Exhibit 10.12 




Consulting Services
Agreement  



        This
Consulting Services Agreement is made as of the 1st day of October, 2007
between Industrial Minerals, Inc. a company incorporated under the laws of the
State of Delaware, having a business address at 2904 South Sheridan Way, Suite 100,
Oakville, Ontario, Canada L6J 7L7 (“IMI”), and P.A. Hynek &
Associates, Company of Businessman Paul Hynek, having an address at: 2439 Newport
Street, Burlington, ON L7M 3Y1 (the “Consultant”). 



        WHEREAS,
the Consultant has experience in, pilot plant design, implementation of test protocols,
lab design and procurement, and market segment analysis; 



        AND
WHEREAS, IMI requires such expertise for the Company, as hereinafter set out in
Schedule “A” – Statement of Work; 



        NOW,
THEREFORE, in consideration of the mutual covenants and provisions herein contained, the
Consultant and IMI agree as follows: 



1.
    Consulting Services. 



        Consultant
shall as and when requested by IMI during reasonable business hours, furnish the Company
with his best advice, information, judgment and knowledge with respect to questions and
concerns by the President, COO, Project Director and VP of Sales and Marketing. 



2.
    Conduct of Services. 



        Consultant
shall dedicate such reasonable time and efforts as may be required in order to fulfil its
obligations hereunder. The Consultant represents and warrants to IMI that it shall provide
the services described herein in a cooperative fashion, promptly, efficiently in
accordance with standards of quality acceptable to IMI acting reasonably, and in a good
and workmanlike manner. 



3.
    Consultant’s
Remuneration and Expenses. 



        In
consideration of the satisfactory performance by the Consultant of its obligations set out
in this Consulting Services Agreement IMI shall: (a) pay the Consultant $6,500.00
per month during the term of this Consulting Services Agreement. 



        In
addition, the Consultant shall be reimbursed for its expenses reasonably and properly
incurred in performing its services hereunder, provided always that such expenses have
been approved in advance by IMI. The Consultant shall be solely responsible for any and
all payments or deductions required to be made respecting unemployment insurance,
workmen’s compensation, income tax, pension plans and such other similar pay list
deductions or payments. 



4.
    Term and Termination. 



        This
Consulting Services Agreement shall be in force and effect from October 1, 2007 and
shall continue for a period of 1 year, or until terminated by IMI by ten (10) days prior
written notice given to the Consultant, whereupon this Consulting Services Agreement shall
terminate on the expiration of the notice period and thereafter no longer be of any force
or effect. 











5.
    Independent
Contractor. 



        This
is an Agreement for the performance of a service and the Consultant is engaged by IMI as
an independent contractor for the sole purpose of providing a service. The Consultant is
not engaged as a coventurer, partner, agent or employee of IMI and no act or omission by
the Consultant shall in any way obligate or be binding upon IMI. 



6.
    Non-Solicitation. 



        Consultant
covenants and agrees that at all times during Consultant’s period of engagement with
IMI, and for a period of one (1) year after the date of termination of Consultant’s
engagement, Consultant will not directly or indirectly (i) induce any customers of IMI or
corporations affiliated with IMI to patronize any similar business which competes with
IMI; (ii) canvass, solicit or accept any similar business from any customer of IMI; (iii)
directly or indirectly request or advise any customers of IMI or corporations affiliated
with IMI to withdraw, curtail or cancel such customer’s business with IMI; (iv)
directly or indirectly disclose to any other person, firm or corporation the names or
addresses of any of the customers of IMI or corporations affiliated with IMI; or (v)
directly or indirectly request, solicit, invite, suggest or entice any employees of IMI or
its affiliates to leave their employment with IMI or its affiliated companies. 



7.
    Non-Disparagement. 



        Consultant
covenants and agrees that Consultant shall not engage in any pattern of conduct that
involves the making or publishing of written or oral statements or remarks (including,
without limitation, the repetition or distribution of derogatory rumours, allegations,
negative reports or comments) which are disparaging, deleterious or damaging to the
integrity, reputation or good will of IMI, its management, or of management of
corporations affiliated with IMI. 



8.
    Protected Information. 



        Consultant
recognizes and acknowledges that Consultant will have access to various confidential or
proprietary information concerning IMI and corporations affiliated with IMI of a special
and unique value which may include, without limitation, (i) books and records relating to
operation, finance, accounting, sales, personnel and management, (ii) policies and matters
relating particularly to operations such as customer service requirements, costs of
providing service and equipment, operating costs and pricing matters, and (iii) various
trade or business secrets, including business opportunities, marketing or business
diversification plans, business development and bidding techniques, methods and processes,
financial data and the like (collectively, the “Protected Information”).
Consultant therefore covenants and agrees that Consultant will not at any time, either
while engaged by IMI or afterwards, knowingly make any independent use of, or knowingly
disclose to any other person or organization (except as authorized by IMI) any of the
Protected Information. 



9.
    Intellectual Property. 



        All
original works of authorship that result from the performance by Consultant of his duties
hereunder are and will be and will remain the sole and exclusive property of the IMI.
Consultant, at the IMI’s request and sole expense, will assign to the IMI in
perpetuity all intellectual property rights that he may have in such works of authorship.
Such assignment shall be done by documents as prepared by IMI. Should IMI elect to
register claims of copyright to any such works of authorship, Consultant will, at the
expense of IMI, do such things, sign such documents and provide such reasonable
cooperation as is necessary for IMI to register such claims, and obtain, protect, defend
and enforce such proprietary rights. Consultant shall have no right to use any trademarks
or proprietary marks of IMI without the express, prior written consent of IMI regarding
each use. 











10.
    Applicable Law. 



        This
Agreement and the rights and obligations of the parties shall be governed by the laws in
force in the Province of Ontario, and the parties hereby attorn to the jurisdiction of the
courts of the Province of Ontario. In the event a dispute between the parties arises which
they cannot resolve, then the matter may be referred by either party to arbitration in
Toronto, Ontario under the provisions of the Arbitration Act, 1991 S.O. 1991, c.17.
The parties shall select a single arbitrator to act as the arbitrator, and the arbitration
determination shall be final and binding upon the parties. 



        In
witness whereof the parties hereto have duly signed and executed this Consulting
Services Agreement. 










		
	                                   

                                   

                                   

___________________________________

Witness                            


	Mr. Paul Hynek:

)

)

/s/ Paul Hynek

P.A. Hynek & Associates





Industrial Minerals, Inc.

By:





/s/ David J. Wodar

David J. Wodar, President 























Schedule “A”
– Statement of Work  



RESEARCH DIRECTOR (RD)
RESPONSIBILITIES  



Overview  



Developing IMI’s business model,
including its pilot plant operation, marketing strategy, and full operation of the
graphite mining facility, will require significant research and development efforts.
Accordingly, there will be a requirement for an experienced metallurgical consultant with
pilot plant experience, laboratory management skills, and research abilities. These areas
will fall under the responsibility of the Research Director (RD) as outlined below. 



	1) 	Metallurgical
Testing 






A key part of the effort to
understand the processing requirements and capabilities of the Bissett Creek ore body will
be completion of the NI 43-101 report and metallurgical testing. Working closely with the
Project Director (PD), the Research Director will oversee the following areas of the
metallurgical testing efforts: 



     	i)	
          NI 43-101 – the RD will provide key insights into the ore assay processes
          and tests being carried out by Geostat Systems. This will include ensuring that
          the graphitic test processes are in agreement and accurately reflect the ore
          grades. It will also include attending various meetings as required with Geostat
          and related companies. 


          



     	ii)	
          Liberation studies – the RD will assist the PD in monitoring the fracture
          characteristic testing done by PRO, Inc. This will include assessing the test
          results to determine flake distribution characteristics during crushing and
          flotation. 


          



     	iii)	
          Bench Testing – the RD will assist the PD in assessing the processes and
          results used by PRO in carrying out various bench test studies. This will
          include attending processing sessions at PRO and related companies, and
          preparing reports as required to summarize the results. 


          



     	2)	
          Pilot Plant Development 


          



Design, construction and operation of
a one tonne of ore per hour pilot plant at the mine site will be required to fully
understand the processing requirements and capabilities of the Bissett Creek ore body. The
Research Director will oversee the following areas of the pilot plant program: 



     	i)	
          Process Flow Optimization – the RD and PD will work together and with
          outside consultants to ensure that the pilot plant design is fully optimized.
          This will ensure that the plant will adequately test the ore processing
          characteristics and that the pilot can be properly scaled up to the full plant
          operation. Optimization will include researching current technologies such as
          flotation to ensure that the pilot and full plant employ cost effective and
          efficient processes, and assisting the PD and COO in choosing and costing the
          equipment required for the plant. 


          











	 	ii) 	Test
Protocols and Procedures – it will be critically important to           establish
test protocols and procedures for operating the plant, including           safety
standards, and carrying out all testing efforts. The RD will therefore be
          responsible for preparing a manual of these processes and procedures prior to
          actual construction of the pilot plant. The manual must also include all
          documents and forms that will be required to be completed by pilot plant staff
          during operation.  






	 	iii) 	Work
Breakdown Structure – working the with PD and COO, the RD will assist           in
the preparation of a work breakdown structure (WBS) that will detail all           steps
required to be carried out during design and construction of the plant. A           WBS
structure will be important in ensuring that the plant is completed on time,
          appropriate required resources are identified in advance of construction, and
          will permit accurate costing of the construction process.  






     	3)	
          Market Research 


          



IMI’s business strategy will go
far beyond being a simple mining operation. The Company must develop a clear and effective
marketing strategy. Assisting the VP, Marketing and the COO in the following areas will
therefore be as crucial a role for the RD as any other. 



          	 	i) 	
               Applications — Bissett Creek is expected to produce a large volume of large
               flake graphite. The RD will assist the team in determining the best fit for the
               concentrate in terms of its ability to perform as required in the various
               applications. This will include providing the Marketing VP and the COO with
               recommendations on potential segments that satisfy business planning criteria
               with respect to pricing, volume and growth. 


               



          	 	ii) 	
               Where requested or required, the RD will attend market research sessions,
               information seminars, and customer meetings to help gather market intelligence
               on potential segments. 


               



300655.1