exh4-2_agmt.htm


 










 


 


 


 


 


EXHIBIT 4.2


 


LETTER AGREEMENT DATED SEPTEMBER 2, 2008 WITH


TEMEX RESOURCES CORP RE: EARN-IN ON THE GP2 JOINT VENTURE PROPERTY


 


 




 




  





  











  








TEMEX RESOURCES CORP


1660-141 Adelaide Street West


Toronto, Ontario CANADA  M5H 3L5


tel: 416-862-2246 fax: 416-862-2244


website: www.temexcorp.com


email: info@temexcorp.com

















September 2, 2008







Mill City Gold Corp.


4719 Chapel Road N.W.


Calgary, AB T2L 1A7







Attention:  James R. Brown, President







Dear James:







Re:  Earn-in on the GP2 Joint Venture Property







Temex Resources Corp. (“Temex”) and East West Resource Corporation (“East West”), carrying on business as the GP2 Joint Venture, are pleased to confirm the basis upon which they jointly will grant to Mill City Gold Corp. (“Mill City”) an option to earn an undivided 50% participating interest (the “Option”) in the GP2 Joint Venture.  The subject matter of the GP2 Joint Venture is the GP2 Property comprising 17 mining claims totaling 240 claim units (the “Claims”) currently recorded in the name of East West but held by the GP2 Joint Venture under a 50:50 Joint Venture Agreement (the “GP2 JVA”) made between Temex and East West dated January 25, 2008, a true and complete copy of which is enclosed herewith.  The GP2 Property (as more particularly described on Schedule A and depicted on Figure 1 hereto annexed) is located in the Sachigo Greenstone Belt in the James Bay Lowlands region of Northern Ontario within Areas BMA 523 864 and BMA 523 871 on Plans G-4263 and G-4273, respectively, in the Thunder Bay Mining Division.







To exercise the Option, Mill City shall be required:



	
  

	
1.

	
subject to TSX-V approval, to issue 375,000 Mill City common shares to each of Temex and East West within 10 days of execution and delivery (“upon signing”) hereof;








	
  

	
2.

	
to incur not less than $500,000 of exploration expenditures on or in respect of the GP2 Property before the first anniversary of signing;








	
  

	
3.

	
to allot and issue to each of Temex and East West an additional 125,000 Mill City Shares on the first anniversary of signing;








	
  

	
4.

	
to incur not less than an additional $1,500,000 (an aggregate of $2,000,000 inclusive of the $500,000 referred to in paragraph 2) of exploration expenditures on or in respect of 







 




  





  











  






 



 



	
  

	
 

	
the GP2 Property before the second anniversary of signing; and










	
  

	
5.

	
to incur not less than an additional $3,000,000 (an aggregate of $5,000,000 inclusive of the $2,000,000 referred to in paragraph 4) of exploration expenditures on or in respect of the GP2 Property before the third anniversary of signing (the aggregate of $5,000,000 of exploration expenditures is herein referred to as the “Work Commitment”;







 


provided that, the obligations set forth in paragraphs 1 and 2 are firm commitments made by Mill City to Temex and East West, and the obligations set forth in paragraphs 3, 4 and 5 are optional in the sole discretion of Mill City, and  Mill City shall be entitled to accelerate such obligations at any time in its sole discretion.







Mill City shall be entitled to extend for one year the time for completion of each milestone of the Work Commitment, by notice to Temex and East West if given prior to the applicable anniversary of signing.  Each extension shall require Mill City, subject to TSX-V approval, to allot and issue to each of Temex and East West 125,000 Mill City Shares.  For greater certainty, if an extension of time is granted by Temex and East West to Mill City for completion of a specified cumulative level of exploration expenditures by a particular anniversary date, it shall operate to defer the time of performance of each subsequent anniversary expenditure milestone by one year and require Mill City to allot and issue to each of Temex and East West 125,000 Mill City Shares.  If no extension is granted to Mill City in accordance with the foregoing then Mill City shall exercise the Option on or before the third anniversary of signing (the expiration of the “Earn-in Period”) provided that each such extension which is granted to Mill City shall extend the Earn-in Period by one year.







Temex is currently the Operator of the GP2 Joint Venture, and will continue to be Operator during the Earn-in Period and shall carry out all exploration programs to be funded by the Work Commitment.  As Operator, Temex is entitled to charge an overhead allowance for managing exploration programs equal to 10% of all exploration expenditures, except where the cost of an individual item exceeds $100,000, in which case such overhead allowance is reduced to 5% of the cost of such items.  Temex reserves the right to designate East West as the manager of field operations during the Earn-in Period.







If during the Earn-in Period Mill City satisfies all its obligations set forth in paragraphs 1 through 5 inclusive, which are conditions precedent to the exercise of the Option, Mill City shall be entitled to give notice to Temex and East West of the exercise of the Option by certifying compliance with the Work Commitment.  If the Option is exercised there shall be a novation of the GP2 JVA whereby Mill City shall be deemed to have acquired a Participating Interest (as therein defined) in the GP2 Joint Venture 


 




  





  











  






 


 


giving Mill City an undivided 50% interest in the GP2 Property, and the Participating Interests of Temex and East West, respectively, shall each be deemed to be diluted to 25%.







Temex and East West shall then each have 60 days from the date of exercise of the Option to elect either:



	
  

	
(a)

	
to continue to participate in the GP2 Joint Venture with Mill City for the further exploration and development of the GP2 Property; or








	
  

	
(b)

	
to relinquish its Participating Interest in the GP2 Joint Venture in exchange for a 7.5% carried and non-assessable interest in the GP2 Property to the date of commencement of Commercial Production (as defined in the GP2 JVA);







provided that, if Temex and East West make disparate elections pursuant to paragraphs (a) and (b) above, then the party electing to continue to participate in the GP2 Joint Venture and Mill City shall be deemed to have acquired the Participating Interest of the party electing to relinquish its Participating Interest in the GP2 Joint Venture pro rata to their respective Participating Interests in the GP2 Joint Venture (for greater certainty, in the ratio of 2:1 in favour of Mill City over the party electing to continue to participate in the GP2 Joint Venture).







For greater certainty, if either Temex or East West elects to retain a 7.5% carried and non-assessable interest in the GP2 Property to the date of commencement of Commercial Production, then the parties electing to continue to participate in the GP2 Joint Venture shall be responsible for 100% of the cost of all further exploration and development expenditures to be incurred on or in respect of the GP2 Property, from the date of such election to the date of commencement of Commercial Production from the GP2 Property.  The party electing to retain a 7.5% carried and non-assessable interest in the GP2 Property to the date of commencement of Commercial Production shall be deemed to maintain an undivided 7.5% undivided interest in the GP2 Property as a tenant in common with parties electing to continue to participate in the GP2 Joint Venture, however, the party electing to retain a 7.5% carried and non-assessable interest in the GP2 Property to the date of commencement of Commercial Production shall not be responsible to contribute to the cost of any further exploration or development expenditures to be incurred on or in respect of the GP2 Property for the purpose of achieving Commercial Production after the date of its election.  For greater certainty, after the date of commencement of Commercial Production each of the parties shall be responsible to contribute to operating costs in accordance with its undivided interest in the GP2 Property and no party shall be carried and non-assessable with respect to operating costs after the date of commencement of Commercial Production.











  





  











  








If both Temex and East West elect to continue to participate in the GP2 Joint Venture with Mill City for the further exploration and development of the GP2 Property, then each of Temex and East West shall be deemed to have an initial investment in the GP2 Joint Venture of $1,250,000, and Mill City shall be deemed to have an initial investment of $2,500,000 as at the date of exercise of the Option, for the purposes of Section 7.8 of the GP2 JVA.







If you concur with the foregoing please so signify by signing and returning a copy hereof to each of Temex and East West.







Yours very truly,







TEMEX RESOURCES CORP.







/s/ Ian Campbell







Ian Campbell, President and CEO












EAST WEST RESOURCE CORPORATION







/s/ Maurice Lavigne




 


Maurice Lavigne, President and CEO












Agreed to and accepted this  2     day of September, 2008


by and on behalf of







MILL CITY GOLD CORP.







/s/ James R. Brown




 


James R. Brown, President and CEO











  





  











  













SCHEDULE A: CLAIMS LIST FOR GP2 PROPERTY













	
Claim

	
Division

	
Area

	
G-Plan

	
Date Recorded

	
Date Due

	
Count

	
Units


	
4216155

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
1

	
16


	
4216156

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
2

	
16


	
4216157

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
3

	
8


	
4216158

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
4

	
16


	
4216159

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
5

	
16


	
4216160

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Feb-20

	
2010-Feb-20

	
6

	
16


	
4216161

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Feb-20

	
2010-Feb-20

	
7

	
16


	
4216162

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Feb-20

	
2010-Feb-20

	
8

	
16


	
4216163

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Feb-20

	
2010-Feb-20

	
9

	
16


	
4216164

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Feb-20

	
2010-Feb-20

	
10

	
16


	
4216165

	
Thunder Bay

	
BMA 522871

	
G-4260

	
2008-Feb-20

	
2010-Feb-20

	
11

	
16


	
4216185

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Mar-19

	
2010-Mar-19

	
12

	
16


	
4216186

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Mar-19

	
2010-Mar-19

	
13

	
10


	
4216187

	
Thunder Bay

	
BMA 523871

	
G-4273

	
2008-Mar-19

	
2010-Mar-19

	
14

	
10


	
4216188

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Mar-19

	
2010-Mar-19

	
15

	
8


	
4216189

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Mar-19

	
2010-Mar-19

	
16

	
16


	
4216190

	
Thunder Bay

	
BMA 523864

	
G-4263

	
2008-Mar-19

	
2010-Mar-19

	
17

	
12


	  	  	  	  	  	
Total

	
17

	
240