (iv) all assessment work required to
hold the unpatented mining claims has been performed and all Governmental Fees have been paid in a
manner consistent with that required of the Manager pursuant to Subsection 8.2(k) through the
assessment year ending August 31, 2006; (v) all affidavits of assessment work, evidence of payment
of Governmental Fees, and other filings required to maintain the claims in good standing have been
properly and timely recorded or filed with appropriate governmental agencies; (vi) the claims are
free and clear of Encumbrances or defects in title; and (vii) Canyon has no knowledge of
conflicting mining claims. Nothing in this Subsection, however, shall be deemed to be a
representation or a warranty that any of the unpatented mining claims contains a valuable mineral
deposit.



               (e) The Properties do not include any unpatented mining claims not located by Canyon.



               (f) With respect to the Properties, to Canyon’s knowledge, there are no pending or threatened
actions, suits, claims or proceedings, and there have been no previous transactions affecting its
interests in the Properties which have not been for fair consideration.



               (g) Except as to matters otherwise disclosed in writing to Horizon prior to the Effective
Date,



                    (i) to Canyon’s knowledge, the conditions existing on or with respect to the Properties and
its ownership and operation of the Properties are not in violation of any Laws (including without
limitation any Environmental Laws), nor causing or permitting any damage (including Environmental
Damage, as defined below) or impairment to the health, safety, or enjoyment of any person at or on
the Properties or in the general vicinity of the Properties;



4









 





                    (ii) to Canyon’s knowledge, there have been no past violations by it or by any of its
predecessors in title of any Environmental Laws or other Laws affecting or pertaining to the
Properties, nor any past creation of damage or threatened damage to the air, soil, surface waters,
groundwater, flora, fauna, or other natural resources on, about or in the general vicinity of the
Properties (“Environmental Damage”); and



                    (iii) Canyon has not received inquiry from or notice of a pending investigation from any
governmental agency or of any administrative or judicial proceeding concerning the violation of any
Laws.



               The representations and warranties set forth above shall survive the execution and delivery of
any documents of Transfer provided under this Agreement. For a representation or warranty made to
a Participant’s “knowledge,” the term “knowledge” shall mean actual knowledge on the part of the
officers, employees, and agents of the representing Participant or of facts that would reasonably
lead to the indicated conclusions.



          3.3 Disclosures. Each of the Participants represents and warrants that at the time this
Agreement is entered into and as of the Effective Date, if different, it is unaware of any material
facts or circumstances that have not been disclosed in this Agreement, which should be disclosed to
the other Participant in order to prevent the representations and warranties in this Article from
being materially misleading. Canyon has disclosed to Horizon all information it believes to be
relevant concerning the Assets, including without limitation all information in its possession
concerning Environmental Liabilities, and has provided to or made available for inspection by
Horizon all such information, but does not make any representation or warranty, express or implied,
as to the accuracy or completeness of the information (except as provided in Section 3.2) or as to
the boundaries or value of the Assets. Each Participant represents to the other that in
negotiating and entering into this Agreement it has relied solely on its own appraisals and
estimates as to the value of the Assets and upon its own geologic and engineering interpretations
related thereto.




          3.4 Record Title. Until directed otherwise by the Management Committee, title to the Assets
shall be held by Canyon for Canyon and Horizon, as their Participating Interests are determined
pursuant to this Agreement.




          3.5 Loss of Title. Any failure or loss of title to the Assets, and all costs of defending
title, shall be charged to the Business Account, except that all costs and losses arising out of or
resulting from breach of the representations and warranties of Canyon or Horizon as to title shall
be charged to Canyon or Horizon, as the case may be.




5









 








          3.6 Royalties, Production Taxes and Other Payments Based on Production. The Manager shall
make all required payments of production royalties, taxes based on production of Products, and
other payments out of production to private parties and governmental entities with such payments
subject to timely reimbursement from each Participant in proportion to its
Participating Interest. The Manager undertakes to make such payments timely and otherwise in
accordance with applicable laws and agreements. The Manager may require each Participant to advance
its proportionate share and each Participant shall timely advance such funds. The Manager shall
record all funds received in the Business Account and maintain evidence of timely payment for all
such required payments. In the event that either Participant fails to advance or reimburse its
proportionate share of any such required payment, the other Participant shall have the right to
advance such funds to cover such payment and shall thereby become subrogated to the rights of such
third party; provided, however, that the reimbursement or advance of funds by the paying
Participant to cover the share of the other Participant shall not constitute acceptance by the
paying Participant of any liability to such third party for the underlying obligation.




          3.7 Indemnities/Limitation of Liability.




               (a) Each Participant shall indemnify the other Participant, its directors, officers,
employees, agents and attorneys, or Affiliates (collectively “Indemnified Participant”) from and
against the entire amount of any Material Loss. A “Material Loss” shall mean all costs, expenses,
damages or liabilities, including attorneys’ fees and other costs of litigation (either threatened
or pending) arising out of or based on a breach by a Participant (“Indemnifying Participant”) of
any representation, warranty or covenant contained in this Agreement, including without limitation:



                    (i) any failure by a Participant to timely advance or reimburse funds to the Manager for the
Participant’s proportionate share of required royalties, production taxes and other payments out of
production due to third parties as required by Section 3.6;



                    (ii) any action taken for or obligation or responsibility assumed on behalf of the other
Participant, its directors, officers, employees, agents and attorneys, or Affiliates by a
Participant, any of its directors, officers, employees, agents and attorneys, or Affiliates, in
violation of Section 4.1;



                    (iii) failure of a Participant or its Affiliates to comply with the non-compete or Area of
Interest provisions of Section 12.6 or Article XIII;



                    (iv) any Transfer that causes termination of the tax partnership established by Section 4.2,
against which the transferring Participant shall indemnify the non-transferring Participant as
provided in Article V of Exhibit C; and



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                    (v) failure of a Participant or its Affiliates to comply with the preemptive right under
Section 16.3.



               A Material Loss shall not be deemed to have occurred until, in the aggregate, an Indemnified
Participant incurs losses, costs, damages or liabilities in excess of One Hundred Thousand Dollars
($100,000) relating to breaches of warranties, representations and covenants contained in this
Agreement. Canyon’s aggregate liability to all Indemnified Participants under this Section for
breaches of the representations in Subsection 3.2(g) shall not, however, exceed Five Hundred
Thousand Dollars ($500,000).



               (b) If any claim or demand is asserted against an Indemnified Participant in respect of which
such Indemnified Participant may be entitled to indemnification under this Agreement, written
notice of such claim or demand shall promptly be given to the Indemnifying Participant. The
Indemnifying Participant shall have the right, but not the obligation, by notifying the Indemnified
Participant within thirty (30) days after its receipt of the notice of the claim or demand, to
assume the entire control of (subject to the right of the Indemnified Participant to participate,
at the Indemnified Participant’s expense and with counsel of the Indemnified Participant’s choice),
the defense, compromise, or settlement of the matter, including, at the Indemnifying Participant’s
expense, employment of counsel of the Indemnifying Participant’s choice. Any damages to the assets
or business of the Indemnified Participant caused by a failure by the Indemnifying Participant to
defend, compromise, or settle a claim or demand in a reasonable and expeditious manner requested by
the Indemnified Participant, after the Indemnifying Participant has given notice that it will
assume control of the defense, compromise, or settlement of the matter, shall be included in the
damages for which the Indemnifying Participant shall be obligated to indemnify the Indemnified
Participant. Any settlement or compromise of a matter by the Indemnifying Participant shall
include a full release of claims against the Indemnified Participant which has arisen out of the
indemnified claim or demand.



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ARTICLE IV

RELATIONSHIP OF THE PARTICIPANTS




          4.1 No Partnership. Nothing contained in this Agreement shall be deemed to constitute either
Participant the partner of the other, or, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal representative of the other, or to create any
fiduciary relationship between them. The Participants do not intend to create, and this Agreement
shall not be construed to create, any mining, commercial or other partnership. Neither
Participant, nor any of its directors, officers, employees, agents and attorneys, or Affiliates,
shall act for or assume any obligation or responsibility on behalf of the other Participant, except
as otherwise expressly provided herein, and any such action or assumption by a Participant’s
directors, officers, employees, agents and attorneys, or Affiliates shall be a breach by such
Participant of this Agreement. The rights, duties, obligations and liabilities of the Participants
shall be several and not joint or collective. Each Participant shall be responsible only for its
obligations as herein set out and shall be liable only for its share of the costs and expenses as
provided herein, and it is the express purpose and intention of the Participants that their
ownership of Assets and the rights acquired hereunder shall be as tenants in common.




          4.2 Federal Tax Elections and Allocations. Without changing the effect of Section 4.1, the
relationship of the Participants shall constitute a tax partnership within the meaning of Section
761(a) of the United States Revenue Code of 1986. Tax elections and allocations shall be made as
set forth in Exhibit C.




          4.3 State Income Tax. To the extent permissible under applicable law, the relationship of the
Participants shall be treated for state income tax purposes in the same manner as it is for federal
income tax purposes.




          4.4 Tax Returns. After approval of the Management Committee, any tax returns or other
required tax forms shall be filed in accordance with Exhibit C.




          4.5 Other Business Opportunities. Except as expressly provided in this Agreement, each
Participant shall have the right to engage in and receive full benefits from any independent
business activities or operations, whether or not competitive with this Business, without
consulting with, or obligation to, the other Participant. The doctrines of “corporate opportunity”
or “business opportunity” shall not be applied to this Business nor to any other activity or
operation of either Participant. Neither Participant shall have any obligation to the other with
respect to any opportunity to acquire any property outside the Area of Interest at any time, or,
except as otherwise provided in Section 12.6, within the Area of Interest after the termination of
the Business. Unless otherwise agreed in writing, neither Participant shall have any obligation to
process or otherwise treat any Products in any facility owned or controlled by such Participant.




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          4.6 Waiver of Rights to Partition or Other Division of Assets. The Participants hereby waive
and release all rights of partition, or of sale in lieu
thereof, or other division of Assets except as provided in Article XV, including any such rights
provided by Law.




          4.7 Transfer or Termination of Rights to Properties. Except as otherwise provided in this
Agreement or as expressly agreed to by the Participants in writing, neither Participant shall
Transfer all or any part of its interest in the Assets or this Agreement or otherwise permit or
cause such interests to terminate.




          4.8 Implied Covenants. There are no implied covenants contained in this Agreement other than
those of good faith and fair dealing.




          4.9 No Third Party Beneficiary Rights. This Agreement shall be construed to benefit the
Participants and their respective successors and assigns only, and shall not be construed to create
third party beneficiary rights in any other party or in any governmental organization or agency,
except to the extent required by Project Financing and as provided in Subsection 3.7(a).




ARTICLE V

CONTRIBUTIONS BY PARTICIPANTS




          5.1 Participants’ Initial Contributions.




               (a) Canyon, as its Initial Contribution, hereby contributes the Assets described in Exhibit A
to the purposes of this Agreement. The amount of Two Million Dollars ($2,000,000) shall be
credited to Canyon’s Equity Account on the Effective Date with respect to Canyon’s Initial
Contribution.



               (b) Subject to Horizon’s right of withdrawal as set forth in Section 5.2, Horizon, as its
Initial Contribution shall fund Operations under Subsection 5.1(e) totaling One Million Dollars
($1,000,000.00) on or before the third anniversary of the Effective Date, with Two Hundred Thousand
Dollars ($200,000) of the Initial Contribution estimated as the minimum to be funded in the first
year following the Effective Date, Three Hundred Thousand Dollars ($300,000) of the Initial
Contribution estimated to be funded in the second year following the Effective Date, and the
remaining Five Hundred Thousand Dollars ($500,000) of the Initial Contribution estimated to be
funded in the third year following the Effective Date. All funding by Horizon in excess of the
stated amount for each year shall be credited towards Horizon’s subsequent year(s) funding
commitment. Horizon may elect, at any time during the period ending on the third anniversary of
the Effective Date to complete the funding of the One Million Dollars ($1,000,000) Initial
Contribution amount, including by lump sum payment made to the Business Account



9









 




equal to the remaining unfunded portion of the One Million Dollar ($1,000,000) Initial Contribution
amount. In determining whether Horizon’s funding obligation has been met, only costs that are
properly chargeable to the Business Account under Exhibit B shall be included (“Qualifying
Expenses”); provided, however, Horizon shall not be entitled to an Administrative Charge during the
time it is making Qualifying Expenses. Upon completion of the Initial Contribution funding, such
amount shall be credited to Horizon’s Equity Account.




          (c) Upon Horizon’s completion of its Initial Contribution under Subsection 5.1(b) and
concurrent with Horizon’s earn-in of its Initial Participating Interest set forth in Section 6.1,
Horizon shall tender to Canyon five hundred thousand (500,000) Horizon common shares for no
additional consideration. Issuance of such common shares is subject to approval of Horizon’s
listing of common shares on the TSX Venture Exchange or an alternate stock exchange solely at
Horizon’s election of such exchange. Should Horizon not have such approval within one hundred
eighty (180) days of the Effective Date, the common shares shall be issued from Horizon’s treasury
shares.




          (d) Upon Horizon’s completion of its Initial Contribution under Subsection 5.1(b) and
concurrent with Horizon’s earn-in of its Initial Participating Interest set forth in Section 6.1,
Horizon shall also tender to Canyon a warrant for the acquisition of an additional five hundred
thousand (500,000) Horizon common shares at a price equal to one hundred twenty five percent (125%)
of the then current market price of Horizon stock. The “then current market price” shall be: i)
if Horizon is a public company trading on any Canadian or United States stock exchange at the date
of tender, the thirty (30) day trailing average price of Horizon common shares sold on the stock
exchange on which Horizon is traded on the date five (5) business days prior to tender; or ii) if
Horizon is not a publicly traded company at the date of tender, the price of the most recent
private placement completed for ownership in Horizon.




          (e) Subject only to the provisions of Sections 9.1 and 7.2, until Horizon has completed its
Initial Contribution, and if Horizon has elected to fund Additional Contribution(s) under
Subsections 5.3(a) and (b) then for so long thereafter as Horizon bears all Qualifying Expenses for
Operations, Horizon shall have the sole right to determine the nature, timing, scope, extent and
method of all Operations without obtaining the approval or consent of Canyon or the Management
Committee. In conducting such Operations, Horizon shall exercise the standard of care set forth in
Section 8.3. Horizon has agreed to fulfill the Manager’s monthly reporting requirements set forth
in Section 8.2(o) beginning as of the Effective Date. With the exception of Section 8.2(o), for so
long as Horizon bears all Qualifying Expenses for Operations, Horizon shall be
entitled, but shall not be obligated, to exercise any of the applicable powers of the Manager in
Section 8.2, except that until Horizon has completed its Initial Contribution it shall not be
entitled or required to perform the activities described in Subsections 8.2(g), (i), (l) and (s)
that would otherwise require consent of the Management Committee or of




10









 







Canyon. For all such Operations, Horizon shall provide for accrual of reasonably anticipated
Environmental Compliance expenses, which shall constitute Qualifying Expenses, and upon completion
of its Initial Contribution, Horizon shall transfer any accrued but unexpended amounts to the
Environmental Compliance Fund established under Paragraph 2.14 of Exhibit B.




               (f) Canyon shall provide Horizon with written notice of any exceptions it may have to the
statement of Qualifying Expenses submitted to it as provided above within three (3) months after
receipt of the statement. Failure to provide such notice within the three (3) month period shall
constitute acceptance by Canyon of the stated Qualifying Expenses, subject to audit provisions of
Section 10.6.



          5.2 Failure to Make Initial Contribution.




               (a) Horizon’s failure to make its Initial Contribution in accordance with the provisions of
this Article V, if not cured within thirty (30) days after notice by Canyon of such default, shall
be deemed to be a withdrawal of Horizon from the Business, the termination of its Participating
Interest hereunder and a transfer of its Participating Interest and Capital Account to Canyon.
Upon such deemed withdrawal, Horizon shall have no further right, title or interest in the Assets
and it shall take such actions as are necessary to ensure that all Assets are free and clear of any
Encumbrances arising by, through or under it, except for such Encumbrances to which the
Participants may have agreed. Subject to Subsection 5.2(b) below, Horizon’s withdrawal shall be
effective upon such failure, but such withdrawal shall not relieve Horizon of its obligation to
Canyon to fund Operations up to the amount of Horizon’s contractual obligations to third parties,
nor shall such withdrawal relieve Horizon of its responsibility to fund and satisfy Horizon’s share
of liabilities to third persons (regardless of whether such liabilities accrue before or after such
withdrawal), including Environmental Liabilities, Continuing Obligations and Environmental
Compliance, arising prior to Horizon’s withdrawal, which responsibility shall be based on Horizon’s
initial Participating Interest.



               (b) Notwithstanding Subsection 5.2(a) above, Horizon shall have the right, within ninety (90)
days after the Effective Date, to conduct an investigation and perform a baseline assessment of the
environmental conditions of the Properties including sampling and analyses as Horizon deems advisable. Upon
completion of such baseline assessment, Horizon shall promptly provide the report and any
analytical results to Canyon. If Horizon determines that conditions may exist on the Properties
which may, in Horizon’s judgment, result in violation of Environmental Laws, Horizon shall have the
right to withdraw from the Business by giving written notice to Canyon of such withdrawal.
Horizon’s withdrawal shall be effective upon receipt by Canyon of such notice, but such withdrawal
shall not relieve Horizon of its obligation to fund Operations up to the amount of Horizon’s agreed
contribution to the Initial Program and Budget. Such withdrawal shall, however, relieve Horizon of
its responsibility to fund and satisfy




11









 






Horizon’s share of liabilities to third parties (regardless of whether such liabilities accrue
before or after such withdrawal), including Environmental Liabilities, Continuing
Obligations and Environmental Compliance, other than those arising out of Operations
conducted by Horizon after the Effective Date and prior to its withdrawal. Horizon shall
fund and satisfy one hundred percent (100%) of such liabilities only until it has contributed
the full amount of its agreed contribution to the Initial Program and Budget. Except as
provided in this Subsection and except as may be otherwise expressly provided herein,
Horizon’s withdrawal shall relieve Horizon from any other obligation to make
contributions hereunder.




     5.3 Additional Contribution(s). At such time as Horizon has
contributed the full amount of its Initial Contribution under
Subsection
 5.1(b), Horizon
may elect to increase its Participating Interest by funding one or both Additional
Contribution(s) described in Subsections 5.3(a) and(b) below.



          (a) Horizon may elect, at its sole discretion, by advance notice to
Canyon within forty-five (45) days prior to the completion of its Initial Contribution, to
solely fund the next One Million Dollars ($1,000,000) of Operations within the two (2) year
period following completion of the funding of its Initial Contribution and thereby earn an
additional twenty percent (20%) Participating Interest. During this period of sole funding
by Horizon, Canyon shall have no obligation to fund its pro rata share of expenditures and
Horizon shall have the sole right and control over Operations consistent with Subsection
5.1(e). Upon completion of Horizon’s Additional Contribution described within this
Subsection, One Million Dollars ($1,000,000) shall be credited to Horizon’s Equity Account,
Horizon’s Participating Interest shall be increased by twenty percent (20%) to a total of
seventy percent (70%), and Canyon’s Participating Interest shall be decreased by twenty
percent (20%) to a total of thirty percent (30%).




          (b) Horizon may elect, at its sole discretion and by advance notice to
Canyon within forty-five (45) days prior to the completion of its funding of the second One
Million Dollar ($1,000,000) contribution described in Subsection 5.3(a), to acquire an
additional twenty percent (20%) Participating Interest, by funding a Feasibility Study
prepared by a Feasibility Contractor and thereby earning an additional five percent (5%)
Participating Interest, for a total of seventy-five percent (75%) Participating Interest at the
time the Feasibility Study is completed and paid for. If Horizon elects to fund a Feasibility
Study prepared by a Feasibility Contractor, Horizon shall proceed with reasonable
diligence to complete the same within a reasonable time following completion of Horizon’s
funding of the second One Million Dollar ($1,000,000) contribution. During this period of
sole funding by Horizon, Canyon shall have no obligation to fund its pro rata share of
expenditures and Horizon shall have the sole right and control over Operations consistent
with Subsection 5.1(e). Upon completion of such funding, an amount equal to the cost of
such Feasibility Study shall be credited to Horizon’s Equity Account, Horizon’s
Participating Interest shall be increased by five percent (5%) to a total of seventy-five




12








 







percent (75%), and Canyon’s Participating Interest shall be decreased by five percent (5%)
to a total of twenty-five percent (25%).




          (c) Upon the Management Committee’s decision to construct a
Mining facility based on the Feasibility Study and subject to applicable securities laws and
regulations, Horizon shall tender to Canyon either the number of common shares of
Horizon equal in value to Two Million Dollars ($2,000,000) if at that date Horizon is a
publicly traded company, or a payment of Two Million Dollars ($2,000,000) if Horizon is
not a publicly traded company. The price to be used for the determination of the number
of such shares to be transferred to Canyon shall be consistent with the pricing mechanism
set forth in Subsections 5.1(d)(i) and (ii).




          (d) If Horizon does not elect to increase its initial Participating
Interest pursuant to Subsections 5.3(a) and (b), the Participants, subject to any election
permitted by Subsection 9.5(a), shall be obligated to contribute funds to adopted Programs
and Budgets in proportion to their respective initial Participating Interests set forth in
Section 6.1.




ARTICLE VI

INTERESTS OF PARTICIPANTS




     6.1 Initial Participating Interests. Horizon’s initial Participating Interest
set forth below shall become effective immediately once Horizon has fulfilled its Initial
Contribution obligations set forth in Section 5.1. Once Horizon has earned its initial
Participating Interest, the Participants shall have the following Participating Interests:



	 	 	 	 	 
	Canyon
	 	 	50	%
	Horizon
	 	 	50	%






     6.2 Changes in Participating Interests. The Participating Interests shall
be eliminated or changed as follows:



          (a) Upon withdrawal or deemed withdrawal as provided in
Sections 5.2, 6.3, and Article XII;




          (b) Upon an election by a Participant pursuant to Section 9.5 to
contribute more or less to an adopted Program and Budget than the percentage equal to its
Participating Interest, or to contribute nothing to an adopted Program and Budget;




          (c) In the event of default by either Participant in making its
agreed-upon contribution to an adopted Program and Budget, followed by an election by
the other Participant to invoke any of the remedies in Section 10.5;




13








 








          (d) Upon Transfer by either Participant of part or all of its
Participating Interest in accordance with Article XVI; or




          (e) Upon acquisition by either Participant of part or all of the
Participating Interest of the other Participant, including any elections by Horizon to
increase its Participating Interest by completing Additional Contribution(s) in accordance
with Section 5.3.




     6.3 Elimination of Minority Interest.



          (a) At such time as a Reduced Participant’s Recalculated
Participating Interest drops to less than fifteen percent (15%), its Recalculated Participating
Interest shall automatically be converted to a three percent (3%) production royalty as
calculated in accordance with Exhibit E (“Production Royalty”). Once converted to a
Production Royalty, the Reduced Participant shall be deemed to have relinquished its
entire Participating Interest free and clear of any Encumbrances arising by, through or
under the Reduced Participant, except any such Encumbrances listed in Paragraph 1.1 of
Exhibit A or to which the Participants have agreed. Such relinquished Participating
Interest shall be deemed to have accrued automatically to the other Participant. The
Reduced Participant’s Capital Account shall be transferred to the remaining Participant.
Upon conversion of its Recalculated Participating Interest to the Production Royalty, and
subject to Section 6.4, the Reduced Participant shall thereafter have no other further right,
title, or interest in the Assets or under this Agreement, and the tax partnership established
by Exhibit C shall dissolve pursuant to Paragraph 4.2 of Exhibit C. In such event, the
Reduced Participant shall execute and deliver an appropriate conveyance of all of its right,
title and interest in the Assets to the remaining Participant in consideration of the other
Participant’s execution and delivery of a royalty deed conveying the Production Royalty.




          (b) The relinquishment, withdrawal and entitlements for which
this Section provides shall be effective as of the effective date of the recalculation under
Sections 9.5 or 10.5. However, if the final adjustment provided under Section 9.6 for any
recalculation under Section 9.5 results in a Recalculated Participating Interest of fifteen
percent (15%) or more: (i) the Recalculated Participating Interest shall be deemed, effective
retroactively as of the first day of the Program Period, to have automatically revested; (ii)
the Reduced Participant shall be reinstated a Participant, with all of the rights and
obligations pertaining thereto; (iii) the right to the Production Royalty under Subsection
6.3(a) shall terminate; and (iv) the Manager, on behalf of the Participants, shall make any
necessary reimbursements, reallocations of Products, contributions and other adjustments
as provided in Subsection 9.6(d). Similarly if such final adjustment under Section 9.6
results in a Recalculated Participating interest of less than fifteen percent (15%) for a
Program Period as to which the provisional calculation under Section 9.5 had not resulted




14








 







in a Participating Interest of less than fifteen percent (15%), then such Participant, at its
election within thirty (30) days after notice of the final adjustment, may contribute an
amount resulting in a revised final adjustment and resultant Recalculated Participating
Interest of fifteen percent (15%). If no such election is made, such Participant shall be
deemed to have withdrawn under the terms of Subsection 6.3(a) as of the beginning of
such Program Period, and the Manager, on behalf of the Participants, shall make any
necessary reimbursements, reallocations of Products, contributions, and other adjustments
as provided in Subsection 9.6(d), to which such Participant may be entitled for such
Program Period.




     6.4 Continuing Liabilities Upon Adjustments of Participating Interests.
Any reduction or conversion of either Participant’s Participating Interest under Section 6.2
shall not relieve such Participant of its share of any liability, including, without limitation,
Continuing Obligations, Environmental Liabilities and Environmental Compliance,
whether arising, before or after such reduction or conversion, out of acts or omissions
occurring or conditions existing prior to the Effective Date or out of Operations conducted
during the term of this Agreement but prior to such reduction or conversion, regardless of
when any funds may be expended to satisfy such liability. For purposes of this Section,
such Participant’s share of such liability shall be equal to its Participating Interest at the
time the act or omission giving rise to the liability occurred after first taking into account
any reduction, readjustment and restoration of Participating Interests under Sections 6.3,
9.5, 9.6 and 10.5 (or, as to such liability arising out of acts or omissions occurring or
conditions existing prior to the Effective Date, equal to such Participant’s initial
Participating Interest). Should the cumulative cost of satisfying Continuing Obligations be
in excess of cumulative amounts accrued or otherwise charged to the Environmental
Compliance Fund as described in Exhibit B, each of the Participants shall be liable for its
proportionate share (i.e., Participating Interest at the time of the act or omission giving rise
to such liability occurred) after first taking into account any reduction, readjustment and
restoration of Participating Interests under Sections 6.3, 9.5, 9.6 and 10.5, of the cost of
satisfying such Continuing Obligations, notwithstanding that either Participant has
previously withdrawn from the Business or that its Participating Interest has been reduced
or converted to a Production Royalty pursuant to Subsection 6.3(a).



     6.5 Documentation of Adjustments to Participating Interests.
Adjustments to the Participating Interests need not be evidenced during the term of this
Agreement by the execution and recording of appropriate instruments, but each
Participant’s Participating Interest and related Equity Account balance shall be shown in
the accounting records of the Manager, and any adjustments thereto, including any
reduction, readjustment, and restoration of Participating Interests under Sections 9.5, 9.6
and 10.5, shall be made monthly. However, either Participant, at any time upon the
request of the other Participant, shall execute and acknowledge instruments necessary to
evidence such adjustments in form sufficient for filing and recording in the jurisdiction
where the Properties are located.



15








 





     6.6 Grant of Lien and Security Interest.



          (a) Subject to Section 6.7, each Participant grants to the other
Participant a lien upon and a security interest in its Participating Interest, including all of
its right, title and interest in the Assets, whenever acquired or arising, and the proceeds
from and accessions to the foregoing.




          (b) The liens and security interests granted by Subsection 6.6(a)
shall secure every obligation or liability of the Participant granting such lien or security
interest created under this Agreement, including the obligation to repay a Cover Payment
in accordance with Section 10.4. Each Participant hereby agrees to take all action necessary
to perfect such lien and security interest and hereby appoints the other Participant its
attorney-in-fact to execute, file and record all financing statements and other documents
necessary to perfect or maintain such lien and security interest.




     6.7 Subordination of Interests. Each Participant shall, from time to time,
take all necessary actions, including execution of appropriate agreements, to pledge and
subordinate its Participating Interest, any liens it may hold which are created under this
Agreement including those created pursuant to Section 6.6 hereof, and any other right or
interest it holds with respect to the Assets (other than any statutory lien of the Manager) to
any secured borrowings for Operations approved by the Management Committee,
including any secured borrowings relating to Project Financing, and any modifications or
renewals thereof.



ARTICLE VII

MANAGEMENT COMMITTEE




     7.1 Organization and Composition. The Participants hereby establish a
Management Committee to determine overall policies, objectives, procedures, methods
and actions under this Agreement. The Management Committee shall consist of an equal
number of member(s) appointed by Canyon and Horizon. Each Participant may appoint
one or more alternates to act in the absence of a regular member. A Participant shall have
at least one member until such time as its Participating Interest is converted to a
Production Royalty pursuant to Section 6.3. Appointments by a Participant shall be made
or changed by notice to the other members.



     7.2 Decisions. After Horizon has completed the funding of its Initial
Contribution, each Participant, acting through its appointed member(s) in attendance at
the meeting, shall have the votes on the Management Committee in proportion to its
Participating Interest. Except for
 super-majority voting matters identified herein or as
otherwise provided in this Agreement, the vote of the Participant with a Participating



16









 




Interest greater than fifty percent (50%) shall determine the decisions of the Management
Committee. Unanimous consent of the Participants shall be required for the following
matters designated as super-majority voting matters: (i) the sale or other disposition of
Assets in accordance with Section 8.2(i) and Article XIV; (ii) the initiation of litigation
against third parties in accordance with Section 8.2(g); (iii) liquidation or wind-up of the
Business except in accordance with Article XII; (iv) changes to the Administrative Charge
provided for in Exhibit B in accordance with Section 8.5; (v) disbursements from the
Business Account or other distributions to the Manager except disbursements due the
Manager Participant from its share of Products, other distributions made to all
Participants, or otherwise as authorized by this Agreement; and (vi) disbursements from
the Environmental Compliance Fund for any purpose other than ongoing Environmental
Compliance conducted during Operations, mine closure, post-Operations Environmental
Compliance or Continuing Obligations.




     7.3 Meetings.



          (a) Beginning as of the Effective Date, the Management
Committee shall hold regular meetings at least quarterly in Golden, Colorado, or at other
agreed places. The Manager shall give fourteen (14) days notice to the Participants of such
meetings. Additionally, either Participant may call a special meeting upon seven (7) days
notice to the other Participant. In case of an emergency, reasonable notice of a special
meeting shall suffice. There shall be a quorum if at least one member representing each
Participant is present; provided, however, that if a Participant fails to attend two consecutive
properly called meetings, then a quorum shall exist at the second meeting if the other
Participant is represented by at least one appointed member, and a vote of such Participant
shall be considered the vote required for the purposes of the conduct of all business
properly noticed even if such vote would otherwise require unanimity.




          (b) If business cannot be conducted at a regular or special meeting
due to the lack of a quorum, either Participant may call the next meeting upon thirty (30)
days notice to the other Participant.




          (c) Each notice of a meeting shall include an itemized agenda
prepared by the Manager in the case of a regular meeting or by the Participant calling the
meeting in the case of a special meeting, but either Participant may add matters to the
agenda at least three (3) days before the meeting or with the consent of the other
Participant. The Manager shall prepare and distribute minutes of all meetings to the other
Participant within fifteen (15) days after the meeting. Either Participant may electronically
record the proceedings of a meeting with the consent of the other Participant. The other
Participant shall sign and return or object to the minutes prepared by the Manager within
thirty (30) days after receipt, and failure to do either shall be deemed acceptance of the
minutes as prepared by the Manager. The minutes, when signed or deemed accepted by
both Participants, shall be the official record of the decisions made by the Management




17








 







Committee. Decisions made at a Management Committee meeting shall be implemented
in accordance with adopted Programs and Budgets. If a Participant timely objects to
minutes proposed by the Manager, the members of the Management Committee shall
seek, for a period not to exceed thirty (30) days from receipt by the Manager of notice of the
objections, to agree upon minutes acceptable to both Participants. If the Management
Committee does not reach agreement on the minutes of the meeting within such thirty (30)
day period, the minutes of the meeting as prepared by the Manager together with the other
Participant’s proposed changes shall collectively constitute the record of the meeting. If
personnel employed in Operations are required to attend a Management Committee
meeting, reasonable costs incurred in connection with such attendance shall be charged to
the Business Account. All other costs shall be paid by the Participants individually.




     7.4 Action Without Meeting in Person. In lieu of meetings in person, the
Management Committee may conduct meetings by telephone or video conference, so long
as minutes of such meetings are prepared in accordance with Subsection 7.3(c). The
Management Committee may also take actions in writing signed by all members.



     7.5 Matters Requiring Approval. Except as provided in Subsection
5.1(e) and as otherwise delegated to the Manager in Section 8.2, the Management
Committee, acting in accordance with Section 7.2, shall have exclusive authority to
determine all matters related to overall policies, objectives, procedures, methods and
actions under this Agreement.



ARTICLE VIII

MANAGER




     8.1 Appointment. The Participants hereby appoint Horizon as the initial
Manager with overall management responsibility for Operations. Horizon hereby agrees
to serve until it resigns or has been deemed to resign as provided in Section 8.4. The
Participants agree that notwithstanding Horizon’s appointment as Manager, for up to one
(1) year from the Effective Date, Canyon shall continue to maintain all mining claims and
lease rights and take all other actions to maintain the Properties until Horizon expressly
assumes this responsibility. Horizon shall promptly reimburse expenses directly incurred
by Canyon to maintain the Properties following receipt of invoice and reasonable
supporting documentation.



     8.2 Powers and Duties of Manager. Subject to the terms and provisions
of this Agreement, the Manager shall have the following powers and duties, which shall be
discharged in accordance with adopted Programs and Budgets.



          (a) The Manager shall manage, direct and control Operations, and
shall prepare and present to the Management Committee proposed Programs and Budgets
as provided in Article IX.




18








 








          (b) The Manager shall implement the decisions of the
Management Committee, shall make all expenditures necessary to carry out adopted
Programs, and shall promptly advise the Management Committee if it lacks sufficient
funds to carry out its responsibilities under this Agreement.




          (c) The Manager shall use reasonable efforts to: (i) purchase or
otherwise acquire all material, supplies, equipment, water, utility and transportation
services required for Operations, such purchases and acquisitions to be made to the extent
reasonably possible on the best terms available, taking into account all of the
circumstances; (ii) obtain such customary warranties and guarantees as are available in
connection with such purchases and acquisitions; and (iii) keep the Assets free and clear of
all Encumbrances, except any such Encumbrances listed in Paragraph 1.1 of Exhibit A and
those existing at the time of, or created concurrent with, the acquisition of such Assets, or
mechanic’s or materialmen’s liens (which shall be contested, released or discharged in a
diligent matter) or Encumbrances specifically approved by the Management Committee.
The Manager shall use its best efforts to obtain bids from multiple third party suppliers for
individual, or related aggregate, purchases or purchase commitments that exceed Fifty
Thousand Dollars ($50,000).




          (d) The Manager shall conduct such title examinations of the
Properties and cure such title defects pertaining to the Properties as may be advisable in its
reasonable judgment.




          (e) Except as to be performed by Canyon under Section 8.1, the
Manager shall: (i) make or arrange for all payments required by leases, licenses, permits,
contracts and other agreements with third parties related to the Assets; (ii) pay all taxes,
assessments and like charges on Operations and Assets except taxes determined or
measured by a Participant’s sales revenue or net income, and shall otherwise promptly pay
and discharge expenses incurred in Operations; provided, however, that the Manager shall
have the right to contest (in the courts or otherwise) the validity or amount of any taxes,
assessments or charges or take other reasonable steps or proceedings to seek a reduction or
readjustment prior to payment but in no event shall the Manager permit or allow title to
the Assets to be lost as the result of the nonpayment of any taxes, assessments or like
charges; and (iii) do all other acts reasonably necessary to maintain the Assets.




          (f) The Manager shall: (i) apply for all necessary permits, licenses
and approvals; (ii) comply with all Laws; (iii) notify promptly the Management Committee
of any actual or alleged substantial violations thereof; and (iv) maintain records and
prepare and file all reports or notices required for or as a result of Operations. The
Manager shall not be in breach of this provision if a violation has occurred in spite of the
Manager’s good faith efforts to comply consistent with its standard of care under Section
8.3. In the event of any such violation, the Manager shall timely cure or dispose of such




19








 







violation on behalf of both Participants through performance, payment of fines and
penalties, or both, and the cost thereof shall be charged to the Business Account.




          (g) The Manager shall prosecute and defend, but shall not initiate
without unanimous consent of the Participants in accordance with Section 7.2, all litigation
against third parties or administrative proceedings arising out of Operations. The
non-managing Participant shall have the right to participate, at its own expense, in such
litigation or administrative proceedings. The non-managing Participant shall approve in
advance any settlement involving payments, commitments or obligations in excess of Fifty
Thousand Dollars ($50,000) in cash or value.




          (h) The Manager shall provide insurance for the benefit of the
Participants as follows or as may otherwise be determined from time to time by the
Management Committee. The Manager shall, at all times while conducting Operations,
comply fully with the applicable worker’s compensation laws and purchase, or provide
protection for the Participants comparable to that provided under standard form insurance
policies for the following risk categories: (i) comprehensive general liability and property
damage with combined limits of not less than Two Million Dollars ($2,000,000) for bodily
injury and property damage; (ii) automobile insurance with combined limits of not less
than One Million Dollars ($1,000,000); and (iii) adequate and reasonable insurance against
risk of fire and other risks ordinarily insured against in similar operations. Insurance
coverage and limits shall be subject to annual review and approval by the Management
Committee. Each Participant shall self-insure or purchase for its own account such
additional insurance as it deems necessary.




          (i) Except as expressly authorized in Article XII, unanimous consent
of both Participants in accordance with Section 7.2 is required before the Manager may: (i)
abandon or surrender Properties as provided in Article XIV; (ii) dispose of Assets in any
one transaction (or in any series of related transactions) having a value in excess of Fifty
Thousand Dollars ($50,000); (iii) begin a liquidation or initiate wind up of the Business; or
(iv) dispose of Assets necessary to achieve the purposes of the Business.




          (j) The Manager shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or independent contractors subject to
Section 8.6 and prior disclosure to the Management Committee of the scope of
responsibilities to be carried out by agents, Affiliates or independent contractors.




          (k) Except as to be performed by Canyon under Section 8.1, the
Manager shall perform or cause to be performed all assessment and other work, and shall
pay all Governmental Fees required by Law in order to maintain the unpatented mining
claims, mill sites and tunnel sites included within the Properties. The Manager shall have
the right to perform the assessment work required hereunder pursuant to a common plan
of exploration and continued actual occupancy of such claims and sites shall not be




20








 







required. The Manager shall not be liable on account of any determination by any court or
governmental agency that the work performed by the Manager does not constitute the
required annual assessment work or occupancy for the purposes of preserving or
maintaining ownership of the claims, provided that the work done is pursuant to an
adopted Program and Budget and is performed in accordance with the Manager’s
standard of care under Section 8.3. The Manager shall timely record with the appropriate
county and file with the appropriate United States agency any required affidavits, notices
of intent to hold and other documents in proper form attesting to the payment of
Governmental Fees, the performance of assessment work or intent to hold the claims and
sites, in each case in sufficient detail to reflect compliance with the requirements applicable
to each claim and site. The Manager shall not be liable on account of any determination by
any court or governmental agency that any such document submitted by the Manager
does not comply with applicable requirements, provided that such document is prepared
and recorded or filed in accordance with the Manager’s standard of care under Section 8.3.




          (l) If authorized by the Management Committee, the Manager
may: (i) locate, amend or relocate any unpatented mining claim or mill site or tunnel site,
(ii) locate any fractions resulting from such amendment or relocation, (iii) apply for patents
or mining leases or other forms of mineral tenure for any such unpatented claims or sites,
(iv) abandon any unpatented mining claims for the purpose of locating mill sites or
otherwise acquiring from the United States rights to the ground covered thereby,
(v) abandon any unpatented mill sites for the purpose of locating mining claims or
otherwise acquiring from the United States rights to the ground covered thereby, (vi)
exchange with or convey to the United States any of the Properties for the purpose of
acquiring rights to the ground covered thereby or other adjacent ground, and (vii) convert
any unpatented claims or mill sites into one or more leases or other forms of mineral
tenure pursuant to any Law hereafter enacted.




          (m) The Manager shall keep and maintain all required accounting
and financial records pursuant to the procedures described in Exhibit B and in accordance
with generally accepted accounting principles used by companies based in the United
States (“US GAAP”) as further described in Exhibit B, and shall ensure appropriate
separation of accounts unless otherwise agreed by the Participants.




          (n) The Manager shall maintain Equity Accounts for each
Participant. Each Participant’s Equity Account shall be credited with the value of such
Participant’s contributions under Subsections 5.1(a), 5.1(b), 5.3(a), and 5.3(b) and shall be
credited with amounts contributed by such Participant under Subsection 5.3(d). Each
Participant’s Equity Account shall be charged with the cash and the fair market value of
property distributed to such Participant (net of liabilities assumed by such Participant and
liabilities to which such distributed property is subject). Contributions and distributions
shall include all cash contributions or distributions plus the agreed value (expressed in
dollars) of all in-kind contributions or distributions. Solely for purposes of determining




21








 







the Equity Account balances of the Participants, the Manager shall reasonably estimate the
fair market value of all Products distributed to the Participants, and such estimated value
shall be used regardless of the actual amount received by each Participant upon
disposition of such Products.




          (o) Subject to Section 8.3, the Manager shall keep the
Management Committee advised of all Operations by submitting in writing to the
members of the Management Committee: (i) monthly progress reports that include
statements of expenditures and comparisons of such expenditures to the adopted Budget;
(ii) periodic summaries of data acquired; (iii) copies of reports concerning Operations;
(iv) a detailed final report within sixty (60) days after completion of each Program and
Budget, which shall include comparisons between actual and budgeted expenditures and
comparisons between the objectives and results of Programs; and (v) such other reports as
any member of the Management Committee may reasonably request. Subject to Article
XVIII, at all reasonable times and upon reasonable advance notice the Manager shall
provide the Management Committee, or other authorized representative of a Participant
access to, and the right to inspect and, at such Participant’s cost and expense, copies of the
Existing Data and all maps, drill logs and other drilling data, core, pulps, reports, surveys,
assays, analyses, production reports, operations, technical, accounting and financial
records, and other Business Information, in the possession of the Manager, subject to
Article XVIII. In addition, the Manager shall allow authorized representatives of the
non-managing Participant, at the latter’s sole risk, cost and expense, and subject to
reasonable safety regulations, to inspect the Assets and Operations at all reasonable times
and upon reasonable advance notice, so long as the representative does not unreasonably
interfere with Operations.




          (p) The Manager shall prepare an Environmental Compliance
plan for all Operations consistent with applicable Laws or contractual obligations and shall
include in each Program and Budget sufficient funding to implement the Environmental
Compliance plan and to satisfy the financial assurance requirements of any applicable Law
or contractual obligation pertaining to Environmental Compliance. To the extent practical,
the Environmental Compliance plan shall incorporate concurrent reclamation of Properties
disturbed by Operations.




          (q) The Manager shall undertake Continuing Obligations when
and as economic and appropriate, whether before or after termination of the Business. As
part of each Program and Budget submittal, the Manager shall specify the measures to be
taken for performance of Continuing Obligations and the cost of such measures and shall
describe the Manager’s efforts to discharge Continuing Obligations. Authorized
representatives of each Participant upon reasonable advance notice shall have the right
from time to time to enter the Properties to inspect work directed toward satisfaction of
Continuing Obligations and audit books, records, and accounts related thereto.




22








 








          (r) The Environmental Compliance Fund shall be maintained by
the Manager as a separate, interest bearing cash management account, which may include,
but is not limited to, money market investments and/or in longer term investments if
approved by the Management Committee. Such funds shall be used solely for
Environmental Compliance and Continuing Obligations, including the committing of such
funds, interests in property, insurance or bond policies, or other security to meet financial
assurance obligations for the reclamation or restoration of the Properties, and for other
Environmental Compliance requirements.




          (s) If Participating Interests are adjusted in accordance with this
Agreement the Manager shall propose from time to time one or more methods for fair pro
rata allocation of costs for Continuing Obligations.




          (t) The Manager shall undertake all other activities reasonably
necessary to fulfill the foregoing, and to implement the policies, objectives, procedures,
methods and actions determined by the Management Committee pursuant to Section 7.1.




     8.3 Standard of Care. The Manager shall discharge its duties under
Section 8.2 and conduct all Operations in a good, workmanlike and efficient manner, in
accordance with sound mining and other applicable industry standards and practices, and
in accordance with Laws and with the terms and provisions of leases, licenses, permits,
contracts and other agreements pertaining to the Assets. Without limiting the generality of
the foregoing, all statements, reports or compilations of factual, financial or other data, and
summaries of such data presented by Manager to the Management Committee shall be
prepared to at least the level of detail, care and attention as those statements, reports or
compilations prepared by the Manager Participant for its own use. The Manager shall not
be liable to the other Participant for any act or omission resulting in damage or loss except
to the extent caused by or attributable to the Manager’s willful misconduct or gross
negligence. The Manager shall not be in default of any of its duties under Section 8.2 if its
inability or failure to perform results from the failure of the other Participant to perform
acts or to contribute amounts required of it by this Agreement.



     8.4 Resignation; Deemed Offer to Resign. The Manager may resign
upon not less than six (6) months’ prior notice to the other Participant, in which case the
other Participant may elect to become the new Manager by notice to the resigning
Participant within sixty (60) days after receipt of the notice of resignation. The Manager
shall be deemed to have resigned upon the occurrence of the event described in each of the
following Subsections, with the other Participant to appoint itself or a third party as the
successor Manager at a subsequently called meeting of the Management Committee, at
which the Manager shall not be entitled to vote.



          (a) The aggregate Participating Interest of the other Participant
and its Affiliates becomes greater than fifty percent (50%);




23








 








          (b) Except for conditions of Force Majeure, the Manager fails to
perform a material obligation imposed upon it under this Agreement and such failure
continues for a period of sixty (60) days after notice from the other Participant demanding
performance;




          (c) The Manager fails to pay or contest in good faith its bills and
Business debts as such obligations become due;




          (d) A receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for a substantial part of its assets is appointed and such
appointment is neither made ineffective nor discharged within sixty (60) days after the
making thereof, or such appointment is consented to, requested by, or acquiesced in by the
Manager;




          (e) The Manager commences a voluntary case under any
applicable bankruptcy, insolvency or similar law now or hereafter in effect; or consents to
the entry of an order for relief in an involuntary case under any such law or to the
appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar official of any substantial part of its assets; or makes a general
assignment for the benefit of creditors; or takes corporate or other action in furtherance of
any of the foregoing; or




          (f) Entry is made against the Manager of a judgment, decree or
order for relief affecting its ability to serve as Manager, or a substantial part of its
Participating Interest or its other assets by a court of competent jurisdiction in an
involuntary case commenced under any applicable bankruptcy, insolvency or other similar
law of any jurisdiction now or hereafter in effect.



Under Subsections (d), (e) or (f) above, the appointment of a successor Manager shall be
deemed to pre-date the event causing a deemed resignation.




     8.5 Payments To Manager. The Manager shall be compensated for its
services and reimbursed for its costs hereunder in accordance with Exhibit B. Unanimous
consent of both Participants is required to increase the Administrative Charge, described in
Paragraph 2.13 of Exhibit B, due Manager under this Agreement. Except as specifically
set out in this Agreement including Exhibit B or agreed to by unanimous consent of both
Participants, the Manager may not collect additional costs, expenses, fees, charges, or other
disbursements from the Business Account.



     8.6 Transactions With Affiliates. If the Manager engages Affiliates to
provide services hereunder, it shall do so on terms no less favorable than would be the case
in arm’s-length transactions with unrelated persons.



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     8.7 Activities During Deadlock. If the Management Committee for any
reason fails to adopt a proposed Program or Budget, the Manager shall continue
Operations at levels sufficient to maintain the then current Operations and Properties.
Additionally, if Mining has already been established, the Manager shall continue Mining
Operations at a level comparable with the last adopted Mining Program and Budget
exclusive of capital items. All of the foregoing shall be subject to the contrary direction of
the Management Committee and the receipt of necessary funds.



ARTICLE IX

PROGRAMS AND BUDGETS




     9.1 Initial Program and Budget. The Initial Program and Budget to
which both Participants have agreed is hereby adopted and is attached as Exhibit F.



     9.2 Operations Pursuant to Programs and Budgets. Except as otherwise
provided in Subsection 5.1(e), Section 9.13, and Article XIII, Operations shall be
conducted, expenses shall be incurred, and Assets shall be acquired only pursuant to
adopted Programs and Budgets. Every Program and Budget adopted pursuant to this
Agreement shall provide for cash accrual of reasonably anticipated Environmental
Compliance expenses for all Operations contemplated under the Program and Budget in
accordance with Paragraph 2.14 of Exhibit B.



     9.3 Presentation of Programs and Budgets. Proposed Programs and
Budgets shall be prepared by the Manager to encompass a period of one (1) year or any
other period and broken out by quarterly periods as approved by the Management
Committee, and shall be submitted to the Management Committee for review and
consideration. All proposed Programs and Budgets may include Exploration,
Pre-Feasibility Studies, Feasibility Study, Development, Mining and Expansion or
Modification Operations components, or any combination thereof, and shall be reviewed
and adopted upon a vote of the Management Committee in accordance with Sections 7.2
and 9.4. Each Program and Budget adopted by the Management Committee, shall be
reviewed quarterly at a meeting of the Management Committee. At least three (3) months
prior to the expiration of the then current annual Program and Budget, a proposed
Program and Budget for the succeeding period shall be submitted to the Management
Committee for review and consideration.



     9.4 Review and Adoption of Proposed Programs and Budgets. A
Participant shall be deemed to have approved and voted to adopt a proposed Plan and
Budget unless it submits in writing to the Management Committee, within thirty (30) days
after receipt, its rejection of or proposed modification(s) to any or all of the components of
the proposed Plan and Budget. If a Participant timely submits its rejection or proposed



25








 




modification(s) to the Management Committee then the Manager working with the other
Participant shall seek for a period of time not to exceed twenty (20) days to develop a
complete Program and Budget acceptable to both Participants. The Manager shall then call
a Management Committee meeting in accordance with Section 7.3 for purposes of
reviewing and voting upon the proposed Program and Budget.




     9.5 Election to Participate.



          (a) By notice to the Management Committee within twenty (20)
days after the final vote adopting a Program and Budget, and notwithstanding its vote
concerning adoption of a Program and Budget, a Participant may elect to participate in the
approved Program and Budget: (i) in proportion to its respective Participating Interest,
(ii) in some lesser amount than its respective Participating Interest, (iii) not at all; or (iv) if
a Reduced Participant, some greater amount than its Recalculated Participating Interest
subject to Subsection 9.5(d). In case of an election under Subsection 9.5(a)(ii) or (iii), its
Participating Interest shall be recalculated as provided in Subsection 9.5(b) below, with
dilution effective as of the first day of the Program Period for the adopted Program and
Budget. If a Participant fails to so notify the Management Committee of the extent to
which it elects to participate, the Participant shall be deemed to have elected to contribute
to such Program and Budget in proportion to its respective Participating Interest as of the
beginning of the Program Period.




          (b) If a Participant elects to contribute to an adopted Program and
Budget some lesser amount than in proportion to its respective Participating Interest, or
not at all, and the other Participant elects to fund all or any portion of the deficiency, the
Participating Interest of the Reduced Participant shall be provisionally recalculated by
dividing: (A) the sum of (1) the amount credited to the Reduced Participant’s Equity
Account with respect to its Initial Contribution under Section 5.1, (2) the total of all of the
Reduced Participant’s contributions under Section 5.3, and (3) the amount, if any, the
Reduced Participant elects to contribute to the adopted Program and Budget; by (B) the
sum of (1), (2) and (3) above for both Participants; and then multiplying the result by one
hundred. The Participating Interest of the other Participant shall be increased by the
amount of the reduction in the Participating Interest of the Reduced Participant, and if the
other Participant elects not to fund the entire deficiency, the Manager shall adjust the
Program and Budget to reflect the funds available.




          (c) Whenever the Participating Interests are recalculated pursuant
to this Section 9.5, (i) the Equity Accounts of both Participants shall be revised to bear the
same ratio to each other as their recalculated Participating Interests; and (ii) the portion of
Capital Account attributable to the reduced Participating Interest of the Reduced
Participant shall be transferred to the other Participant.




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          (d) Until such time as a Reduced Participant’s Recalculated
Participating Interest drops to less than fifteen percent (15%) and is converted to a
Production Royalty in accordance with Section 6.3, a Reduced Participant may elect to
restore its diluted Participating Interest by participating in an approved Program and
Budget in an amount greater than in proportion to its Recalculated Participating Interest.
At such time as the Reduced Participant has (i) funded its share of the current Program
and Budget at least in proportion to its current Recalculated Participating Interest, as well
as (ii) contributed funds to the Business Account equal to one hundred fifty percent (150%)
or more of the amount the Reduced Participant should have contributed to any prior
Program and Budget in order to maintain its Participating Interest in effect on the first day
of the Program Period for such Program and Budget, the Reduced Participant’s
Participating Interest shall be recalculated in accordance with Subsection 9.5(b) and shall
be effective in accordance with Subsection 9.6(d).




     9.6 Recalculation or Restoration of Reduced Interest Based on Actual Expenditures.



          (a) If a Participant makes an election under Subsection 9.5(a)(ii)
or (iii), then within thirty (30) days after the conclusion of such Program and Budget, the
Manager shall report the total amount of money expended plus the total obligations
incurred by the Manager for such Budget.




          (b) If the Manager expended or incurred obligations that were
more or less than the adopted Budget, the Participating Interests shall be recalculated
pursuant to Subsection 9.5(b) by substituting each Participant’s actual contribution to the
adopted Budget for that Participant’s estimated contribution at the time of the Reduced
Participant’s election under Subsection 9.5(a). Such recalculation shall take into account
any payments or contributions made by a Reduced Participant pursuant to Subsection
9.5(d).




          (c) If the Manager expended or incurred obligations of less than
eighty percent (80%) of the adopted Budget, within twenty (20) days of receiving the
Manager’s report on expenditures, the Reduced Participant may reimburse the other
Participant for the difference between any amount contributed by the Reduced Participant
to such adopted Program and Budget and the Reduced Participant’s proportionate share
(at the Reduced Participant’s former Participating Interest) of the actual amount expended
or incurred for the Program, plus interest on the difference accruing at the rate described in
Section 10.3 plus three (3) percentage points. Failure of the Reduced Participant to timely
reimburse shall result in dilution occurring in accordance with this Article IX and shall bar
the Reduced Participant from its rights under this Subsection 9.6(c) concerning the
relevant adopted Program and Budget.




27








 








          (d) All recalculations under this Article IX shall be effective as of
the first day of the Program Period for the Program and Budget. The Manager, on behalf
of both Participants, shall make such adjustments so that, to the extent possible, each
Participant will be placed in the position it would have been in had its Participating
Interests as recalculated under this Section been in effect as of the first day of the Program
Period for such Program and Budget. If the Participants are required to make
contributions, reimbursements or other adjustments pursuant to this Section, the Manager
shall have the right to purchase or sell a Participant’s share of Products in the same manner
as under Section 11.2 and to apply the proceeds of such sale to satisfy that Participant’s
obligation to make such contributions, reimbursements or adjustments.




          (e) Whenever the Participating Interests are recalculated pursuant
to this Section, (i) the Participants’ Equity Accounts shall be revised to bear the same ratio
to each other as their Recalculated Participating Interests; and (ii) the portion of Capital
Account attributable to the reduced Participating Interest of the Reduced Participant shall
be transferred to the other Participant.




     9.7 Pre-Feasibility Study Program and Budgets.



          (a) At such time as either Participant is of the good faith and
reasonable opinion that economically viable Mining Operations may be possible on the
Properties, the Participant may propose by written notice to the other Participant that a
Pre-Feasibility Study Program and Budget component be prepared. Such proposal shall
reference the data upon which the proposing Participant bases its opinion, and shall call a
meeting of the Management Committee pursuant to Section 7.3. If such proposal is
adopted by the Management Committee, the Manager shall cause to have prepared a Pre-
Feasibility Study Program and Budget component as approved by the Management
Committee and shall submit the same to the Management Committee within thirty (30)
days following adoption of the proposal.




          (b) Pre-Feasibility Studies may be conducted by the Manager,
Feasibility Contractors, or both, or may be conducted by the Manager and audited by
Feasibility Contractors, as the Management Committee determines. A Pre-Feasibility
Study Program shall include the work approved in the proposal adopted by the
Management Committee, which may include some or all of the following:




               (i) analyses of various alternatives for mining, processing
and treating of Products;



               (ii) analyses of alternative rates of mining, processing and
treating of Products;



28








 





               (iii) analyses of alternative sites for placement of facilities
(i.e., water supply facilities, transport facilities, reagent storage, offices, shops, warehouses,
stock yards, explosives storage, handling facilities, housing, public facilities);



               (iv) analyses of alternatives for waste treatment and
handling (including a description of each alternative of the method of tailings disposal and
the location of the proposed disposal site);



               (v) estimates of recoverable proven and probable reserves
of Products and of related substances, in terms of technical and economic constraints
(extraction and treatment of Products), including the effect of grade, losses, and impurities,
and the estimated mineral composition and content thereof, and review of mining rates
commensurate with such reserves;



               (vi) analyses of environmental impacts of the various
alternatives, including an analysis of the permitting, environmental liability and other
Environmental Law implications of each alternative, and costs of Environmental
Compliance for each alternative;



               (vii) tests to determine the efficiency of alternative
extraction, recovery and processing techniques, including an estimate of water, power, and
reagent consumption requirements;



               (viii) hydrologic studies related to any required use of water
or dewatering; and



               (ix) other studies and analyses approved by the
Management Committee.



          (c) If data results reasonably support a conclusion that further
work would be unwarranted for a particular alternative, the Manager shall have no
obligation to continue expenditures on other Pre-Feasibility Studies related solely to such
alternative.




     9.8 Completion of Pre-Feasibility Studies and Selection of Approved
Alternatives. As soon as reasonably practical following completion of all Pre-Feasibility
Studies required to evaluate fully the alternatives studied, the Manager shall prepare a
report summarizing all Pre-Feasibility Studies and shall submit the same to the
Management Committee. Such report shall incorporate the following:



          (a) the results of the analyses of the alternatives and other matters
evaluated by the Pre-Feasibility Programs;




29








 








          (b) reasonable estimates of capital costs for the Development and
start-up of the facilities required by the Development and Mining alternatives evaluated
(based on flowsheets, piping and instrumentation diagrams, and other major engineering
diagrams), which cost estimates shall include reasonable estimates of:




               (i) capitalized pre-stripping expenditures, if an open pit or
surface mine is proposed;



               (ii) expenditures required to purchase, construct and install
all machinery, equipment and other facilities and infrastructure (including contingencies)
required to bring a mine into commercial production, including an analysis of costs of
equipment or supply contracts in lieu of Development costs for each Development and
Mining alternative evaluated;



               (iii) expenditures required to perform all other related work
required to commence commercial production of Products and, if applicable, process
Products (including reasonable estimates of working capital requirements); and



               (iv) all other direct and indirect costs and general and
administrative expenses that may be required for a proper evaluation of the Development
and Mining alternatives and annual production levels evaluated. The capital cost
estimates shall include a schedule of the timing of the estimated capital requirements for
each alternative;



          (c) a reasonable estimate of the monthly expenditures required for
the first year of Operations after completion of the capital program described in
Subsection 9.8(b) for each Development alternative evaluated, and for subsequent
quarters of Operations, including estimates of annual production, processing,
administrative, operating and maintenance expenditures, taxes (other than income taxes),
working capital requirements, royalty and purchase obligations, equipment leasing or
supply contract expenditures, work commitments, Environmental Compliance costs, post-
Operations Environmental Compliance and Continuing Obligations funding requirements
and all other anticipated costs of such Operations. This analysis shall also include an
estimate of the number of workers required to conduct such Operations for each
alternative;




          (d) a review of the nature, extent and rated capacity of the mine,
machinery, equipment and other facilities preliminarily estimated to be required for the
purpose of producing and marketing Products under each Development and Mining
alternative analyzed;




          (e) an analysis (and sensitivity analyses reasonably requested by
either Participant), based on various target rates of return and price assumptions requested




30









 







by either Participant, of whether it is technically, environmentally, and economically
feasible to place a prospective ore body or deposit within the Properties into commercial
production for each of the Development and Mining alternatives analyzed (including a
discounted cash flow rate of return investment analysis for each alternative and net present
value estimate using various discount rates requested by either Participant); and




          (f) such other information as the Management Committee deems
appropriate.



Within sixty (60) days after delivery of the Pre-Feasibility Study summary to the
Participants, a Management Committee meeting shall be convened for the purposes of
reviewing the Pre-Feasibility Study summary and selecting one or more Approved
Alternatives, if any.




     9.9 Programs and Budgets for Feasibility Study. Within ninety (90)
days following the selection of an Approved Alternative, the Manager shall submit to the
Management Committee a Program and a Budget component, which shall include
necessary Operations, for the preparation of a Feasibility Study. A Feasibility Study shall
be prepared by Feasibility Contractors.



     9.10 Development Programs and Budgets; Project Financing.



          (a) Unless otherwise determined by the Management Committee,
the Manager shall not submit to the Management Committee a Program and Budget
component including Development of the mine described in a completed Feasibility Study
until ninety (90) days following the receipt by Manager of a favorable Feasibility Study.
The Program and Budget, which includes Development of the mine described in the
completed Feasibility Study, shall be based on the estimated cost of Development
described in the Feasibility Study for the Approved Alternative, unless otherwise directed
by the Management Committee.




          (b) Promptly following adoption of the Program and Budget,
which includes Development as described in a completed Feasibility Study the Manager
shall submit to the Management Committee a report on material bids received for
Development work (“Bid Report”). If bids described in the Bid Report result in the
aggregate cost of Development work exceeding one hundred twenty percent (120%) of the
Development cost estimates that formed the basis of the Development component of the
adopted Program and Budget, the Program and Budget, which includes relevant
Development, shall be deemed to have been resubmitted to the Management Committee
based on the aggregate costs as described in the Bid Report on the date of receipt of the Bid
Report and shall be reviewed and adopted in accordance with Sections 7.2 and 9.4.




31








 








          (c) If the Management Committee approves the Development of
the mine described in a Feasibility Study and also decides to seek Project Financing for
such mine, each Participant shall, at its own cost, cooperate in seeking to obtain Project
Financing for such mine; provided, however, that all fees, charges and costs (including
attorneys and technical consultants fees) paid to the Project Financing lenders shall be
borne by the Participants in proportion to their Participating Interests, unless such fees are
capitalized as a part of the Project Financing.




     9.11 Expansion or Modification Programs and Budgets. Any Program
and Budget proposed by the Manager involving Expansion or Modification shall be based
on a Feasibility Study prepared by the Manager, Feasibility Contractors, or both, or
prepared by the Manager and audited by Feasibility Contractors, as the Management
Committee determines. The Program and Budget, which include Expansion or
Modification, shall be submitted for review and approval by the Management Committee
within ninety (90) days following receipt by the Manager of such Feasibility Study.



     9.12 Budget Overruns; Program Changes. For Programs and Budgets
adopted after completion of Horizon’s Initial Contribution, the Manager shall immediately
notify the Management Committee of any material departure from an adopted Program
and Budget. If the Manager exceeds an adopted Budget by more than twenty percent
(20%) in the aggregate, then the excess over ten percent (10%), except to the extent caused
by a Force Majeure condition, emergency or unexpected expenditure made pursuant to Section 9.13 or unless otherwise authorized or ratified by the Management Committee,
shall be for the sole account of the Manager and such excess shall not be included in the
calculations of the Participating Interests nor deemed a contribution under this Agreement.
Budget overruns of twenty percent (20%) or less in the aggregate shall be borne by the
Participants in proportion to their respective Participating Interests.



     9.13 Emergency or Unexpected Expenditures. In case of emergency, the
Manager may take any reasonable action it deems necessary to protect life or property, to
protect the Assets or to comply with Laws. The Manager may make reasonable
expenditures on behalf of the Participants for unexpected events that are beyond its
reasonable control and that do not result from a breach by it of its standard of care. The
Manager shall promptly notify the Participants of the emergency or unexpected
expenditure, and the Manager shall be reimbursed for all resulting costs by the Participants
in proportion to their respective Participating Interests.




32









 







ARTICLE X

ACCOUNTS AND SETTLEMENTS




     10.1 Monthly Statements. The Manager shall promptly submit to the Management Committee
monthly statements of account reflecting in reasonable detail the charges and credits to the
Business Account during the preceding month in accordance with Section 8.3.



     10.2 Cash Calls. Following Horizon’s Initial Contribution under Subsection 5.1(b) and any
Additional Contribution(s) it elects under Section 5.3, on the basis of each adopted Program and
Budget, the Manager shall submit prior to the last day of each month a billing for estimated cash
requirements for the next month. Within ten (10) days after receipt of each billing, or a billing
made pursuant to Section 9.13 or 12.4, each Participant shall advance its proportionate share of
such cash requirements. The Manager shall record all funds received in the Business Account. All
funds received from a Participant in excess of the Participant’s pro rata cash requirement or other
funding commitment under this Agreement, or in excess of actual Program expenditures shall be
credited towards the Participant’s future pro rata cash requirement or other funding commitment.
The Manager shall at all times maintain a cash balance approximately equal to the rate of
disbursement for up to ninety (90) days. All funds in excess of immediate cash requirements shall
be invested by the Manager for the benefit of the Business in cash management accounts and
investments selected at the discretion of the Manager, which accounts may include, but are not
limited to, money market investments and money market funds.



     10.3 Failure to Meet Cash Calls. A Participant that fails to meet cash calls in the amount and
at the times specified in Section 10.2 shall be in default, and the amounts of the defaulted cash
call shall bear interest from the date due at an annual rate equal to two (2) percentage points
over the Prime Rate, but in no event shall the rate of interest exceed the maximum permitted by
Law. Such interest shall accrue to the benefit of and be payable to the non-defaulting Participant,
but shall not be deemed as amounts contributed by the non-defaulting Participant in the event
dilution occurs in accordance with Article VI. In addition to any other rights and remedies
available to it by Law, the non-defaulting Participant shall have those other rights, remedies, and
elections specified in Sections 10.4 and 10.5.



     10.4 Cover Payment. If a Participant defaults in making a contribution or cash call required
by an adopted Program and Budget, the non-defaulting Participant may, but shall not be obligated
to, advance some portion or all of the amount in default on behalf of the defaulting Participant (a
“Cover
Payment”). Each and every Cover Payment shall constitute a demand loan bearing interest from the
date of the advance at the rate provided in Section 10.3. If more than one Cover Payment is made,
the Cover Payments shall be aggregated and the rights and remedies described herein pertaining to
an



33









 




individual Cover Payment shall apply to the aggregated Cover Payments. The failure to repay such
loan upon demand shall be a default.




     10.5 Remedies. The Participants acknowledge that if either Participant defaults in making a
contribution required by Article V or a cash call, or in repaying a loan, as required under
Sections 10.2, 10.3 or 10.4, whether or not a Cover Payment is made, it will be difficult to
measure the damages resulting from such default (it being hereby understood and agreed that the
Participants have attempted to determine such damages in advance and determined that the
calculation of such damages cannot be ascertained with reasonable certainty). Both Participants
acknowledge and recognize that the damage to the non-defaulting Participant could be significant.
In the event of such default, as reasonable liquidated damages, the non-defaulting Participant may,
with respect to any such default not cured within thirty (30) days after notice to the defaulting
Participant of such default, elect any of the following remedies by giving notice to the defaulting
Participant. Such election may be made with respect to each failure to meet a cash call relating to
a Program and Budget, regardless of the frequency of such cash calls, provided such cash calls are
made in accordance with Section 10.2.



          (a) The defaulting Participant grants to the non-defaulting Participant a power of sale as to
all or any portion of its interest in any Assets or in its Participating Interest that is subject
to the lien and security interest granted in Section 6.6 (whether or not such lien and security
interest has been perfected), upon a default under Sections 10.3 or 10.4. Such power shall be
exercised in the manner provided by applicable Law or otherwise in a commercially reasonable manner
and upon reasonable notice. If the non-defaulting Participant elects to enforce the lien or
security interest pursuant to the terms of this Subsection, the defaulting Participant shall be
deemed to have waived any available right of redemption, any required valuation or appraisal of the
secured property prior to sale, any available right to stay execution or to require a marshaling of
assets, and any required bond in the event a receiver is appointed, and the defaulting Participant
shall be liable for any deficiency.




          (b) The non-defaulting Participant may elect to have the defaulting Participant’s
Participating Interest diluted or eliminated. The Reduced Participant’s Participating Interest
shall be recalculated by dividing: (X) the sum
of (1) the value of the Reduced Participant’s Initial Contribution under Section 5.1, (2) the total
of all of the Reduced Participant’s contributions under Section 5.3, and (3) the amount, if any,
the Reduced Participant contributed to the adopted Program and Budget with respect to which the
default occurred; by (Y) the sum of (1), (2) and (3) above for both Participants; and then
multiplying the result by one hundred. Dilution under this Subsection 10.5(b) shall be effective as
of the date of the original default, and Section 9.6 shall not apply. The amount of any Cover
Payment under Section 10.4 and interest thereon, or any interest accrued in accordance with Section
10.3, shall be deemed to be amounts contributed by the non-defaulting Participant, and not as
amounts contributed by the defaulting Participant.




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Whenever the Participating Interests are recalculated pursuant to this Subsection 10.5(b), (A) the
Equity Accounts of both Participants shall be adjusted to bear the same ratio to each other as
their recalculated Participating Interests; and (B) the portion of Capital Account attributable to
the reduced Participating Interest of the Reduced Participant shall be transferred to the other
Participant.




     10.6 Audits.



          (a) After completion of Horizon’s Initial Contribution, within six (6) months after the end of
each calendar year, at the request of a Participant, an audit shall be completed by certified
public accountants who are independent of the Manager and reasonably acceptable to both
Participants. The audit shall be conducted in accordance with generally accepted auditing
standards and shall cover all books and records maintained by the Manager pursuant to this
Agreement, all Assets and Encumbrances, and all transactions and Operations conducted during such
calendar year, including production and inventory records and all costs for which the Manager
sought reimbursement under this Agreement, together with all other matters customarily included in
such audits. All written exceptions to and claims upon the Manager for discrepancies disclosed by
such audit shall be made not more than three (3) months after receipt of the audit report, unless
either Participant elects to conduct an independent audit pursuant to Subsection 10.6(b) which is
ongoing at the end of such three (3) month period, in which case such exceptions and claims may be
made within the period provided in Subsection 10.6(b). Failure to make any such exception or claim
within such period shall mean the audit is deemed to be correct and binding upon the Participants.
The cost of all audits under this Subsection shall be charged to the Business Account.




          (b) Notwithstanding the annual audit conducted by certified public accountants selected by the
Manager, each Participant shall have the right to have an independent audit of all Business books,
records and
accounts, including all charges to the Business Account. This audit shall review all issues raised
by the requesting Participant, with all costs borne by the requesting Participant. The requesting
Participant shall give the other Participant thirty (30) days prior notice of such audit. Any
audit conducted on behalf of either Participant shall be made during the Manager’s normal business
hours and shall not interfere with Operations. Neither Participant shall have the right to audit
records and accounts of the Business relating to transactions or Operations more than twenty-four
(24) months after the calendar year during which such transactions, or transactions related to such
Operations, were charged to the Business Account. All written exceptions to and claims upon the
Manager for discrepancies disclosed by such audit shall be made not more than three (3) months
after completion and delivery of such audit, or they shall be deemed waived.




35









 








ARTICLE XI

DISPOSITION OF PRODUCTION




     11.1 Taking In Kind. Each Participant shall take in kind or separately dispose of its share
of all Products in proportion to its Participating Interest. Any extra expenditure incurred in the
taking in kind or separate disposition by either Participant of its proportionate share of Products
shall be borne by such Participant. Nothing in this Agreement shall be construed as providing,
directly or indirectly, for any joint or cooperative marketing or selling of Products or permitting
the processing of Products owned by any third party at any processing facilities constructed by the
Participants pursuant to this Agreement. The Manager shall give notice in advance of the
anticipated delivery date upon which Products will be available. Each Participant agrees to report
promptly to the Manager the prices it receives for its share of Products to enable the Manager to
pay taxes, royalties and other payments due third parties on a weighted average basis.



     11.2 Delegation of Authority to Sell Products Taken In Kind. Unless Participant expressly
notifies the Manager that the Participant will sell its share of Products, a Participant will be
deemed to have authorized the Manager to sell Participant’s share of Products taken in kind for
Producer’s account and the Manager shall have the right, but not the obligation, for a period of
time consistent with the minimum needs of the industry, but not to exceed one (1) year from the
notice date described in Section 11.1, to purchase the Participant’s share for its own account or
to sell such share as agent for the Participant at not less than the prevailing market price in the
area. Subject to the terms of any such contracts of sale then outstanding, during any period that
the Manager is purchasing or selling a Participant’s share of production, the Participant may elect
by notice to the Manager to terminate its delegation of authority and sell all
or part of its share of Products taken in kind. The Manager shall be entitled to deduct from
proceeds of any sale by it for the account of a Participant reasonable expenses incurred in such a
sale.



     11.3 Hedging. Neither Participant shall have any obligation to account to the other
Participant for, nor have any interest or right of participation in any profits or proceeds nor
have any obligation to share in any losses from, futures contracts, forward sales, trading in puts,
calls, options or any similar hedging, price protection or marketing mechanism employed by a
Participant with respect to its proportionate share of any Products produced or to be produced from
the Properties.



36









 





ARTICLE XII

WITHDRAWAL AND TERMINATION




     12.1 Termination by Expiration or Agreement. This Agreement shall terminate as expressly
provided in Section 2.5, unless earlier terminated by written agreement.



     12.2 Termination by Deadlock. If the Management Committee fails to adopt a Program and Budget
within twelve (12) months after the expiration of the latest adopted Program and Budget, either
Participant may elect to terminate the Business by giving sixty (60) days notice of termination to
the other Participant.



     12.3 Withdrawal. Horizon shall be deemed to have withdrawn from the Business if it fails to
complete its Initial Contributions as required by Subsection 5.1(b). Either Participant may
withdraw from the Business by giving notice to the other Participant of the effective date of
withdrawal, which shall be the later of the end of the then current Program Period or thirty (30)
days after the date of the notice. Upon such withdrawal, the Business shall terminate, and the
withdrawing Participant shall be deemed to have transferred to the remaining Participant all of its
Participating Interest, including all of its interest in the Assets, without cost and free and
clear of all Encumbrances arising by, through or under such withdrawing Participant, except those
described in Paragraph 1.1 of Exhibit A and those to which both Participants have agreed. The
withdrawing Participant shall execute and deliver all instruments as may be necessary in the
reasonable judgment of the other Participant to effect the transfer of its interests in the Assets
to the other Participant. If within a sixty (60) day period both Participants elect to withdraw,
then the Business shall instead be deemed to have been terminated by the consent of the
Participants pursuant to Section 12.1.



     12.4 Continuing Obligations and Environmental Liabilities. On termination of the Business
under Sections 12.1, 12.2 or 12.3, each Participant shall remain liable for its respective share of
liabilities to third persons (whether such arises before or after such withdrawal), including
Environmental Liabilities and Continuing Obligations. The withdrawing Participant’s share of such
liabilities shall be equal to its Participating Interest at the time such liability was incurred,
after first taking into account any reduction, readjustment, and restoration of Participating
Interests under Sections 6.3, 9.5, 9.6 and 10.5 (or, as to liabilities arising prior to the
Effective Date, its initial Participating Interest).



     12.5 Disposition of Assets on Termination. Promptly after termination under Sections 12.1 or
12.2, the Manager shall take all action necessary to wind up the activities of the Business, in
accordance with Exhibit C. All costs and expenses incurred in connection with the termination of
the Business shall be expenses chargeable to the Business Account.



37









 





     12.6 Non-Compete Covenants. Neither a Participant that withdraws pursuant to Section 12.3, or
is deemed to have withdrawn pursuant to Sections 5.2, 6.3 or 10.5, nor any Affiliate of such a
Participant, shall directly or indirectly acquire any interest or right to explore or mine, or
both, on any property any part of which is within the Area of Interest for twelve (12) months after
the effective date of withdrawal. If a withdrawing Participant, or the Affiliate of a withdrawing
Participant, breaches this Section 12.6, such Participant shall be obligated to offer to convey to
the non-withdrawing Participant, without cost, any such property or interest so acquired (or ensure
its Affiliate offers to convey the property or interest to the non-withdrawing Participant, if the
acquiring party is the withdrawing Participant’s Affiliate). Such offer shall be made in writing
and can be accepted by the non-withdrawing Participant at any time within ten (10) days after the
offer is received by such non-withdrawing Participant. Failure of a Participant’s Affiliate to
comply with this Section 12.6 shall be a breach by such Participant of this Agreement.



     12.7 Right to Data After Termination. After termination of the Business pursuant to Sections
12.1 or 12.2, each Participant shall be entitled to make copies of all applicable information
acquired hereunder before the effective date of termination not previously furnished to it, but a
terminating or withdrawing Participant shall not be entitled to any such copies after any other
termination or withdrawal.



     12.8 Continuing Authority. On termination of the Business under Sections 12.1, 12.2 or 12.3
or the deemed withdrawal of either Participant pursuant to Sections 5.2 or 10.5, the Participant
which was the Manager prior to
such termination or withdrawal (or the other Participant in the event of a withdrawal by the
Manager) shall have the power and authority to do all things on behalf of both Participants which
are reasonably necessary or convenient to: (a) wind up Operations and (b) complete any transaction
and satisfy any obligation, unfinished or unsatisfied, at the time of such termination or
withdrawal, if the transaction or obligation arises out of Operations prior to such termination or
withdrawal. The Manager shall have the power and authority to grant or receive extensions of time
or change the method of payment of an already existing liability or obligation, prosecute and
defend actions on behalf of both Participants and the Business, encumber Assets, and take any other
reasonable action in any matter with respect to which the former Participants continue to have, or
appear or are alleged to have, a common interest or a common liability.



38









 





ARTICLE XIII

ACQUISITIONS WITHIN AREA OF INTEREST




     13.1 General. Any interest or right to acquire any interest in real property or water rights
related thereto within the Area of Interest either acquired or proposed to be acquired during the
term of this Agreement by or on behalf of either Participant
(“Acquiring Participant”) or any Affiliate of such Participant shall be subject to the terms and
provisions of this Agreement. Canyon and Horizon and their respective Affiliates for their separate
account shall be free to acquire lands and interests in lands outside the Area of Interest and to
locate mining claims outside the Area of Interest. Failure of any Affiliate of either Participant
to comply with this Article XIII shall be a breach by such Participant of this Agreement.



     13.2 Notice to Non-Acquiring Participant. Within thirty (30) days after the acquisition or
proposed acquisition, as the case may be, of any interest or the right to acquire any interest in
real property or water rights wholly or partially within the Area of Interest (except real property
acquired by the Manager pursuant to a Program), the Acquiring Participant shall notify the other
Participant of such acquisition by it or its Affiliate; provided further that if the acquisition of
any interest or right to acquire any interest pertains to real property or water rights partially
within the Area of Interest, then all such real property (i.e., the part within the Area of
Interest and the part outside the Area of Interest) shall be subject to this Article XIII. The
Acquiring Participant’s notice shall describe in detail the acquisition, the acquiring party if
that party is an Affiliate, the lands and minerals covered thereby, any water rights related
thereto, the cost thereof, and the reasons why the Acquiring Participant believes that the
acquisition (or proposed acquisition) of the interest is in the best interests of the Participants
under this Agreement. In addition to such notice, the
Acquiring Participant shall make any and all information concerning the relevant interest available
for inspection by the other Participant.



     13.3 Option Exercised. Within forty-five (45) days after receiving the Acquiring
Participant’s notice, the other Participant may notify the Acquiring Participant of its election to
accept a proportionate interest in the acquired interest equal to its Participating Interest.
Promptly upon such notice, the Acquiring Participant shall convey or cause its Affiliate to convey
to the Participants, in proportion to their respective Participating Interests, by special warranty
deed with title held as described in Section 3.4, all of the Acquiring Participant’s (or its
Affiliate’s) interest in such acquired interest, free and clear of all Encumbrances arising by,
through or under the Acquiring Participant (or its Affiliate) other than those to which both
Participants have agreed. The acquired interests shall become a part of the Properties for all
purposes of this Agreement immediately upon such notice. The other Participant shall promptly pay
to the Acquiring Participant its proportionate share of the latter’s actual out-of-pocket
acquisition costs.



39









 





     13.4 Option Not Exercised. If the other Participant does not give such notice within the
forty-five (45) day period set forth in Section 13.3, it shall have no interest in the acquired
interests, and the acquired interests shall not be a part of the Assets or continue to be subject
to this Agreement.



ARTICLE XIV

ABANDONMENT AND SURRENDER OF PROPERTIES




     In accordance with Sections 7.2 and 8.2(i), unanimous consent of both Participants is required
to authorize the Manager to surrender or abandon part or all of the Properties. If the Management
Committee does not authorize such surrender or abandonment, the Participant that desires to
surrender or abandon shall assign to the objecting Participant, by special warranty deed and
without cost to the objecting Participant, all of the abandoning Participant’s interest in the
Properties sought to be abandoned or surrendered, free and clear of all Encumbrances created by,
through, or under the abandoning Participant other than those to which both Participants have
agreed. Upon the assignment, such properties shall cease to be part of the Properties. The
Participant that desires to abandon or surrender shall remain liable for its share (determined by
its Participating Interest as of the date of such abandonment, after first taking into account any
reduction, readjustment, and restoration of Participating Interests under Sections 6.3, 9.5, 9.6
and 10.5) of any liability with respect to such Properties, including, without limitation
Continuing Obligations, Environmental Liabilities and Environmental Compliance, whether accruing
before or after such abandonment, arising out of activities prior to the Effective Date and out of
Operations conducted prior to the date of such abandonment, regardless of when any funds may be
expended to satisfy such liability.



ARTICLE XV

SUPPLEMENTAL BUSINESS AGREEMENT




     15.1 Supplemental Business Agreement. At any time during the term of this Agreement, the
Management Committee may determine by unanimous vote of both Participants after Horizon’s Initial
Contribution obligations have been fully satisfied that it is appropriate to segregate the Area of
Interest into areas subject to separate Programs and Budgets for purposes of conducting further
Exploration, Pre-Feasibility or Feasibility Studies, Development, or Mining. At such time, the
Management Committee shall designate which portion of the Properties will comprise an area of
interest under a separate business arrangement (“Supplemental Business”), and the Participants
shall enter into a new agreement (“Supplemental Business Agreement”) for the purpose of further
exploring, analyzing, developing, and mining such portion of the Properties. The Supplemental
Business Agreement shall be in substantially the same form as this Agreement, with the Participants
agreeing to new Capital and Equity Accounts. Upon its



40









 




execution, the Supplemental Business Agreement shall govern the Properties covered by the
Supplemental Business Agreement.




     15.2 Subdivided Area of Interest. Following the completion and delivery of any Pre-Feasibility
Study or Feasibility Study, if one Participant desires to proceed with further Studies or
Development and the other Participant does not, the Participants agree to take the actions
necessary to subdivide or otherwise carve-out the Area of Interest and Business and enter into a
Supplemental Business Agreement that will govern the new Supplemental Business in accordance with
Section 15.1. Upon the effective date of the Supplemental Business Agreement, the Participants’
initial Participating Interests in the Supplemental Business shall be equal to their then current
respective Participating Interests under this Agreement. However, the Participants’ respective
Participating Interests shall be recalculated as a Participant contributes a lesser amount than in
proportion to its respective Participating Interest consistent with the dilution and Account
recalculation mechanisms described in Subsections 9.5(b) and (c). Until such time as a Reduced
Participant’s Recalculated Participating Interest drops to less than fifteen percent (15%) and is
converted to a Production Royalty in accordance with Section 6.3, a Reduced Participant may take
actions to restore its diluted Participating Interest, but only in accordance with
Subsection 9.5(d).



ARTICLE XVI

TRANSFER OF INTEREST; PREEMPTIVE RIGHT




     16.1 General. A Participant shall have the right to Transfer to a third party an interest in
its Participating Interest, including an interest in this Agreement or the Assets, solely as
provided in this Article XVI.



     16.2 Limitations on Free Transferability. Any Transfer by either Participant under Section
16.1 shall be subject to the following limitations:



          (a) Neither Participant shall Transfer any interest in this Agreement or the Assets
(including, but not limited to, any royalty, profits, or other interest in the Products) except in
conjunction with the Transfer of part or all of its Participating Interest;




          (b) No transferee of all or any part of a Participant’s Participating Interest shall have the
rights of a Participant unless and until the transferring Participant has provided to the other
Participant notice of the Transfer, and, except as provided in Subsections 16.2(g) and 16.2(h), the
transferee, as of the effective date of the Transfer, has committed in writing to assume and be
bound by this Agreement to the same extent as the transferring Participant;




41









 








          (c) Neither Participant, without the consent of the other Participant, shall make a Transfer
that shall violate any Law, or result in the cancellation of any permits, licenses, or other
similar authorization;




          (d) No Transfer permitted by this Article XVI shall relieve the transferring Participant of
its share of any liability, whether accruing before or after such Transfer, which arises out of
Operations conducted prior to such Transfer or exists on the Effective Date;




          (e) [Intentionally Omitted]




          (f) In the event of a Transfer of less than all of a Participating Interest, the transferring
Participant and its transferee shall act and be treated as one Participant by notifying the
non-transferring Participant of their designated Agent to act on their behalf with respect to all
matters pertaining to this Agreement and the Business. The transferring Participant and its
transferee
may change the Agent (but such replacement must be one of them) by giving notice to the other
Participant. Such notices must conform to Subsection 16.2(f)(ii).




          (g) If the Transfer is the grant of an Encumbrance in a Participating Interest to secure a
loan or other indebtedness of either Participant in a bona fide transaction, other than a
transaction approved unanimously by the Management Committee or Project Financing approved by the
Management Committee, such Encumbrance shall be granted only in connection with such Participant’s
financing payment or performance of that Participant’s obligations under this Agreement and shall
be subject to the terms of this Agreement and the rights and interests of the other Participant
hereunder (including without limitation under Section 6.7). Any such Encumbrance shall be further
subject to the condition that the holder of such Encumbrance
(“Chargee”) first enter into a written agreement with the other Participant in form satisfactory to
the other Participant, acting reasonably, binding upon the Chargee, to the effect that:




               (i) the Chargee shall not enter into possession or institute any proceedings for foreclosure
or partition of the encumbering Participant’s Participating Interest and that such Encumbrance
shall be subject to the provisions of this Agreement;



               (ii) the Chargee’s remedies under the Encumbrance shall be limited to the sale of the whole
(but only of the whole) of the encumbering Participant’s Participating Interest to the other
Participant, or, failing such a sale, at a public auction to be held at least ten (10) days after
prior notice to the other Participant, such sale to be subject to the purchaser entering into a
written agreement with the other Participant whereby such purchaser assumes all obligations of the
encumbering Participant under the terms of this Agreement. The price of any preemptive sale to the
other Participant shall be



42









 




the remaining principal amount of the loan plus accrued interest and related expenses, and such
preemptive sale shall occur within sixty (60) days of the Chargee’s notice to the other Participant
of its intent to sell the encumbering Participant’s Participating Interest. Failure of a sale to
the other Participant to close by the end of such period, unless failure is caused by the
encumbering Participant or by the Chargee, shall permit the Chargee to sell the encumbering
Participant’s Participating Interest at a public sale; and




               (iii) the charge shall be subordinate to any then-existing debt, including Project Financing
previously approved by the
Management Committee, encumbering the transferring Participant’s Participating Interest;



          (h) If a sale or other commitment or disposition of Products or proceeds from the sale of
Products by either Participant upon distribution to it pursuant to Article XI creates in a third
party a security interest by Encumbrance in Products or proceeds therefrom prior to such
distribution, such sales, commitment or disposition shall be subject to the terms and conditions of
this Agreement including, without limitation,
Section 6.7.




     16.3 Preemptive Right. Any Transfer by either Participant under Section 16.1 and any Transfer
by an Affiliate of Control of either Participant shall be subject to a preemptive right of the
other Participant as described below.



          (a) If either Participant intends to Transfer all or any part of its Participating Interest,
or an Affiliate of either Participant intends to Transfer Control of such Participant
(“Transferring Entity”), such Participant shall promptly notify the other Participant of such
intent. The notice shall state the price and all other pertinent terms and conditions of the
intended Transfer, and shall be accompanied by a copy of the offer or the contract for sale. If the
consideration for the intended transfer is, in whole or in part, other than monetary, the notice
shall describe such consideration and its monetary equivalent (based upon the fair market value of
the non-monetary consideration and stated in terms of cash or currency).




          (b) The other Participant shall have ninety (90) days from the date such notice is received to
notify the Transferring Entity whether it elects to acquire the offered interest at the same price
(or its monetary equivalent in cash or currency) and on the same terms and conditions as set forth
in the notice. If it does so elect, the acquisition by the other Participant shall be consummated
promptly after notice of such election is delivered.




          (c) If the other Participant fails to so elect within the period provided for above, the
Transferring Entity shall have one hundred eighty (180) days following the expiration of such
period to consummate the Transfer to the third party at a price and on terms no less favorable to
the Transferring Entity than those offered. If the Transferring




43









 







Entity fails to consummate the Transfer to a third party within the period set forth above, the
preemptive right of the other Participant in such offered interest
shall be deemed to be revived. Any subsequent proposal to Transfer such interest shall be
conducted in accordance with all of the procedures set forth in this Subsection.




          (d) These procedures shall not apply to the following:




               (i) Transfer by either Participant of all or any part of its Participating Interest to an
Affiliate; pursuant to an incorporation, or corporate consolidation or reorganization of a
Participant by which the surviving entity shall possess substantially all of the stock or all of
the property rights and interests, and be subject to substantially all of the liabilities and
obligations of that Participant; or corporate merger or amalgamation by which the surviving entity
or amalgamated company shall possess all of the stock or all of the property rights and interests,
and be subject to substantially all of the liabilities and obligations of that Participant.



               (ii) Subject to Subsection 16.2(g) of the Agreement, the grant by either Participant of a
security interest in its Participating Interest by Encumbrance.



               (iii) the creation by any Affiliate of either Participant of an Encumbrance affecting its
Control of such Participant.



               (iv) a sale or other commitment or disposition of Products or proceeds from sale of Products
by either Participant upon distribution to it pursuant to Article XI of the Agreement.



          (e) Failure of a Participant’s Affiliate to comply with this Article XVI shall be a breach by
such Participant of this Agreement.




ARTICLE XVII

DISPUTES




     17.1 Governing Law. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Colorado, without regard for any conflict of laws or choice of laws
principles that would permit or require the application of the laws of any other jurisdiction.



     17.2 Venue. The Participants agree that the location for any arbitration proceeding shall be
Golden, Colorado.



     17.3 Alternative Dispute Resolution. The Participants prefer to attempt to settle and resolve
any controversy or claim relating to this Agreement informally



44









 




through good faith face to face negotiations between executive representatives of each Participant
having the authority to settle. The Participants’ representatives agree to meet within sixty (60)
days of a Participant’s written notice to the other of a dispute requiring resolution. If the
Participants have not reached a mutually agreeable resolution to such dispute within thirty (30)
days of the meeting, either Participant may seek resolution via binding arbitration pursuant to the
American Arbitration Association rules of arbitration.




     17.4 Fees and Costs. All disputes arising under or in connection with this Agreement which
cannot be resolved by agreement between the Participants shall be resolved in accordance with
applicable Law. If any legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection
with any of the provisions of this Agreement, the successful or substantially prevailing
Participant shall be entitled to recover reasonable attorneys’ fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they may be entitled.



ARTICLE XVIII

CONFIDENTIALITY, OWNERSHIP, USE AND DISCLOSURE OF INFORMATION




     18.1 Business Information. All Business Information shall be owned jointly by the
Participants as their Participating Interests are determined pursuant to this Agreement. Except as
provided in Sections 18.3 and 18.4, or with the prior written consent of the other Participant,
each Participant shall keep confidential and not disclose to any third party or the public any
portion of the Business Information that constitutes Confidential Information.



     18.2 Participant Information. In performing its obligations under this Agreement, neither
Participant shall be obligated to disclose any Participant Information. If a Participant elects to
disclose Participant Information in performing its obligations under this Agreement, such
Participant Information, together with all improvements, enhancements, refinements and incremental
additions to such Participant Information that are developed, conceived, originated or obtained by
either Participant in performing its obligations under this Agreement (“Enhancements”), shall be
owned exclusively by the Participant that originally developed, conceived, originated or obtained
such Participant Information. Each Participant may use and enjoy the benefits of such Participant
Information and Enhancements in the conduct of the Business hereunder, but the Participant that did
not originally develop, conceive, originate or obtain such Participant Information may not use such
Participant Information and Enhancements for any other purpose. Except as provided in Section 18.4,
or with
the prior written consent of the other Participant, which consent may be withheld in such
Participant’s sole discretion, each Participant shall keep confidential and not disclose to any
third party or the public any



45









 




portion of Participant Information and Enhancements owned by the other Participant that constitutes
Confidential Information.




     18.3 Permitted Disclosure of Confidential Business Information. Either Participant may
disclose Business Information that is Confidential Information: (a) to a Participant’s officers,
directors, partners, members, employees, Affiliates, shareholders, agents, attorneys, accountants,
consultants, contractors, subcontractors or advisors, for the sole purpose of such Participant’s
performance of its obligations under this Agreement; (b) to any bona fide potential transferee to
whom the disclosing Participant contemplates a Transfer of all or any part of its Participating
Interest, for the sole purpose of evaluating the proposed Transfer; (c) to any actual or potential
lender, underwriter or investor for the sole purpose of evaluating whether to make a loan to or
investment in the disclosing Participant; or (d) to a third party with whom the disclosing
Participant contemplates any independent business activity or operation.



          The Participant disclosing Confidential Information pursuant to this Section 18.3, shall
disclose such Confidential Information to only those parties who have a bona fide need to have
access to such Confidential Information for the purpose for which disclosure to such parties is
permitted under this Section 18.3 and who have agreed in writing supplied to, and enforceable by,
the other Participant to protect the Confidential Information from further disclosure, to use such
Confidential Information solely for such purpose and to otherwise be bound by the provisions of
this Article XVIII. Such writing shall not preclude parties described in Subsection 18.3(b) from
discussing and completing a Transfer with the other Participant. The Participant disclosing
Confidential Information shall be responsible and liable for any use or disclosure of the
Confidential Information by such parties in violation of this Agreement and such other writing.




     18.4 Disclosure Required By Law. Notwithstanding anything contained in this Article XVIII, a
Participant may disclose any Confidential Information if, in the opinion of the disclosing
Participant’s legal counsel: (a) such disclosure is legally required to be made in a judicial,
administrative or governmental proceeding pursuant to a valid subpoena or other applicable order;
or (b) such disclosure is legally required to be made pursuant to the rules
or regulations of a stock exchange or similar trading market applicable to the disclosing
Participant.



          Prior to any disclosure of Confidential Information under this Section 18.4, the disclosing
Participant shall give the other Participant at least ten (10) days prior written notice (unless
less time is required by such rules, regulations or proceeding) and, in making such disclosure, the
disclosing Participant shall disclose only that portion of Confidential Information required to be
disclosed and shall take all reasonable steps to preserve the confidentiality thereof, including,
without limitation, obtaining protective orders and supporting the other Participant in
intervention in any such proceeding.





46










 







     18.5 Public Announcements. Prior to making or issuing any press release or other
public announcement or disclosure of Business Information that is not
Confidential Information, a Participant shall first consult with the other Participant as to the
content and timing of such announcement or disclosure, unless in the good faith judgment of such
Participant, there is not sufficient time to consult with the other
Participant before such announcement or disclosure must be made under applicable Laws; but in
such event, the disclosing Participant shall notify the other Participant, as soon as
possible, of the pendency of such announcement or disclosure, and it shall notify the other
Participant before such announcement or disclosure is made if at all reasonably possible. Any press
release or other public announcement or disclosure to be issued by either Participant relating to
this Business shall also identify the other Participant.



ARTICLE XIX

GENERAL PROVISIONS




     19.1 Notices. All notices, payments and other required or permitted
communications (“Notices”) to either Participant shall be in writing, and shall be addressed respectively as follows:



	 	 	 	 	 	 	 	 	 
	 	 	If to Canyon:	 	 	 	14142 Denver West Parkway
	 

	 	 	 	 	 	 	 	Suite 250
	 

	 	 	 	 	 	 	 	Golden, CO 80401
	 

	 	 	 	Attention:
	 	 	 	James K. B. Hesketh
	 

	 	 	 	Telephone:
	 	 	 	(303) 278-8464
	 

	 	 	 	Facsimile:
	 	 	 	(303) 279-3772
	 
	 	 	 	 	 	 	 	 
	 	 	            With a Copy to:	 	 	 	Bruce C. Kirchhoff
	 

	 	 	 	 	 	 	 	Carver Kirchhoff Schwarz
	 

	 	 	 	 	 	 	 	McNab & Bailey, LLC
	 

	 	 	 	 	 	 	 	Hudson’s Bay Centre
	 

	 	 	 	 	 	 	 	1600 Stout Street, Suite 1700
	 

	 	 	 	 	 	 	 	Denver, Colorado 80202
	 

	 	 	 	Telephone:
	 	 	 	(303) 531-6482
	 

	 	 	 	Facsimile:
	 	 	 	(303) 592-7680






47









 






	 	 	 	 	 	 	 	 	 
	 	 	If to Horizon:	 	 	 	2221 East Street
	 

	 	 	 	 	 	 	 	Suite 200
	 

	 	 	 	 	 	 	 	Golden, CO 80401
	 

	 	 	 	Attention:
	 	 	 	William R. Wilson
	 

	 	 	 	Telephone:
	 	 	 	(303) 422-7803
	 

	 	 	 	Facsimile:
	 	 	 	(303) 940-9572
	 
	 	 	 	 	 	 	 	 
	 	 	            With a Copy to:	 	 	 	Paul C. Jones
	 

	 	 	 	 	 	 	 	2221 East Street, Suite 200
	 

	 	 	 	 	 	 	 	Golden CO 80401
	 

	 	 	 	Telephone:
	 	 	 	(303) 277-1222
	 

	 	 	 	Facsimile:
	 	 	 	(303) 277-0006






          All Notices shall be given (a) by personal delivery to the Participant, (b) by electronic
communication, capable of producing a printed transmission, (c) by registered or certified mail
return receipt requested; or (d) by overnight or other express courier service. All Notices shall
be effective and shall be deemed given on the date of receipt at the principal address if received
during normal business hours, and, if not received during normal business hours, on the next
business day following receipt, or if by electronic communication, on the date of such
communication. Either Participant may change its address by Notice to the other Participant.




     19.2 Gender. The singular shall include the plural, and the plural the singular wherever the
context so requires, and the masculine, the feminine, and the neuter genders shall be mutually
inclusive.



     19.3 Currency. All references to “dollars” or “$” herein shall mean lawful currency of the
United States of America.



     19.4 Headings. The subject headings of the Sections and Subsections of this Agreement and the
Paragraphs and Subparagraphs of the Exhibits to this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of any of its provisions.



     19.5 Waiver. The failure of either Participant to insist on the strict performance of any
provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall
not constitute a waiver of any provision of this Agreement or limit such Participant’s right
thereafter to enforce any provision or exercise any right.



     19.6 Modification. No modification of this Agreement shall be valid unless made in writing
and duly executed by both Participants.



48









 





     19.7 Force Majeure. Except for the obligation to make payments when due hereunder, the
obligations of a Participant shall be suspended to the extent and for the period that performance
is prevented by any cause, whether foreseeable or unforeseeable, beyond its reasonable control,
including, without limitation, labor disputes (however arising and whether or not employee demands
are reasonable or within the power of the Participant to grant); acts of God; Laws, instructions or
requests of any government or governmental entity; judgments or orders of any court; inability to
obtain on reasonably acceptable terms any public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of Environmental Laws; action or inaction by any federal, state or local
agency that delays or prevents the issuance or granting of any approval or authorization required
to conduct Operations beyond the reasonable expectations of the Participant seeking the approval or
authorization; acts of war or conditions arising out of or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake, storm,
flood, sink holes, drought or other adverse weather condition; delay or failure by suppliers or
transporters of materials, parts, supplies, services or equipment or by contractors’ or
subcontractors’ shortage of, or inability to obtain, labor, transportation, materials, machinery,
equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or
facilities; actions by native rights groups, environmental groups, or other similar special
interest groups; or any other cause whether similar or dissimilar to the foregoing. The affected
Participant shall promptly give notice to the other Participant of the suspension of performance,
stating therein the nature of the suspension, the reasons therefore, and the expected duration
thereof. The affected Participant shall resume performance as soon as reasonably possible. During
the period of suspension the obligations of both Participants to advance funds pursuant to Section
10.2 shall be reduced to levels consistent with then current Operations.



     19.8 Rule Against Perpetuities. The Participants do not intend that there shall be any
violation of the Rule Against Perpetuities, the Rule Against Unreasonable Restraints on the
Alienation of Property, or any similar rule. Accordingly, if any right or option to acquire any
interest in the Properties, in a Participating Interest, in the Assets, or in any real property
exists under this Agreement, such right or option must be exercised, if at all, so as to vest such
interest within time periods permitted by applicable rules. If, however, any such violation should
inadvertently occur, the Participants hereby agree that a court shall reform that provision in such
a way as to approximate most closely the intent of the Participants within the limits permissible
under such rules.



     19.9 Further Assurances. Each of the Participants shall take, from time to time and without
additional consideration, such further actions and
execute such additional instruments as may be reasonably necessary or convenient to implement and
carry out the intent and purpose of this Agreement or as may be reasonably required by lenders in
connection with Project Financing.



49









 





     19.10 Entire Agreement; Successors and Assigns. This Agreement contains the entire
understanding of the Participants and supersedes all prior agreements and understandings between
the Participants relating to the subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the Participants.



     19.11 Memorandum. At the request of either Participant, a Memorandum or short form of this
Agreement, or a Financing Statement(s) (to which copies of the Memorandum or short form of this
Agreement shall be attached) shall be prepared by the Manager, executed and acknowledged by both
Participants, and delivered to the Manager for recording and filing in those appropriate recording
districts and Uniform Commercial Code filing offices as may be necessary to provide constructive
notice of this Agreement and the rights and obligations of the Participants hereunder. The Manager
shall record and file in the proper recording districts, county recording offices and Uniform
Commercial Code filing offices, all such documents delivered to it by the Participants. Unless
both Participants agree, this Agreement shall not be recorded.



     19.12 Counterparts. This Agreement may be executed in any number of counterparts, and it
shall not be necessary that the signatures of both Participants be contained on any counterpart.
Each counterpart shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.



Canyon




     By       /s/ James
K. B. Hesketh                                                 



                     James K. B. Hesketh




     Its            President




Horizon




     By       /s/ Paul
C. Jones                                                             



                     Paul C. Jones




     Its            Executive Vice President and Chief Operating Officer




50









 








EXHIBIT A

To

CONVERSE URANIUM PROJECT




EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation




ASSETS AND AREA OF INTEREST





	1.1	 	PROPERTIES AND TITLE EXCEPTIONS





List of Mining Claims and Leases




     CONVERSE PROJECT



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	BLM	 	 	 	 	 	 	 	 	 	 	 	 
	CLAIMS	 	WMC #	 	WIDTH	 	LENGTH	 	AREA	 	ACRES	 	 	 	 
	Scott Ranch Area	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	BC-1
	 	WMC 268577	 	 	50	 	 	 	1,450	 	 	 	72,500	 	 	 	1.66	 	 	 	1	 
	BC-2
	 	WMC 268578	 	 	50	 	 	 	1,450	 	 	 	72,500	 	 	 	1.66	 	 	 	2	 
	BC-3
	 	WMC 268579	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	3	 
	BC-4
	 	WMC 268580	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	4	 
	BC-5
	 	WMC 268581	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	5	 
	BC-6
	 	WMC 268582	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	6	 
	BC-7
	 	WMC 268583	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	7	 
	BC-8
	 	WMC 268584	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	8	 
	BC-9
	 	WMC 268585	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	9	 
	BC-10
	 	WMC 268586	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	10	 
	BC-11
	 	WMC 268587	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	11	 
	BC-12
	 	WMC 268588	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	12	 
	BC-13
	 	WMC 268589	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	13	 
	BC-14
	 	WMC 268590	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	14	 
	BC-15
	 	WMC 268591	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	15	 
	BC-16
	 	WMC 268592	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	16	 
	BC-17
	 	WMC 268593	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	17	 
	BC-18
	 	WMC 268594	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	18	 
	BC-19
	 	WMC 268595	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	19	 
	BC-20
	 	WMC 268596	 	 	600	 	 	 	1,450	 	 	 	870,000	 	 	 	19.97	 	 	 	20	 
	BC-21
	 	WMC 268597	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	21	 






EXHIBIT A

Page 1 of 9




 









 








	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	BLM	 	 	 	 	 	 	 	 	 	 	 	 
	CLAIMS	 	WMC #	 	WIDTH	 	LENGTH	 	AREA	 	ACRES	 	 	 	 
	BC-22
	 	WMC 268598	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	22	 
	BC-23
	 	WMC 268599	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	23	 
	BC-24
	 	WMC 268600	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	24	 
	BC-25
	 	WMC 268601	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	25	 
	BC-26
	 	WMC 268602	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	26	 
	BC-27
	 	WMC 268603	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	27	 
	BC-28
	 	WMC 268604	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	28	 
	BC-29
	 	WMC 268605	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	29	 
	BC-30
	 	WMC 268606	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	30	 
	BC-31
	 	WMC 268607	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	31	 
	BC-32
	 	WMC 268608	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	32	 
	BC-33
	 	WMC 268609	 	 	380	 	 	 	1,360	 	 	 	516,800	 	 	 	11.86	 	 	 	33	 
	BC-34
	 	WMC 268610	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	34	 
	BC-35
	 	WMC 268611	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	35	 
	BC-36
	 	WMC 268612	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	36	 
	BC-37
	 	WMC 268613	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	37	 
	BC-38
	 	WMC 268614	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	38	 
	BC-39
	 	WMC 268615	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	39	 
	BC-40
	 	WMC 268616	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	40	 
	BC-41
	 	WMC 268617	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	41	 
	BC-42
	 	WMC 268618	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	42	 
	BC-43
	 	WMC 268619	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	43	 
	BC-44
	 	WMC 268620	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	44	 
	BC-45
	 	WMC 268621	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	45	 
	BC-46
	 	WMC 268622	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	46	 
	BC-47
	 	WMC 268623	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	47	 
	BC-48
	 	WMC 268624	 	 	600	 	 	 	1,430	 	 	 	858,000	 	 	 	19.70	 	 	 	48	 
	BC-49
	 	WMC 268625	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	49	 
	BC-50
	 	WMC 268626	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	50	 
	BC-51
	 	WMC 268627	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	51	 
	BC-52
	 	WMC 268628	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	52	 
	BC-53
	 	WMC 268629	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	53	 
	BC-54
	 	WMC 268630	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	54	 
	BC-55
	 	WMC 268631	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	55	 
	BC-56
	 	WMC 268632	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	56	 
	BC-57
	 	WMC 268633	 	 	520	 	 	 	1,360	 	 	 	707,200	 	 	 	16.24	 	 	 	57	 
	BC-58
	 	WMC 268634	 	 	600	 	 	 	1,360	 	 	 	816,000	 	 	 	18.73	 	 	 	58	 
	BC-59
	 	WMC 268635	 	 	520	 	 	 	1,360	 	 	 	707,200	 	 	 	16.24	 	 	 	59	 
	BC-61
	 	WMC 268636	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	60	 
	BC-62
	 	WMC 268637	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	61	 
	BC-63
	 	WMC 268638	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	62	 
	BC-64
	 	WMC 268639	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	63	 
	BC-65
	 	WMC 268640	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	64	 
	BC-66
	 	WMC 268641	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	65	 
	BC-67
	 	WMC 268642	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	66	 
	BC-68
	 	WMC 268643	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	67	 
	BC-69
	 	WMC 268644	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	68	 






EXHIBIT A

Page 2 of 9




 









 








	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	BLM	 	 	 	 	 	 	 	 	 	 	 	 
	CLAIMS	 	WMC #	 	WIDTH	 	LENGTH	 	AREA	 	ACRES	 	 	 	 
	BC-70
	 	WMC 268645	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	69	 
	BC-71
	 	WMC 268646	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	70	 
	BC-72
	 	WMC 268647	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	71	 
	BC-73
	 	WMC 268648	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	72	 
	BC-74
	 	WMC 268649	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	73	 
	BC-75
	 	WMC 268650	 	 	390	 	 	 	1,320	 	 	 	514,800	 	 	 	11.82	 	 	 	74	 
	BC-76
	 	WMC 268651	 	 	150	 	 	 	1,500	 	 	 	225,000	 	 	 	5.17	 	 	 	75	 
	BC-77
	 	WMC 268652	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	76	 
	BC-78
	 	WMC 268653	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	77	 
	BC-79
	 	WMC 268654	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	78	 
	BC-80
	 	WMC 268655	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	79	 
	BC-81
	 	WMC 268656	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	80	 
	BC-82
	 	WMC 268657	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	81	 
	BC-83
	 	WMC 268658	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	82	 
	BC-84
	 	WMC 268659	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	83	 
	BC-85
	 	WMC 268660	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	84	 
	BC-86
	 	WMC 268661	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	85	 
	BC-87
	 	WMC 268662	 	 	160	 	 	 	1,500	 	 	 	240,000	 	 	 	5.51	 	 	 	86	 
	BC-88
	 	WMC 268663	 	 	160	 	 	 	1,500	 	 	 	240,000	 	 	 	5.51	 	 	 	87	 
	BC-89
	 	WMC 268664	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	88	 
	BC-90
	 	WMC 268665	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	89	 
	BC-91
	 	WMC 268666	 	 	83	 	 	 	1,200	 	 	 	99,600	 	 	 	2.29	 	 	 	90	 
	BC-92
	 	WMC 268667	 	 	83	 	 	 	1,350	 	 	 	112,050	 	 	 	2.57	 	 	 	91	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Acres  	 	 	 	1655.18	 	 	 	 	 
	S. Douglas Area	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SD-9
	 	WMC 268767	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	1	 
	SD-10
	 	WMC 268768	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	2	 
	SD-11
	 	WMC 268769	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	3	 
	SD-12
	 	WMC 268770	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	4	 
	SD-13
	 	WMC 268771	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	5	 
	SD-14
	 	WMC 268772	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	6	 
	SD-15
	 	WMC 268773	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	7	 
	SD-16
	 	WMC 268774	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	8	 
	SD-17
	 	WMC 268775	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	9	 
	SD-18
	 	WMC 268776	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	10	 
	SD-19
	 	WMC 268777	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	11	 
	SD-20
	 	WMC 268778	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	12	 
	SD-21
	 	WMC 268779	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	13	 
	SD-22
	 	WMC 268780	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	14	 
	SD-23
	 	WMC 268781	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	15	 
	SD-24
	 	WMC 268782	 	 	600	 	 	 	1,370	 	 	 	822,000	 	 	 	18.87	 	 	 	16	 
	SD-25
	 	WMC 268783	 	 	400	 	 	 	1,320	 	 	 	528,000	 	 	 	12.12	 	 	 	17	 
	SD-26
	 	WMC 268784	 	 	400	 	 	 	1,370	 	 	 	548,000	 	 	 	12.58	 	 	 	18	 
	SD-27
	 	WMC 268785	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	19	 
	SD-28
	 	WMC 268786	 	 	600	 	 	 	1,320	 	 	 	792,000	 	 	 	18.18	 	 	 	20	 
	SD-29
	 	WMC 268787	 	 	220	 	 	 	1,320	 	 	 	290,400	 	 	 	6.67	 	 	 	21	 
	SD-30
	 	WMC 268788	 	 	150	 	 	 	1,500	 	 	 	225,000	 	 	 	5.17	 	 	 	22	 





EXHIBIT A

Page 3 of 9




 









 








	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	BLM	 	 	 	 	 	 	 	 	 	 	 	 
	CLAIMS	 	WMC #	 	WIDTH	 	LENGTH	 	AREA	 	ACRES	 	 	 	 
	SD-31
	 	WMC 268789	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	23	 
	SD-32
	 	WMC 268790	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	24	 
	SD-33
	 	WMC 268791	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	25	 
	SD-34
	 	WMC 268792	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	26	 
	SD-35
	 	WMC 268793	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	27	 
	SD-36
	 	WMC 268794	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	28	 
	SD-37
	 	WMC 268795	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	29	 
	SD-38
	 	WMC 268796	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	30	 
	SD-39
	 	WMC 268797	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	31	 
	SD-40
	 	WMC 268798	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	32	 
	SD-41
	 	WMC 268799	 	 	350	 	 	 	1,500	 	 	 	525,000	 	 	 	12.05	 	 	 	33	 
	SD-42
	 	WMC 268800	 	 	350	 	 	 	1,500	 	 	 	525,000	 	 	 	12.05	 	 	 	34	 
	SD-45
	 	WMC 268801	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	35	 
	SD-46
	 	WMC 268802	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	36	 
	SD-47
	 	WMC 268803	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	37	 
	SD-48
	 	WMC 268804	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	38	 
	SD-49
	 	WMC 268805	 	 	300	 	 	 	1,500	 	 	 	450,000	 	 	 	10.33	 	 	 	39	 
	SD-57
	 	WMC 268806	 	 	600	 	 	 	1,445	 	 	 	867,000	 	 	 	19.90	 	 	 	40	 
	SD-59
	 	WMC 268807	 	 	600	 	 	 	1,445	 	 	 	867,000	 	 	 	19.90	 	 	 	41	 
	SD-60
	 	WMC 268808	 	 	600	 	 	 	1,200	 	 	 	720,000	 	 	 	16.53	 	 	 	42	 
	SD-62
	 	WMC 268809	 	 	600	 	 	 	1,200	 	 	 	720,000	 	 	 	16.53	 	 	 	43	 
	SD-100
	 	WMC 268810	 	 	600	 	 	 	1,395	 	 	 	837,000	 	 	 	19.21	 	 	 	44	 
	SD-101
	 	WMC 268811	 	 	600	 	 	 	1,395	 	 	 	837,000	 	 	 	19.21	 	 	 	45	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Acres   	 	 	 	804.30	 	 	 	 	 
	Shawnee Area	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SH-1
	 	WMC 268668	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	1	 
	SH-2
	 	WMC 268669	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	2	 
	SH-3
	 	WMC 268670	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	3	 
	SH-4
	 	WMC 268671	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	4	 
	SH-5
	 	WMC 268672	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	5	 
	SH-6
	 	WMC 268673	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	6	 
	SH-7
	 	WMC 268674	 	 	460	 	 	 	1,400	 	 	 	644,000	 	 	 	14.78	 	 	 	7	 
	SH-8
	 	WMC 268675	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	8	 
	SH-9
	 	WMC 268676	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	9	 
	SH-10
	 	WMC 268677	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	10	 
	SH-11
	 	WMC 268678	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	11	 
	SH-12
	 	WMC 268679	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	12	 
	SH-13
	 	WMC 268680	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	13	 
	SH-14
	 	WMC 268681	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	14	 
	SH-15
	 	WMC 268682	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	15	 
	SH-16
	 	WMC 268683	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	16	 
	SH-17
	 	WMC 268684	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	17	 
	SH-18
	 	WMC 268685	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	18	 
	SH-19
	 	WMC 268686	 	 	600	 	 	 	1,400	 	 	 	840,000	 	 	 	19.28	 	 	 	19	 
	SH-20
	 	WMC 268687	 	 	460	 	 	 	1,400	 	 	 	644,000	 	 	 	14.78	 	 	 	20	 
	SH-21
	 	WMC 268688	 	 	460	 	 	 	1,400	 	 	 	644,000	 	 	 	14.78	 	 	 	21	 






EXHIBIT A

Page 4 of 9




 









 








	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	BLM	 	 	 	 	 	 	 	 	 	 	 	 
	CLAIMS	 	WMC #	 	WIDTH	 	LENGTH	 	AREA	 	ACRES	 	 	 	 
	SH-25
	 	WMC 268689	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	22	 
	SH-26
	 	WMC 268690	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	23	 
	SH-27
	 	WMC 268691	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	24	 
	SH-28
	 	WMC 268692	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	25	 
	SH-29
	 	WMC 268693	 	 	440	 	 	 	1,500	 	 	 	660,000	 	 	 	15.15	 	 	 	26	 
	SH-30
	 	WMC 268694	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	27	 
	SH-31
	 	WMC 268695	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	28	 
	SH-32
	 	WMC 268696	 	 	270	 	 	 	1,500	 	 	 	405,000	 	 	 	9.30	 	 	 	29	 
	SH-33
	 	WMC 268697	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	30	 
	SH-34
	 	WMC 268698	 	 	600	 	 	 	1,500	 	 	 	900,000	 	 	 	20.66	 	 	 	31	 
	SH-35
	 	WMC 268699	 	 	300	 	 	 	1,500	 	 	 	450,000	 	 	 	10.33	 	 	 	32	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Acres	 	 	 	591.53	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,051.0	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	TOTAL ACRES	 	 	1	 	 	 	 	 






AGREEMENTS



South Douglas Prospect





	 	1.	 	Surface Use Agreement dated 7/7/2005 with Fellows, Tim & Lori for 72.66 acres in
Township 32N, Range 71W, Sections 19 and 20.
	 
	 	2.	 	Surface Use Agreement dated 7/8/2005 with Arnbrister, Tom & Mary E. for 19.35 acres in Township 32N, Range 71W, Section 19.
	 
	 	3.	 	Surface Use Agreement dated 7/15/2005 with Philbrick Ranch, L.L.C. for 350.14 acres in Township 32N, Range 71W, Sections 31 and 32.




Scott Ranch Prospect





	 	1.	 	Surface Use Agreement dated 7/13/2005 with Johnson, Sam & Robin for 36 acres in
Township 32N, Range 70W, Section 19.
	 
	 	2.	 	Surface Use Agreement dated 7/27/2005 with Markwardt, David & Lois for 55.92 in Township 32N, Range 70W, Section 19.
	 
	 	3.	 	Surface Use Agreement dated 10/11/2005 with Scott Ranches, L.L.C. for
1,280 acres in Township 32N, Range 70W, Sections 19-21 and 30.






	1.2	 	PERSONAL PROPERTY





Index of Converse Project Files

Canyon Resources Corporation

Converse County,Wyoming




Prepared November 18, 2005 by Steven R. Davis




REPORTS/PUBLICATIONS



Bauer, J. et. al., 1982, Shawnee Project, Converse County, Wyoming — Results of the 1981 Drilling
Campaign (Elf Aquitaine), Cross-Sections. Binder w/o index contains plate 8 through 16 (9)




EXHIBIT A

Page 5 of 9





 









 






of cross-sections on program drill holes.



Bauer J. et. al., 1982, Shawnee Project, Converse County, Wyoming — Results of the 1981 Drilling
Campaign (Elf Aquitaine), Maps. Binder w/o index contains six folded maps (plates 1-6) of geology,
land status, drill hole locations and structural contour maps on geologic horizons (3).



Bauer, J., Marcus, Donald L., 1982, Results of 1982 Shawnee Exploration Program (Elf Aquitaine), 30
pages text, four section Appendix (A – D), and “Plates and
Figures” — including Figures 1-8 and
Plates Ia, II through VII (Roman) and Plate 7.



Bauer, J., 1981, Greater Shawnee Project (Morton Ranch Area), Converse County, Wyoming; Results of
the 1981 Drilling Campaign (Elf Aquitaine Mining Corporation — Canyon Resources Joint Venture).
Includes 4 figures and two plates, plus a number of drill hole radiometric logs (oil/gas and
uranium drill holes). Two Copies.



Canyon Resources, et. al., March 1981, Shawnee Uranium Project, Southern Powder River Basin,
Wyoming. 39 pages, includes 12 figures and 3 appendices (5 copies).



Canyon Resources, et. al., October 1983, Shawnee Uranium Project Summary Report, Converse County,
Wyoming, 18 pages (includes14figures).



Collings, Stephen P., Knode, Ralph H., 1982, Crow Butte Uranium Project (Deposit), Wyoming Fuel
Company. 10 pages, including 3 figures. (kept inside First Exploration Company 1982 Annual Report.)



Denson, N.M., Horn, G.H., 1976, Geologic and Structure Map of the Southern Part of the Powder River
Basin, Converse, Niobrara and Natrona Counties, Wyoming. 1:125,000, USGS Miscellaneous
Investigations Series Map I-877 (2 sheets).



First Exploration Company, 1982 Annual Report, 9 pages plus Appendix of NUEXCO Monthly Report on
the Nuclear Fuel Market #175, March 1983.



Mueller, Joseph W., 1976, Geology and Ore Controls of Uranium Deposits in Oligocene and Miocene
Sediments, Northern Hartville Uplift, Wyoming, Masters Thesis, Colorado School of Mines



Love, J.D., Christiansen, Ann Coe, Sever, C.K., 1978, Preliminary Geological Map of the Torrington
1o x 2o Quadrangle, 1:250,000, USGS Open File Report 78-535




EXHIBIT A

Page 6 of 9





 









 







Love, J.D., Christiansen, Ann Coe, Sever, C.K., 1980, The Torrington 1o x 2o Quadrangle,
Southeastern Wyoming and Western Nebraska, 1:250,000, USGS Miscellaneous Field Studies Map MF-1184.



Mueller, Joseph W., 1976, Geology and Ore Controls of Uranium Deposits in Oligocene and Miocene
Sediments, Northern Hartville Uplift, Wyoming, Masters Thesis, Colorado School of Mines.




MAP FILES



Sabine GT Map File, 1978-1981, Land Status Map, Correspondence, Joint Venture Proposal and three GT
maps for the A, B &C Sands (horizons) at 1” = 1,000’.



Oil Well Data, Converse Project map file. Has five (?) oil well logs (copies), two maps and eight
pages of hand written research notes regarding oil/gas wells in the project area.



Aquitaine Mining, Converse Project map file (some correspondence included). Isopach map of Shawnee
Project Tertiary sediments (1” = 2mi ±), Thickness (Isopach) main basal sand interval (Chadron
Sand), White River fm, Shawnee Project 1” = 2,000’. Table of Shawnee Project 1981 drilling, 5 pages,
and map of greater project area (Shawnee) with the area of properties held/subject to the
agreement. Five pages handwritten notes.



Analytical Results, Converse Project (not a map file). Bondar-Clegg results on what appears to be
water samples only (results in ppb), two pages 35 sample results (three copies of the second page).



High Plains Uranium, Converse Project (file). A three-page summary of the company’s management and
directors with a “Strategy Statement.” A 19 page Power
Point presentation w/cover letter — sent to
Gary Huber by Ted Wilton (May 18, 2005).



Shawnee Report 10/1983, Converse Project. A loose (unbound) copy of the Canyon Resources
Corporation Summary Report on the Shawnee Project, dated October, 1983.



BLM Land Maps, Converse Project. Folded 1:100,000 scale standard (feet) and metric maps of the
Douglas, Wyoming 30’ x 60’ quadrangle (std. 1995, metric 1981), one copy of each. Includes a four
piece Xerox mosaic of the project area of this map, and two 8 1/2” x 11” copies of immediate
Douglas (Sabine) and Shawnee areas.



Shawnee Report 03/01/1981, Converse Project. A clipped, but unbound copy of the Canyon Resources
Corporation report on the




EXHIBIT A

Page 7 of 9





 









 







Shawnee Uranium Project, dated March 1, 1981.



Topographic Maps file, Converse Project. Includes eight 7 1/2” USGS Topographic maps from in or near
the area of the Converse Project (two are partial/cutoff, individual names of maps not noted).



Miscellaneous Maps, Converse Project (Folder). Niobrara County Map, 1953, (1:63,360) w/oil/gas
well pre-Tertiary or TD rock type noted by stickers and hand notes; Niobrara County Map, 1953,
(1:63,360) w/hand drawn geology in area 2 to 13 miles south of the small village of Redbird;
Subcrop map of Northern Hartville Uplift, Converse and Niobrara Counties, Wyoming, 1/15/1975,
Geology by J. Mueller; Geology of Northern Hartville Uplift, Converse and Niobrara Counties,
Wyoming, 01/15/1975, Modified after Denson (1972) by J. Mueller.
Plate 10A. — Contours on the Base
of the Pre-Oligocene Surface and Pre-Oligocene Geologic Map, Compiled by David L. Macke and Norman
M. Denson, USGS.



Sabine Maps, Converse Project (Folder), Eight detailed maps and a number of drill logs (examined
very briefly, no details).



Converse Project Map File, Earth Sciences Corporation, Several varied maps from early Earth
Sciences work in the area — not examined in detail (time).



Drill hole logs, Converse Project, full size probe logs and a few “mini-logs” from the early 1980’s
drilling programs — not examined in detail (time).




1.3 AREA OF INTEREST



The Plat on the next page identifies the Converse Project Boundary, encompassing lands in both
Converse and Niobrara Counties, Wyoming.




EXHIBIT A

Page 8 of 9





 









 













EXHIBIT A — Page 9 of 9

Converse Uranium Project, Area of Interest












 









 





EXHIBIT B

To

CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation




ACCOUNTING PROCEDURES




     The financing and accounting procedures to be followed by the Manager and the Participants
under the Agreement are set forth below. All capitalized terms in these Accounting Procedures
shall have the definition attributed to them in the Agreement, unless defined otherwise herein.



     The purpose of these Accounting Procedures is to establish equitable methods for determining
charges and credits applicable to Operations. It is the intent of the Participants that neither of
them shall lose or profit by reason of the designation of one of them to exercise the duties and
responsibilities of the Manager. The Participants shall meet and in good faith endeavor to agree
upon changes deemed necessary to correct any unfairness or inequity. In the event of a conflict
between the provisions of these Accounting Procedures and those of the Agreement, the provisions of
the Agreement shall control.



ARTICLE I

GENERAL PROVISIONS 




     1. General Accounting Records. The Manager shall maintain detailed and comprehensive
cost accounting records in accordance with generally accepted accounting principles used by
companies based in the United States (“US GAAP”). For purposes of this Agreement, US GAAP shall
mean the written opinions, standards, interpretations, and bulletins developed by the Financial
Accounting Standards Board (“FASB”), the accounting profession (“AICP”), and the Security and
Exchange Commission (“SEC”). Cost accounting records maintained under these Accounting
Procedures, shall including general ledgers, supporting and subsidiary journals, invoices, checks
and other customary documentation, sufficient to provide a record of revenues and expenditures and
periodic statements of financial position and the results of Operations for managerial, tax,
regulatory or other financial, regulatory, or legal reporting purposes related to the Business.
Such records shall be retained for the duration of the period allowed the Participants for audit or
the period necessary to comply with tax or other



EXHIBIT B

Page 1 of 9




 









 







regulatory requirements. The records shall reflect all obligations, advances and credits of the
Participants.




     2. Cash Management Accounts. The Manager shall maintain one or more separate cash
management accounts for the payment of all expenses and the deposit of all cash receipts for the
Business.



     3. Statements and Billings. The Manager shall prepare statements and bill the
Participants as provided in Article X of the Agreement. Payment of any such billings by either
Participant, including the Manager, shall not prejudice such Participant’s right to protest or
question the correctness thereof for a period not to exceed twenty-four (24) months following the
calendar year during which such billings were received by such Participant. All written exceptions
to and claims upon the Manager for incorrect charges, billings or statements shall be made upon the
Manager within such twenty-four (24) month
period. The time period permitted for adjustments hereunder shall not apply to adjustments
resulting from periodic inventories as provided in Paragraphs 5.1 and 5.2.



ARTICLE II

CHARGES TO BUSINESS ACCOUNT 




     Subject to the limitations hereinafter set forth, the Manager shall charge the Business
Account with the following:



     2.1 Property Acquisition Costs, Rentals, Royalties and Other Payments. All property
acquisition and holding costs, including Governmental Fees, filing fees, license fees, costs of
permits and assessment work, delay rentals, production royalties, including any required advances,
and all other payments made by the Manager which are necessary to acquire or maintain title to the
Assets.



     2.2 Labor and Employee Benefits 




          2.2.1 Salaries and wages of the Manager’s employees directly engaged in Operations, including
salaries or wages of employees who are temporarily assigned to and directly employed by same.




          2.2.2 The Manager’s cost of holiday, vacation, sickness and disability benefits, and other
customary allowances applicable to the salaries and wages chargeable under Subparagraph 2.2.1 and
Paragraph 2.12. Such costs may be charged on a “when and as paid basis” or by “percentage
assessment” on the amount of salaries and wages. If percentage assessment is used, the rate shall
be applied to wages or salaries excluding overtime and bonuses. Such rate shall be based on the
Manager’s cost experience consistent with the current range of rates within the industry and it
shall be periodically




EXHIBIT B

Page 2 of 9





 









 







reviewed, and adjusted if needed, at least annually to ensure that the total of such charges does
not exceed the actual cost thereof to the Manager.




          2.2.3 The Manager’s actual cost of established plans for employees’ group life insurance,
hospitalization, pension, retirement, stock purchase, thrift, bonus (except production or incentive
bonus plans under a union contract based on actual rates of production, cost savings and other
production factors, and similar non-union bonus plans customary in the industry
or necessary to attract competent employees, which bonus payments shall be considered salaries and
wages under Subparagraph 2.2.1 or Paragraph 2.12 rather than employees’ benefit plans) and other
benefit plans of a like nature applicable to salaries and wages chargeable under Subparagraphs
2.2.1 or Paragraph 2.12, provided that the plans are limited to the extent feasible to those
customary in the industry.




          2.2.4 Cost of assessments imposed by governmental authority that are applicable to salaries
and wages chargeable under Subparagraph 2.2(a) and Paragraph 2.12, including all penalties except
those resulting from the willful misconduct or gross negligence of the Manager.




     2.3 Materials, Equipment and Supplies. The cost of materials, equipment and supplies
(herein called “Material”) purchased from unaffiliated third parties or furnished by either
Participant as provided in Paragraph 3.1. The Manager shall purchase or furnish only so much
Material as may be required for immediate use in efficient and economical Operations. The Manager
shall also maintain inventory levels of Material at reasonable levels to avoid unnecessary
accumulation of surplus stock or disruption of Operations.



     2.4 Equipment and Facilities Furnished by Manager. The cost of machinery, equipment
and facilities owned by the Manager and used in Operations or used to provide support or utility
services to Operations charged at rates commensurate with the actual costs of ownership and
operation of such machinery, equipment and facilities. Such rates shall include costs of
maintenance, repairs, other operating expenses, insurance, taxes, depreciation and interest at a
rate not to exceed Prime Rate plus three percent (3%) per annum. Such rates shall not exceed the
average commercial rates currently prevailing in the vicinity of the Operations.



     2.5 Transportation. Reasonable transportation costs incurred in connection with the
transportation of employees and material necessary for Operations.



     2.6 Contract Services and Utilities. The cost of contract services and utilities
procured from outside sources, other than services described in Paragraphs 2.9 and 2.13. If
contract services are performed by the Manager or an Affiliate thereof, the cost charged to the
Business Account shall not be greater than that for which comparable services and utilities are
available in the open market within the vicinity of Operations.



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The cost of professional consultant services procured from outside sources in excess of Twenty-Five
Thousand Dollars ($25,000.00) per annum per contract shall not be charged to the Business Account
unless approved by the Management Committee.




     2.7 Insurance Premiums. Net premiums paid for insurance required to be carried for
Operations for the protection of the Participants. When Operations are conducted in an area where
the Manager may self-insure for Worker’s Compensation and/or Employer’s Liability under state law,
the Manager may elect to include such risks in its self-insurance program and shall charge its
costs of self-insuring such risks to the Business Account provided that such charges shall not
exceed published manual rates.



     2.8 Damages and Losses. All costs in excess of insurance proceeds necessary to repair
or replace damage or losses to any Assets resulting from any cause other than the willful
misconduct or gross negligence of the Manager. The Manager shall furnish the Management Committee
with written notice of damages or losses as soon as practicable after a report thereof has been
received by the Manager.



     2.9 Legal and Regulatory Expense. Except as otherwise provided in Paragraph 2.13, all
legal and regulatory costs and expenses incurred in or resulting from Operations or necessary to
protect or recover the Assets of the Business, including costs of title investigation and title
curative services. All attorneys fees and other legal costs to handle, investigate and settle
litigation or claims, and amounts paid in settlement of such litigation or claims in excess of
Twenty-Five Thousand Dollars ($25,000.00) per annum shall not be charged to the Business Account
unless approved by the Management Committee.



     2.10 Audit. Cost of annual audits under Subsection 10.6(a).



     2.11 Taxes. All taxes, assessments and like charges on Operations and Assets which
have been paid by the Manager for the benefit of the Participants. Each Participant is separately
responsible for taxes determined or measured by a Participant’s sales revenue or net income.



     2.12
District and Camp Expense (Field Supervision and Camp
Expenses). A pro rata
portion of: (i) the salaries and expenses of the Manager’s superintendent and other employees
serving Operations whose time is not allocated directly to such Operations, and (ii) the costs of
maintaining and operating an office and any necessary suboffice, and (iii) all necessary camps,
including housing facilities for employees, used for Operations. The expense of those facilities,
less any revenue therefrom, shall include depreciation or a fair monthly rental in lieu of
depreciation of the investment. The total of such charges for all Properties served by the
Manager’s employees and facilities shall
be apportioned to the Business Account on the basis of a ratio to be approved by the Management
Committee.



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     2.13 Administrative Charge.



          2.13.1 Each month, the Manager shall charge the Business Account a sum for each phase of
Operations as provided below, which shall be a liquidated amount to reimburse the Manager for its
home office overhead and general and administrative expenses to conduct each phase of Operations,
and which shall be in lieu of any management fee and for taxes based on production of Products:




               2.13.1.1
Exploration Phase — Five percent (5%) of Allowable Costs up to and including
Five Thousand Dollars ($5000), and two percent (2%) of Allowable Costs over Five Thousand Dollars
($5000).



               2.13.1.2
Development Phase — Five percent (5%) of Allowable Costs up to and including
Ten Thousand Dollars ($10,000), and two percent (2%) of Allowable Costs over Ten Thousand Dollars
($10,000).



               2.13.1.3
Major Construction Phase — Ten percent (10%) of Allowable Costs up to and
including Twenty-Five Thousand Dollars ($25,000), and two percent (2%) of Allowable Costs over
Twenty-Five Thousand Dollars ($25,000).



               2.13.1.4
Mining Phase — One and one half percent (1.5%) of Allowable Costs.



          2.13.2 The term “Allowable Costs” as used in this Paragraph for a particular phase of
Operations shall mean all charges to the Business Account excluding: (i) the administrative charge
referred to herein; (ii) depreciation, depletion or amortization of tangible or intangible Assets;
(iii) amounts charged in accordance with Paragraphs 2.1 and 2.9, and (iv) marketing costs. The
Manager shall attribute such Allowable Costs to a particular phase of Operations by applying the
following guidelines:




               (A) The Exploration Phase shall cover those Operations conducted to ascertain the existence,
location, extent or quantity of any deposit of ore or mineral.



               (B) The Development Phase shall cover those Operations, including Pre-Feasibility and
Feasibility Study Operations,
conducted to assess a commercially feasible ore body or to extend production of an existing ore
body, and to construct or install related fixed Assets.



               (C) The Major Construction Phase shall include all Operations involved in the construction of
treatment or processing facilities.



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               (D) The Mining Phase shall include all other Operations activities not otherwise covered
above, including activities conducted after Mining Operations have ceased.



          (c) Various phases of Operations may be conducted concurrently, in which event the
administrative charge shall be calculated separately for Allowable Costs attributable to each
phase.




          (d) The monthly administration charge determined for each phase of Operations shall be a
liquidated amount to reimburse Manager for its home office overhead and general and administrative
expenses for its conduct of Operations, and shall be equitably apportioned among all of the
properties served during such monthly period on the basis of a ratio approved by the Management
Committee.




          (e) The following is a representative list of items that constitute the Manager’s principal
business office expenses that are expressly covered by the administrative charge provided in this
Paragraph, except to the extent that such items are directly chargeable to the Business Account
under other provisions of this Article II:




               2.13.2.1 Administrative supervision, which includes all services rendered by managers,
department supervisors, officers and directors of the Manager for Operations.



               2.13.2.2 Accounting, data processing, personnel administration, billing and record keeping in
accordance with governmental regulations and the provisions of the Agreement, and preparation of
reports;



               2.13.2.3 The services of tax counsel and tax administration employees for all tax matters,
including any protests, except any outside professional fees which the Management Committee may
approve as a direct charge to the Business Account;



               2.13.2.4 Routine legal services rendered by outside sources and the Manager’s legal staff not
otherwise charged to the Business Account under Paragraph 2.9, including property acquisition,
attorney management and oversight, and support services provided by Manager’s legal staff
concerning any litigation; and



               2.13.2.5 Rentals and other charges for office and records storage space, telephone service,
office equipment and supplies.



          (f) The Management Committee shall annually review the administrative charges and shall amend
the methodology or rates used to determine such charges if they are found to be insufficient or
excessive based on the principles that the




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Manager shall not make a profit or suffer a loss and that it should be fairly and adequately
compensated for its costs and expenses.




     2.14 Environmental Compliance Fund. Costs of reasonably anticipated Environmental
Compliance which, on a Program basis, shall be determined by the Management Committee and shall be
based on proportionate contributions in an amount sufficient to establish an Environmental
Compliance Fund, which through successive proportionate contributions during the life of the
Business, will pay for ongoing Environmental Compliance conducted during Operations and which will
aggregate the reasonably anticipated costs of mine closure, post-Operations Environmental
Compliance and Continuing Obligations. The Manager shall invest such amounts on behalf of the
Participants as provided in Subsection 8.2(r).



     2.15 Other Expenditures. Any reasonable direct expenditure, other than expenditures
which are covered by the foregoing provisions, incurred by the Manager for the necessary and proper
conduct of Operations.



ARTICLE III

BASIS OF CHARGES TO BUSINESS ACCOUNT 




     3.1 Purchases. Material purchased and services procured from third parties shall be
charged to the Business Account by the Manager at invoiced cost, including applicable transfer
taxes, less all discounts taken. If any Material is determined to be defective or is returned to a
vendor for any other reason, the Manager shall credit the Business Account when an adjustment is
received from the vendor.



     3.2 Material Furnished by a Participant for Use in the Business. Any Material
furnished by either Participant for use in the Business or distributed to either Participant by the
Manager shall be priced on the following basis:



          (a) New Material: New Material furnished by either Participant shall be priced F.O.B.
the nearest reputable supply store or railway receiving point, where like Material is available, at
the current replacement cost of the same kind of Material, exclusive of any available cash
discounts, at the time it is furnished (herein called “New Price”).




          (b) Used Material.




               (i) Used Material in sound and serviceable condition and suitable for reuse without
reconditioning shall be priced as follows:



                    (a) Used Material furnished by either Participant shall be priced at seventy-five percent
(75%) of the New Price;



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                    (b) Used Material distributed to either Participant shall be priced (i) at seventy-five
percent (75%) of the New Price if such Material was originally charged to the Business Account as
new Material, or (ii) at sixty-five percent (65%) of the New Price if such Material was originally
charged to the Business Account as good used Material at seventy-five percent (75%) of the New
Price.



               (ii) Other used Material that, after reconditioning, will be further serviceable for original
function as good secondhand Material, or that is serviceable for original function but not
substantially suitable for reconditioning, shall be priced at fifty percent (50%) of New Price.
The cost of any reconditioning shall be borne by the transferee.



               (iii) Bad-Order Material which is no longer usable for its original purpose without excessive
repair cost but further usable for some other purpose shall be priced on a basis comparable with
items normally used for that purpose.



               (iv) All other Material, including junk, shall be priced at a value commensurate with its use
or at prevailing prices.



          (c) Obsolete Material. Any Material that is serviceable and usable for its original
function, but its condition is not equivalent to that which would justify a price as provided
above, shall be priced by the Management Committee. Such price shall be set at a level that will
result in a charge to the Business Account equal to the value of the service to be rendered by such
Material.




     3.3 Premium Prices. Whenever Material is not readily obtainable at published or
listed prices because of national emergencies, strikes or other unusual circumstances over which
the Manager has no control, the Manager may charge the Business Account for the required Material
on the basis of the Manager’s direct cost and expenses incurred in procuring such Material and
making it suitable for use. The Manager shall give written notice of the proposed charge to the
Participants prior to the time when such charge is to be billed, whereupon either Participant shall
have the right, by notifying the Manager within ten (10) days of the delivery of the notice from
the Manager, to furnish at the usual receiving point all or part of its share of Material suitable
for use and acceptable to the Manager.



     3.4 Warranty of Material Furnished by the Manager or Participants. Neither
Participant warrants any Material furnished beyond any dealer’s or manufacturer’s warranty and no
credits shall be made to the Business Account for defective Material until adjustments are received
by the Manager from the dealer, manufacturer or their respective agents.



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ARTICLE IV

DISPOSAL OF MATERIAL




          4.1 Disposition Generally. The Manager shall have no obligation to
purchase either Participant’s interest in Material. The Management Committee shall
determine the disposition of major items of surplus Material, provided the Manager shall
have the right to dispose of normal accumulations of junk and scrap Material either by sale
or by transfer to the Participants as provided in Paragraph 4.2.




          4.2 Distribution to Participants. Any Material to be distributed to the
Participants shall be made in proportion to their respective Participating Interests, and
corresponding credits shall be made to the Business Account on the basis provided in
Paragraph 3.2.




          4.3 Sales. Sales of Material to third parties shall be credited to the
Business Account at the net amount received. Any damages or claims by the Purchaser
shall be charged back to the Business Account if and when paid.




ARTICLE V

INVENTORIES




          5.1 Periodic Inventories, Notice and Representations. At reasonable
intervals, inventories shall be taken by the Manager, which shall include all such Material
as is ordinarily considered controllable by operators of mining properties, and the expense
of conducting such periodic inventories shall be charged to the Business Account. The
Manager shall give written notice to the Participants of its intent to take any inventory at
least thirty (30) days before such inventory is scheduled to take place. A Participant shall
be deemed to have accepted the results of any inventory taken by the Manager if the
Participant fails to be represented at such inventory.




          5.2 Reconciliation and Adjustment of Inventories. Reconciliation of
inventory with charges to the Business Account shall be made, and a list of overages and
shortages shall be furnished to the Management Committee within six (6) months after the
inventory is taken. Inventory adjustments shall be made by the Manager to the Business
Account for overages and shortages, but the Manager shall be held accountable to the
Business only for shortages due to lack of reasonable diligence.




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EXHIBIT C



To

CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation





TAX MATTERS




ARTICLE I

EFFECT OF THIS EXHIBIT




          This Exhibit shall govern the relationship of the Participants with respect to
tax matters and the other matters addressed herein. Except as otherwise indicated,
capitalized terms used in this Exhibit shall have the meanings given to them in the
Agreement. In the event of a conflict between this Exhibit and the other provisions of the
Agreement, the terms of this Exhibit shall control.




ARTICLE II

TAX MATTERS PARTNER




          2.1 Designation of Tax Matters Partner. The Manager is hereby
designated the tax matters partner (hereinafter “TMP”) as defined in Section 6231(a)(7) of
the Internal Revenue Code of 1986 (“the Code”) and shall be responsible for, make elections
for, and prepare and file any federal and state tax returns or other required tax forms
following approval of the Management Committee. In the event of any change in
Manager, the Participant serving as Manager at the end of a taxable year shall continue as
TMP with respect to all matters concerning such year unless the TMP for that year is
required to be changed pursuant to applicable Treasury Regulations. The TMP and the
other Participant shall use reasonable best efforts to comply with the responsibilities
outlined in this Article II and in Sections 6221 through 6233 of the Code (including any
Treasury regulations promulgated thereunder) and in doing so shall incur no liability to
any other party.




          2.2 Notice. Each Participant shall furnish the TMP with such information
(including information specified in Section 6230(e) of the Code) as it may reasonably
request to permit it to provide the Internal Revenue Service with sufficient information to
allow proper notice to the Participants in accordance with Section 6223 of the Code. The
TMP shall keep each Participant informed of all administrative and judicial proceedings




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for the adjustment at the partnership level of partnership items in accordance with Section
6223(g) of the Code.




          2.3 Inconsistent Treatment of Partnership Item. If an administrative
proceeding contemplated under Section 6223 of the Code has begun, and the TMP so
requests, each Participant shall notify the TMP of its treatment of any partnership item on
its federal income tax return that is inconsistent with the treatment of that item on the
partnership return.




          2.4 Extensions of Limitation Periods. The TMP shall not enter into any
extension of the period of limitations as provided under Section 6229 of the Code without
first giving reasonable advance notice to the other Participant of such intended action.




          2.5 Requests for Administrative Adjustments. Neither Participant shall
file, pursuant to Section 6227 of the Code, a request for an administrative adjustment of
partnership items for any partnership taxable year without first notifying the other
Participant. If the other Participant agrees with the requested adjustment, the TMP shall
file the request for administrative adjustment on behalf of the partnership. If consent is not
obtained within thirty (30) days after notice from the proposing Participant, or within the
period required to timely file the request for administrative adjustment, if shorter, either
Participant, including the TMP, may file that request for administrative adjustment on its
own behalf.




          2.6 Judicial Proceedings. Either Participant intending to file a petition
under Section 6226, 6228 or other sections of the Code with respect to any partnership item,
or other tax matters involving the tax partnership, shall notify the other Participant of such
intention and the nature of the contemplated proceeding. If the TMP is the Participant
intending to file such petition, such notice shall be given within a reasonable time to allow
the other Participant to participate in the choosing of the forum in which such petition will
be filed. If both Participants do not agree on the appropriate forum, then the appropriate
forum shall be decided in accordance with Section 7.2. If a deadlock results, the TMP shall
choose the forum. If either Participant intends to seek review of any court decision
rendered as a result of a proceeding instituted under the preceding part of this Paragraph,
such Participant shall notify the other Participant of such intended action.




          2.7 Settlements. The TMP shall not bind the other Participant to a
settlement agreement without first obtaining the written consent of any such Participant.
Either Participant who enters into a settlement agreement for its own account with respect
to any partnership items, as defined by Section 6231(a)(3) of the Code, shall notify the other
Participant of such settlement agreement and its terms within ninety (90) days from the
date of settlement.




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          2.8 Fees and Expenses. The TMP shall not engage legal counsel, certified
public accountants, or others without the prior consent of the Management Committee.
Either Participant may engage legal counsel, certified public accountants, or others in its
own behalf and at its sole cost and expense. Any reasonable item of expense, including but
not limited to fees and expenses for legal counsel, certified public accountants, and others
which the TMP incurs (after proper consent by the Management Committee as provided
above) in connection with any audit, assessment, litigation, or other proceeding regarding
any partnership item, shall constitute proper charges to the Business Account and shall be
borne by the Participants as any other item which constitutes a direct charge to the
Business Account pursuant to the Agreement.




          2.9 Survival. The provisions of the foregoing paragraphs, including but
not limited to the obligation to pay fees and expenses contained in Paragraph 2.8, shall
survive the termination of the tax partnership or the termination of either Participant’s
interest in the tax partnership and shall remain binding on the Participants for a period of
time necessary to resolve with the Internal Revenue Service or the Department of the
Treasury any and all matters regarding the federal income taxation of the tax partnership
for the applicable tax year(s).




ARTICLE III

TAX ELECTIONS AND ALLOCATIONS




          3.1 Tax Partnership Election. It is understood and agreed that the
Participants intend to create a partnership for United States federal and state income tax
purposes, and, unless otherwise agreed to hereafter by both Participants, neither
Participant shall make an election to be, or have the arrangement evidenced hereby,
excluded from the application of any provisions of Subchapter K of the Code, or any
equivalent state income tax provision. It is understood and agreed that the Participants
intend to create a partnership for federal and state income tax purposes only (a “tax
partnership”). The Manager shall file with the appropriate office of the Internal Revenue
Service a partnership income tax return covering the Operations. The Participants
recognize that this Agreement may be subject to state income tax statutes. The Manager
shall file with the appropriate offices of the state agencies any required partnership state
income tax returns. Each Participant agrees to furnish to the Manager any information it
may have relating to Operations as shall be required for proper preparation of such
returns. The Manager shall furnish to the other Participant for its review a copy of each
proposed income tax return at least two weeks prior to the date the return is filed.




          3.2 Tax Elections. The tax partnership shall make the following elections
for purposes of all partnership income tax returns:




               (a) To use the accrual method of accounting.



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               (b) Pursuant to the provisions at Section 706(b)(1) of the Code, to
use as its taxable year the year ended December 31. In this connection, Canyon represents
that its taxable year is the year ending December 31 and Horizon represents that its taxable
year is the year ending December 31.



               (c) To deduct currently all development expenses to the extent
possible under Section 616 of the Code.



               (d) Unless the Participants unanimously agree otherwise, to
compute the allowance for depreciation in respect of all depreciable Assets using the
maximum accelerated tax depreciation method and the shortest life permissible or, at the
election of the Manager, using the units of production method of depreciation.



               (e) To treat advance royalties as deductions from gross income for
the year paid or accrued to the extent permitted by law.






               (f) To adjust the basis of tax partnership property under Section
754 of the Code at the request of either Participant;






               (g) To amortize over the shortest permissible period all
organizational expenditures and business start-up expenses under Sections 195 and 709 of
the Code;



          Any other election required or permitted to be made by the tax partnership
under the Code or any state tax law shall be made as determined by the Management
Committee.




          Each Participant shall elect under Section 617(a) of the Code to deduct
currently all exploration expenses. Each Participant reserves the right to capitalize its share
of development and/or exploration expenses of the tax partnership in accordance with
Section 59(e) of the Code, provided that a Participant’s election to capitalize all or any
portion of such expenses shall not affect the Participant’s Capital Account.




          3.3 Allocations to Participants. Allocations for Capital Account purposes
shall be in accordance with the following:




               (a) The Participants recognize the provision for taking production
in kind, as provided elsewhere in the Agreement, as each Participant’s right to determine a
market for the sale of a proportionate share of production subject to Subparagraph 3.3(h)
below. All items of income, gain, deduction, loss, credit or tax attribute arising from the
sale and marketing of such production shall be allocated to the Participant who designated
such market.



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               (b) Exploration expenses and development cost deductions shall
be allocated among the Participants in accordance with their respective contributions to
such expenses and costs.



               (c) Depreciation and amortization deductions with respect to a
depreciable Asset shall be allocated among the Participants in accordance with their
respective contributions to the adjusted basis of the Asset which gives rise to the
depreciation, amortization or loss deduction.



               (d) Production and operating cost deductions shall be allocated
among the Participants in accordance with their respective contributions to such costs.



               (e) Deductions for depletion (to the extent of the amount of such
deductions that would have been determined for Capital Account purposes if only cost
depletion were allowable for federal income tax purposes) shall be allocated to the
Participants in accordance with their respective contributions to the adjusted basis of the
depletable property. Any remaining depletion deductions shall be allocated to the
Participants so that, to the extent possible, the Participants receive the same total amounts
of percentage depletion as they would have received if percentage depletion were
allocated to the Participants in proportion to their respective shares of the gross income
used as the basis for calculating the federal income tax deduction for percentage depletion.



               (f) Subject to Subparagraph 3.3(h) below, gross income on the sale
of production shall be allocated in accordance with the Participants’ rights to share in the
proceeds of such sale.



               (g) Except as provided in Subparagraph 3.3(h) below, gain or loss
on the sale of a depreciable or depletable asset shall be allocated so that, to the extent
possible, the net amount reflected in the Participants’ Capital Account with respect to such
property (taking into account the cost of such property, depreciation, amortization,
depletion or other cost recovery deductions and gain or loss) most closely reflects the
Participants’ Participating Interests.



               (h) Gains and losses on the sale of all or substantially all the Assets
of the tax partnership shall be allocated so that, to the extent possible, the Participants’
resulting Capital Account balances are in the same ratio as their Participating Interests at
the time of such sale.



               (i) {Intentionally Omitted.]



               (j) All deductions and losses that are not otherwise allocated in
this Paragraph shall be allocated among the Participants in accordance with their



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respective contributions to the costs producing each such deduction or to the adjusted
basis of the Asset producing each such loss.




               (k) Any recapture of exploration expenses under Section
617(b)(1)(A) of the Code, and any disallowance of depletion under Section 617(b)(1)(B) of
the Code, shall be borne by the Participants in the same manner as the related exploration
expenses were allocated to, or claimed by, them.



               (l) All other items of income and gain shall be allocated to the
Participants in accordance with their Participating Interests.



               (m) If a reduced Participating Interest is restored pursuant to
Section 9.6, the Manager shall endeavor to allocate items of income, gain, loss, and
deduction (in the same year as the restoration of such Participating Interest or, if necessary,
in subsequent years) so as to cause the Capital Account balances of the Participants to be
the same as they would have been if the restored Participating Interest had never been
reduced.



               (n) If the Participants’ Participating Interests change during any
taxable year of the tax partnership, the distributive share of items of income, gain, loss and
deduction of each Participant shall be determined in any manner (1) permitted by Section
706 of the Code, and (2) agreed on by both Participants. If the Participants cannot agree on
a method, the method shall be determined by the Manager in consultation with the tax
partnership’s tax advisers, with preference given to the interim closing-of-the-books
method except where application of that method would result in undue administrative
expense in relationship to the amount of the items to be allocated.



               (o) “Nonrecourse deductions,” as defined by Treas. Reg.
Section 1.704-2(b)(1) shall be allocated between the Participants in proportion to their
Participating Interests.



          3.4 Regulatory Allocations. Notwithstanding the provisions of
Paragraph 3.3 to the contrary, the following special allocations shall be given effect for
purposes of maintaining the Participants’ Capital Accounts.




               (a) If either Participant unexpectedly receives any adjustments,
allocations, or distributions described in Treas. Reg. Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), which result in a deficit Capital Account balance,
items of income and gain shall be specially allocated to each such Participant in an amount
and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the
Capital Account deficit of such Participant as quickly as possible. For the purposes of this
Paragraph, each Participant’s Capital Account balances shall be increased by the sum of
(i) the amount such Participant is obligated to restore pursuant to any provision of the



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Agreement, and (ii) the amount such Participant is deemed to be obligated to restore
pursuant to the penultimate sentences of Treas. Reg. Sections 1.704-2(g)(1) and 1.704-2(i)(5).




               (b) The “minimum gain chargeback” and “partner minimum gain
chargeback” provisions of Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4), respectively, are
incorporated herein by reference and shall be given effect. In accordance with Treas. Reg.
Section 1.704-2(i)(1), deductions attributable to a “partner nonrecourse liability” shall be
allocated to the Participant that bears the economic risk of loss for such liability.



               (c) If the allocation of deductions to either Participant would
cause such Participant to have a deficit Capital Account balance at the end of any taxable
year of the tax partnership (after all other allocations provided for in this Article III have
been made and after giving effect to the adjustments described in Subparagraph 3.4(a)),
such deductions shall instead be allocated to the other Participant.



          3.5 Curative Allocations. The allocations set forth in Paragraph 3.4 (the
“Regulatory Allocations”) are intended to comply with certain requirements of the
Treasury Regulations. It is the intent of the Participants that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of income, gain, loss or deduction pursuant to this
Paragraph. Therefore, notwithstanding any other provisions of this Article III (other than
the Regulatory Allocations), the Manager shall make such offsetting special allocations of
income, gain, loss or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Participant’s Capital Account balance is, to the
extent possible, equal to the Capital Account balance such Participant would have had if
the Regulatory Allocations were not part of this Agreement and all items were allocated
pursuant to Paragraph 3.3 without regard to Paragraph 3.4.




          3.6 Tax Allocations. Except as otherwise provided in this Paragraph,
items of taxable income, deduction, gain and loss shall be allocated in the same manner as
the corresponding item is allocated for book purposes under Paragraphs 3.3, 3.4 and 3.5 of
the corresponding item determined for Capital Account purposes.




               (a) Recapture of tax deductions arising out of a disposition of
property shall, to the extent consistent with the allocations for tax purposes of the gain or
amount realized giving rise to such recapture, be allocated to the Participants in the same
proportions as the recaptured deductions were originally allocated or claimed.



               (b) To the extent required by Section 704(c) of the Code, income,
gain, loss, and deduction with respect to property contributed to the tax partnership by a
Participant shall be shared among both Participants so as to take account of the variation
between the basis of the property to the tax partnership and its fair market value at the
time of contribution. The Participants intend that Section 704(c) shall effect no allocations



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of tax items that are different from the allocations under Paragraphs 3.3, 3.4 and 3.5 of the
corresponding items for Capital Account purposes. However, to the extent that allocations
of tax items are required pursuant to Section 704(c) of the Code to be made other than in
accordance with the allocations under Paragraphs 3.3, 3.4 and 3.5 of the corresponding
items for Capital Account purposes, Section 704(c) shall be applied in accordance with the
“traditional method without curative allocations” under Treas. Reg. Section 1.704-3(b).




               (c) Depletion deductions with respect to contributed property
shall be determined without regard to any portion of the property’s basis that is
attributable to precontribution expenditures by Canyon that were capitalized under Code
Sections 616(b), 59(e) and 291(b). Deductions attributable to precontribution expenditures
by Canyon shall be calculated under such Code Sections as if Canyon continued to own the
depletable property to which such deductions are attributable, and such deductions shall
be reported by the tax partnership and shall be allocated solely to Canyon.



               (d) The Participants understand the allocations of tax items set
forth in this Paragraph, and agree to report consistently with such allocations for federal
and state tax purposes.



ARTICLE IV

CAPITAL ACCOUNTS; LIQUIDATION




          4.1 Capital Accounts.




               (a) A separate Capital Account shall be established and
maintained by the TMP for each Participant. Such Capital Account shall be increased by
(i) the amount of money contributed by the Participant to the tax partnership, (ii) the fair
market value of property contributed by the Participant to the tax partnership (net of
liabilities secured by such contributed property that the partnership is considered to
assume or take subject to under Code Section 752) and (iii) allocations to the Participant
under Paragraphs 3.3, 3.4 and 3.5 of tax partnership income and gain (or items thereof),
including income and gain exempt from tax; and shall be decreased by (iv) the amount of
money distributed to the Participant by the tax partnership, (v) the fair market value of
property distributed to the Participant by the tax partnership (net of liabilities secured by
such distributed property and that the Participant is considered to assume or take subject
to under Code Section 752), (vi) allocations to the Participant under Paragraphs 3.3, 3.4 and
3.5 of expenditures of the tax partnership not deductible in computing its taxable income
and not properly chargeable to a Capital Account, and (vii) allocations of tax partnership
loss and deduction (or items thereof), excluding items described in (vi) above and
percentage depletion to the extent it exceeds the adjusted tax basis of the depletable
property to which it is attributable. The Participants agree that the net fair market value of
the property contributed by Canyon to the tax partnership pursuant to Section 5.1(a) of the
Agreement is Two Million Dollars ($2,000,000).



EXHIBIT C

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               (b) In the event that the Capital Accounts of the Participants are
computed with reference to the book value of any Asset which differs from the adjusted
tax basis of such Asset, then the Capital Accounts shall be adjusted for depreciation,
depletion, amortization and gain or loss as computed for book purposes with respect to
such Asset in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g).



               (c) In the event any interest in the tax partnership is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest, except as
provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(1).



               (d) In the event property, other than money, is distributed to a
Participant, the Capital Accounts of the Participants shall be adjusted to reflect the manner
in which the unrealized income, gain, loss and deduction inherent in such property (that
has not been reflected in the Capital Accounts previously) would be allocated among the
Participants if there was a taxable disposition of such property for the fair market value of
such property (taking Section 7701(g) of the Code into account) on the date of distribution.
For this purpose the fair market value of the property shall be determined as set forth in
Paragraph 4.2(a) below.



               (e) In the event the Management Committee designates a
Supplemental Business Agreement area within the Area of Interest as described in Article
XV of the Agreement, the Management Committee shall appropriately segregate Capital
Accounts to reflect that designation and shall make such other modifications to the
Agreement as are appropriate to reflect the manner of administering Capital Accounts in
accordance with the terms of this Exhibit C.



               (f) Canyon is contributing to the Agreement certain depletable
properties with respect to which Canyon currently has an adjusted tax basis which may
consist in part of depletable expenditures and in part of expenditures capitalized under
Code Sections 616(b), 291(b) and/or 59(e). For purposes of maintaining the Capital
Accounts, the tax partnership’s deductions with respect to contributed property in each
year for (i) depletion, (ii) deferred development expenditures under Section 616(b)
attributable to pre-contribution expenditures, (iii) amortization under Section 291(b)
attributable to pre-contribution expenditures, and (iv) amortization under Section 59(e)
attributable to pre-contribution expenditures shall be the amount of the corresponding
item determined for tax purposes pursuant to Subparagraph 3.6(c) multiplied by the ratio
of (A) the book value at which the contributed property is recorded in the Capital
Accounts to (B) the adjusted tax basis of the contributed property (including basis resulting
from capitalization of pre-contribution development expenditures under Sections 616(b),
291(b), and 59(e)).



EXHIBIT C

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               (g) The foregoing provisions, and the other provisions of the
Agreement relating to the maintenance of Capital Accounts and the allocations of income,
gain, loss, deduction and credit, are intended to comply with Treasury Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Management Committee shall determine that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits thereto, are
computed in order to comply with such Regulations, the Management Committee may
make such modification, provided that it is not likely to have a material effect on the
amount distributable to either Participant upon liquidation of the tax partnership pursuant
to Paragraph 4.2.



               (h) If the Participants so agree, upon the occurrence of an event
described in Treas. Reg. Section 1.704-1(b)(2)(iv)(5), the Capital Accounts shall be restated
in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(f) to reflect the manner in which
unrealized income, gain, loss or deduction inherent in the assets of the tax partnership (that
has not been reflected in the Capital Accounts previously) would be allocated among the
Participants if there were a taxable disposition of such assets for their fair market values, as
determined in accordance with Section 4.2(a). For purposes of Paragraph 3.3, a Participant
shall be treated as contributing the portion of the book value of any property that is
credited to the Participant’s Capital Account pursuant to the preceding sentence.
Following a revaluation pursuant to this Subparagraph 4.1(h), the Participants’ shares of
depreciation, depletion, amortization and gain or loss, as computed for tax purposes, with
respect to property that has been revalued pursuant to this Subparagraph 4.1(h) shall be
determined in accordance with the principles of Code Section 704(c) as applied pursuant to
the final sentence of Subparagraph 3.6(b).



          4.2 Liquidation. In the event the partnership is “liquidated” within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g) then, notwithstanding any
other provision of the Agreement to the contrary, the following steps shall be taken (after
taking into account any transfers of Capital Accounts pursuant to Sections 5.2(a), 6.3(a) or
12.3 of the Agreement):




               (a) The Capital Accounts of the Participants shall be adjusted to
reflect any gain or loss which would be realized by the partnership and allocated to the
Participants pursuant to the provisions of Article III of this Exhibit C if the Assets had been
sold at their fair market value at the time of liquidation. The fair market value of the
Assets shall be determined by agreement of both Participants; provided, however, that in
the event that the Participants fail to agree on the fair market value of any Asset, its fair
market value shall be determined by a nationally recognized independent engineering firm
or other qualified independent party approved by both Participants.



               (b) After making the foregoing adjustments and/or contributions,
all remaining Assets shall be distributed to the Participants in accordance with the balances



EXHIBIT C

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in their Capital Accounts (after taking into account all allocations under Article III,
including Subparagraph 3.3(h)). Unless otherwise expressly agreed on by both
Participants, each Participant shall receive an undivided interest in each and every Asset
determined by the ratio of the amount in each Participant’s Capital Account to the total of
both of the Participants’ Capital Accounts. Assets distributed to the Participants shall be
deemed to have a fair market value equal to the value assigned to them pursuant to
Subparagraph 4.2(a) above.




               (c) All distributions to the Participants in respect of their Capital
Accounts shall be made in accordance with the time requirements of Treasury Regulation
Sections 1.704-1(b)(2)(ii)(b)(2) and (3).



          4.3 Deemed Terminations. Notwithstanding the provisions of Paragraph
4.2, if the “liquidation” of the tax partnership results from a deemed termination under
Section 708(b)(1)(B) of the Code, then (i) Subparagraphs 4.2(a) and (b) shall not apply, (ii)
the tax partnership shall be deemed to have distributed its Assets in accordance with the
relative Capital Account balances of the Participants as adjusted pursuant to Subparagraph
4.2(a), (iii) the Participants shall be deemed for tax purposes to have contributed those
Assets to a new partnership pursuant to the terms of this Exhibit, and (iv) the new tax
partnership shall continue pursuant to the terms of this Agreement and this Exhibit.




EXHIBIT C

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EXHIBIT D

To

CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation




DEFINITIONS




     “Affiliate” means any person, partnership, limited liability company, joint venture,
corporation, or other form of enterprise which Controls, is Controlled by, or is under common
Control with a Participant.



     “Agreement” means this Converse Uranium Project Exploration, Development and Mine Operating
Agreement, including all amendments and modifications, and all schedules and exhibits, all of which
are incorporated by this reference.



     “Approved Alternative” means a Development and Mining alternative selected by the Management
Committee from various Development and Mining alternatives analyzed in the Pre-Feasibility Studies.



     “Area of Interest” means the area described in Paragraph 1.3 of Exhibit A.



     “Assets” means the Properties, Products, Business Information, and all other real and personal
property, tangible and intangible, including existing or after-acquired properties and all contract
rights held for the benefit of the Participants hereunder.



     “Budget” means a detailed estimate of all costs to be incurred and a schedule of cash advances
to be made by the Participants with respect to a Program.



     “Business” means the contractual relationship of the Participants under this Agreement.



     “Business Account” means the account maintained by the Manager for the Business in accordance
with Exhibit B.



     “Business Information” means the terms of this Agreement, and any other agreement relating to
the Business, the Existing Data, and all information, data, knowledge



EXHIBIT D

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and know-how, in whatever form and however communicated (including, without limitation,
Confidential Information), developed, conceived, originated or obtained by either Participant in
performing its obligations under this Agreement. The term “Business Information” shall not include
any improvements, enhancements, refinements or incremental additions to Participant Information
that are developed, conceived, originated or obtained by either Participant in performing its
obligations under this Agreement.




     “Capital Account” means the account maintained for each Participant in accordance with Exhibit
C.



     “Confidential Information” means all information, data, knowledge and know-how (including, but
not limited to, formulas, patterns, compilations, programs, devices, methods, techniques and
processes) that derives independent economic value, actual or potential, as a result of not being
generally known to, or readily ascertainable by, third parties and which is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy, including without limitation
all analyses, interpretations, compilations, studies and evaluations of such information, data,
knowledge and know-how generated or prepared by or on behalf of either Participant. Confidential
Information does not include information within the public domain through no fault or action taken
of any party after the Effective Date of this Agreement.



     “Continuing Obligations” mean obligations or responsibilities that are reasonably expected to
continue or arise after Operations on a particular area of the Properties have ceased or are
suspended, such as future monitoring, stabilization, or Environmental Compliance.



     “Control” used as a verb means, when used with respect to an entity, the ability, directly or
indirectly through one or more intermediaries, to direct or cause the direction of the management
and policies of such entity through (i) the legal or beneficial ownership of voting securities or
membership interests; (ii) the right to appoint managers, directors or corporate management; (iii)
contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when used with respect to
a person, means the actual or legal ability to control the actions of another, through family
relationship, agency, contract or otherwise; and “Control” used as a noun means an interest which
gives the holder the ability to exercise any of the foregoing powers.



     “Cover Payment” shall have the meaning as set forth in Section 10.4 of the Agreement.



     “Development” means all preparation (other than Exploration) for the removal and recovery of
Products, including pilot or test projects and installation or construction of improvements to be
used for Mining, and all related Environmental Compliance.



EXHIBIT D

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     “Effective Date” means the date set forth in the preamble to this Agreement.



     “Encumbrance” or “Encumbrances” means mortgages, deeds of trust, security interests, pledges,
liens, net profits interests, royalties or overriding royalty interests, other payments out of
production, or other burdens of any nature.



     “Environmental Compliance” means actions performed during or after Operations to comply with
the requirements of all Environmental Laws or contractual commitments related to reclamation of the
Properties or other compliance with Environmental Laws.



     “Environmental Laws” means Laws aimed at reclamation or restoration of the Properties;
abatement of pollution; protection of the environment; protection of wildlife, including endangered
species; ensuring public safety from environmental hazards; protection of cultural or historic
resources; management, storage or control of hazardous materials and substances; releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances as wastes into the environment, including without limitation, ambient air, surface water
and groundwater; and all other Laws relating to the manufacturing, processing, distribution, use,
treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes.



     “Environmental Liabilities” means any and all claims, actions, causes of action, damages,
losses, liabilities, obligations, penalties, judgments, amounts paid in settlement, assessments,
costs, disbursements, or expenses (including, without limitation, attorneys’ fees and costs,
experts’ fees and costs, and consultants’ fees and costs) of any kind or of any nature whatsoever
that are asserted against either Participant, by any person or entity other than the other
Participant, alleging liability (including, without limitation, liability for studies, testing or
investigatory costs, cleanup costs, response costs, removal costs, remediation costs, containment
costs, restoration costs, corrective action costs, closure costs, reclamation costs, natural
resource damages, property damages, business losses, personal injuries, penalties or fines) arising
out of, based on or resulting from (i) the presence, release, threatened release, discharge or
emission into the environment of any hazardous materials or substances existing or arising on,
beneath or above the Properties and/or emanating or migrating and/or threatening to emanate or
migrate from the Properties to off-site properties; (ii) physical disturbance of the environment;
or (iii) the violation or alleged violation of any Environmental Laws.



     “Equity Account” means the account maintained for each Participant by the Manager in
accordance with Subsection 8.2(n) of the Agreement.



EXHIBIT D

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     “Existing Data” means maps, drill logs and other drilling data, core tests, pulps, reports,
surveys, assays, analyses, production reports, operations, technical, accounting and financial
records, and other material information developed in operations on the Properties prior to the
Effective Date.



     “Expansion” or “Modification” means (i) a material increase in mining or production capacity;
(ii) a material change in the recovery process; or (iii) a material change in waste or tailings
disposal methods. An increase or change shall be deemed “material” if it is anticipated to cost
more than ten percent (10%) of original capital costs attributable to the Development of the mining
or production capacity, recovery process or waste or tailings disposal facility to be expanded or
modified.



     “Exploration” means all activities directed toward ascertaining the existence, location,
magnitude and extent, quantity, quality or commercial value of deposits of Products, including but
not limited to additional drilling required after to evaluate potentially commercial
mineralization, and including related Environmental Compliance.



     “Feasibility Contractors” means one or more engineering firms approved by the Management
Committee for purposes of preparing or auditing any Pre-Feasibility Study or Feasibility Study.



     “Feasibility Study” means a report to be prepared following selection by the Management
Committee of one or more Approved Alternatives. The Feasibility Study shall include a review of
information presented in any Pre-Feasibility Studies concerning the Approved Alternative(s). The
Feasibility Study shall be in a form, of a scope, and at a level of accuracy generally acceptable
to reputable financial institutions that provide financing to the mining industry.



     “Governmental Fees” means all location fees, mining claim rental fees, mining claim
maintenance payments and similar payments required by Law to locate and hold mining claims or
leases.



     “Initial Contribution” means that contribution each Participant has made or agrees to make
pursuant to Section 5.1 of the Agreement.



     “Law” or “Laws” means all applicable federal, state and local laws (statutory or common),
rules, ordinances, regulations, grants, concessions, franchises, licenses, orders, directives,
judgments, decrees, and other governmental restrictions, including permits and other similar
requirements, whether legislative, municipal, administrative or judicial in nature.



     “Management Committee” means the committee established under Article VII of the Agreement.



EXHIBIT D

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     “Manager” means the Participant appointed under Article VIII of the Agreement to manage
Operations, or any successor Manager.



     “Mining” means the mining whether by surface, underground, or in-situ methods, extracting,
producing, treating, handling, processing, removal and stockpiling of Products.



     “Operations” means the activities carried out under this Agreement.



     “Participant” means Canyon or Horizon, or any permitted successor or assign of Canyon or
Horizon under the Agreement.



     “Participant Information” means all information, data, knowledge and know-how, in whatever
form and however communicated (including, without limitation, Confidential Information but
excluding the Existing Data), which, as shown by written records, was developed, conceived,
originated or obtained by a Participant: (a) prior to entering into this Agreement, or (b)
independent of its performance under the terms of this Agreement.



     “Participating Interest” means the percentage interest representing the ownership interest of
a Participant in the Assets, and all other rights and obligations arising under this Agreement, as
such interest may from time to time be adjusted hereunder. Participating Interests shall be
calculated to three decimal places and rounded to two decimal places as follows: Decimals of .005
or more shall be rounded up (e.g., 1.519% rounded to 1.52%); decimals of less than .005 shall be
rounded down (e.g., 1.514% rounded to 1.51%). The initial Participating Interests of the
Participants are set forth in Section 6.1 of the Agreement.



     “Payout” means the date on which the Equity Account balance of each of the Participants has
become zero or a negative number, regardless of whether the Equity Account balance of either or
both Participants subsequently becomes a positive number. If one Participant’s Equity Account
balance becomes zero or a negative number before the other Participant’s, Payout shall not occur
until the date that the other Participant’s Equity Account balance first becomes zero or a negative
number.



     “Pre-Feasibility Studies” means one or more studies prepared to analyze whether economically
viable Mining Operations may be possible on the Properties, as described in Section 9.8.



     “Prime Rate” means the interest rate quoted and published as “Prime” as published in The Wall
Street Journal, under the heading “Money Rate,” as the rate may change from day to day.



EXHIBIT D

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     “Products” means all ores, minerals and mineral resources produced from the Properties,
including but not limited to all uranium, vanadium, other fissionable source materials, other
spatially associated minerals, and all forms of U3O8 in resins, solutions,
concentrates, or yellowcake, but shall not include any oil, gas, associated liquid hydrocarbons or
coal.



     “Program” means a description in reasonable detail of Operations to be conducted and
objectives to be accomplished by the Manager for a period determined by the Management Committee.



     “Program Period” means the time period covered by an adopted Program and Budget.



     “Project Financing” means any financing approved by the Management Committee and obtained by
the Participants for the purpose of placing a mineral deposit situated on the Properties into
commercial production, but shall not include any such financing obtained individually by either
Participant to finance payment or performance of its obligations under the Agreement.



     “Properties” means those interests in real property described in Paragraph 1.1 of Exhibit A
and all other interests in real property within the Area of Interest that are acquired and held
subject to the Agreement.



     “Recalculated Participating Interest” means the reduced Participating Interest of a
Participant as recalculated under Sections 9.5, 9.6 or 10.5 of the Agreement.



     “Reduced Participant” means a Participant whose Participating Interest is reduced under
Sections 9.5 or 10.5 of the Agreement.



     “Transfer” means, when used as a verb, to sell, grant, assign, create an Encumbrance, pledge
or otherwise convey, or dispose of or commit to do any of the foregoing, or to arrange for
substitute performance by an Affiliate or third party (except as permitted under Subsection 8.2(j)
and Section 8.6 of the Agreement), either directly or indirectly; and, when used as a noun, means
such a sale, grant, assignment, Encumbrance, pledge or other conveyance or disposition, or such an
arrangement.



EXHIBIT D

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EXHIBIT E

To

CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation




PRODUCTION ROYALTY



Production Royalty, as defined in Section 6.3(a) of the Agreement to which this Exhibit E is
attached, shall be determined and paid in accordance with the following terms and conditions, which
terms and conditions shall be set forth in any royalty deed delivered pursuant to Section 6.3(a).
For purposes of this Exhibit E: (a) the term “Grantor” shall mean the Participant that is
responsible for paying Production Royalty; (b) the term “Grantee” shall mean the person or entity
to whom the Production Royalty is granted and paid; and (c) all other defined terms shall have the
meaning given to them in the Agreement or in Exhibit D attached to the Agreement.




     1. Reservation of Production Royalty. Upon Grantee’s conversion to a Production Royalty and
Grantee’s conveyance of all of its right, title and interest in the Assets to Grantor in accordance
with Section 6.3(a), Grantee shall reserve a royalty in the amount of three percent (3%) of the Net
Returns from the sale or other disposition of all Products mined or produced from the Properties.



     2. Computation of Production Royalty. Grantor shall calculate the Net Returns realized on the
sale of all Products mined or produced from the Properties and sold or otherwise disposed of (with
or without sale) by or for Grantor by subtracting Allowable Deductions from Gross Sales Revenue.
The Production Royalty payable to Grantee shall be the amount of the Net Returns so calculated
multiplied by three percent (3%). Grantee shall have no right whatsoever to take Products “in
kind.”



     3. Definitions. For purposes of this Exhibit E:




	 	a.	 	“Allowable Deductions” has the meaning given to it in
Paragraph 4, below;
	 
	 	b.	 	“Gross Sales Revenue” shall mean the gross revenue received by or on behalf of
Grantor from the sale or other disposition (with or without sale) of Products.
Gross Sales Revenue shall be determined on a weighted average basis when Grantor
receives more than one





EXHIBIT E

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	 	 	 	price for Products sold or otherwise disposed of during the period for
which Production Royalty is payable;
	 
	 	c.	 	“Net Returns” means an amount determined by subtracting
Allowable Deductions from Gross Sales Revenue; and
	 
	 	d.	 	“Products” means all ores, minerals and mineral resources produced from the
Properties, including but not limited to all uranium, vanadium, other fissionable
source materials, other spatially associated minerals, and all forms of
U3O8 in resins, solutions, concentrates, or yellowcake, but shall
not include any oil, gas, associated liquid hydrocarbons or coal.





     4. Allowable Deductions.



          a. For Products that are uranium-bearing, “Allowable Deductions” shall mean and include all of
the following:





     i. all costs, expenses and charges of any nature whatsoever that are paid or
incurred by Grantor for or in connection with the transportation of Products away
from the Properties to the point of treatment, recovery, processing, storage or
sale;




     ii. all deductions made by the purchaser or processor for moisture,
impurities, sampling, assaying, penalties, and treatment or tolling charges or
fees;




     iii. all costs, expenses and charges of any nature whatsoever that are paid or
incurred by Grantor for or in connection with insurance, storage, representation at
a treatment, recovery, processing plant, or for consignment sale or sales brokerage
costs or fees;




     iv. all rentals and royalties of any kind payable to surface or mineral
interest owners or to the United States; and




     v. all federal, state and local sales, use, severance, net proceeds of mine,
excise, privilege and any other taxes, except income tax paid or incurred by
Grantor, which is levied on, measured by, or applicable to mineral production or
the value of Products produced from the Properties.



          b. For Products that are not uranium-bearing, “Allowable Deductions” shall mean and include
all of the following:




EXHIBIT E

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     i. all costs, expenses and charges of any nature whatsoever that are paid or
incurred by Grantor for or in connection with the transportation of Products away
from the Properties to a mill, smelter, refinery, recovery plant or other point of
treatment, recover, processing, storage or sale;




     ii. all costs, expenses and charges of any nature whatsoever that are paid or
incurred by Grantor for or in connection with mineral concentration, treatment,
smelting, refining or other beneficiation processes or procedures (whether or not
currently known) which are undertaken off of the Properties, including without
limitation costs, expenses and charges paid or incurred for or in connection with
moisture, impurities, sampling, assaying, penalties, umpire services and other
processor deductions;




     iii. all costs, expenses and charges of any nature whatsoever that are paid or
incurred by Grantor for or in connection with insurance, storage, representation at
a mill, smelter, refinery, recovery or treatment plant, or for consignment sale or
sales brokerage costs or fees;




     iv. all rentals and royalties of any kind payable to surface or mineral
interest owners or to the United States; and




     v. all federal, state and local sales, use, severance, net proceeds of mine,
excise, privilege and any other taxes, except income tax paid or incurred by
Grantor, which is levied on, measured by, or applicable to mineral production or
the value of Products produced from the Properties.



     5. Treatment and Sale. Grantor shall have the right to concentrate, mill, smelt, refine,
upgrade or otherwise recover, treat, process or beneficiate Products mined from the Properties at
locations on or off the Properties. In the event that Products are concentrated, milled, smelted,
refined, upgraded or otherwise recovered, treated, processed or beneficiated in facilities owned or
controlled by Grantor (whether on or off the Properties), then Allowable Deductions shall not
exceed Allowable Deductions that would have been paid or incurred by Grantor if the facilities were
owned or controlled by an independent party. No Production Royalty shall be payable to Grantee for
or with respect to reasonable quantities of Products that are not sold by Grantor but are used by
Grantor for assaying, treatment amenability, metallurgical or other analytical processes or
procedures.



     6. Statements and Payments. (a) Payment of Production Royalty shall be made by wire transfer
within thirty (30) calendar days after the calendar quarter in which Gross Sales Revenue is
received by or on behalf of Grantor. Payment shall be



EXHIBIT E

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made to an account for the credit of Grantee at a bank designated from time to time in writing by
Grantee. At the time of each payment of Production Royalty, Grantor shall deliver to Grantee a
statement setting forth in detail all pertinent facts and figures relevant to and supporting the
calculation and payment of Production Royalty, including without limitation: (i) the form, weight
and analysis of all Products for which Gross Sales Revenue was received during the period for which
payment of Production Royalty is made; (ii) the price received for all Products from all purchasers
thereof during such period; and (iii) an itemized statement of all Allowable Deductions, such that
Grantee may verify the accuracy of the amount of the payment.




          (b) All statements provided to Grantee by Grantor shall be conclusively presumed to be true
and correct after twenty-four (24) months following the calendar year during which such statement
was received by Grantee, unless Grantee submits a written exception to Grantor within such
twenty-four (24) month period. All written exceptions and claims upon Grantor for incorrect
payments of Production Royalty shall be made within such twenty-four (24) month period or shall be
deemed waived.




     7. Audits. Grantee shall have the right to an independent audit of all books, records and
accounts relating to the calculation and payment of Production Royalty. Such audit shall review all
issues raised by Grantee in any notice given by Grantee pursuant to Paragraph 7(a) above. All costs
of such audit shall be borne by Grantee. Grantee shall give Grantor thirty (30) days prior notice
of such audit. Any audit conducted on behalf of Grantee shall be made during Grantor’s normal
business hours and shall not interfere with the business and operations of Grantor. Grantee shall
not have the right to audit the books, records and accounts of Grantor relating to the calculation
and payment of Production Royalty more than twenty-four (24) months after the calendar year during
which the payment of Production Royalty (or the statement provided by Grantor in connection with
such payment) was received. All written exceptions to and claims upon Grantor for discrepancies
disclosed by such audit shall be made by Grantee not more than three (3) months after completion
and delivery of such audit, or they shall be deemed waived.



     8. Adjustments. The amounts of any charges, costs or expenses or any adjustments which are
actually made and given to Grantor by a purchaser, shipper, processor or other creditor that were
not taken into account in a statement to Grantee which accompanied a preceding payment of
Production Royalty shall be taken into account in determining the amount of the next Production
Royalty payment, but no such charges or adjustments shall otherwise affect the conclusiveness of
preceding statements or payments.



     9. Lesser Interest. If it is finally determined that Grantor owns an interest in the
Properties which is less than the entire and undivided mineral estate therein,



EXHIBIT E

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whether or not such lesser interest is referred to herein, then the Production Royalty provided for
herein shall be paid to Grantee only in the proportion to which Grantor’s interest bears to the
whole and undivided mineral estate. Grantee shall be entitled to retain only that portion of the
Production Royalty previously paid to Grantee hereunder as Grantor’s actual interest in the mineral
estate bears to the whole and undivided mineral estate. In no case shall Grantee be required to
refund or return any Production Royalty previously paid to it which exceeds the amount of
Production Royalty to which Grantee was actually entitled. Instead, Grantor’s sole remedy shall be
to offset all moneys previously paid Grantee that exceeded the actual amounts due Grantee against
future Production Royalty which later becomes due and payable to Grantee, if any. With respect to
any portion of the Properties in which Grantee owns no right, title, or interest in the Products,
Grantor is under no obligation to pay, and Grantee has no right to receive, any Production Royalty.




EXHIBIT E

Page 5 of 5





 









 








EXHIBIT F

To

CONVERSE URANIUM PROJECT

EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT

By And Between

Canyon Resources Corporation

And

New Horizon Uranium Corporation




INITIAL PROGRAM AND BUDGET




	 	 	 	 	 
	2006	 	 	 
	Item	 	$     	 
	Initial 43-101 Property Report
	 	 	10,000	 
	Landman, acquisition of private fee land
	 	 	20,000	 
	Environmental Assessment
	 	 	15,000	 
	Exploration permit including reclamation bonding
	 	 	25,000	 
	Environmental Compliance Fund
	 	 	25,000	 
	Drilling — 30 holes to 750 ft avg. – total 22,500 ft
	 	 	225,000	 
	Drilling results analysis
	 	 	10,000	 
	Drilling Report (43-101 compliant by 3rd party)
	 	 	25,000	 
	 	 	 	 	 
	 
	 	 	 	 
	2006 Total
	 	 	355,000	 
	 	 	 	 	 








 




		
	* 	All rotary drilling @$10.00 per ft.





EXHIBIT F

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